Inside Tanzania's Sh3 trillion energy development plan

Dar es Salaam. The government yesterday pledged to continue investing in the implementation of energy projects in 2023/24.

The plan is aimed at raising electricity generation, reducing the use of solid biomass for cooking, building a gas-based economy and raising Tanzania’s petroleum reserves.

Energy minister January Makamba told Parliament that the proposed Sh3.049 trillion budget for his ministry for the fiscal year 2023/24 was in line with President Samia Suluhu Hassan’s goal of expanding electricity coverage, protecting the environment through the use of clean energy, protecting Tanzanians against volatile global petroleum prices and ensuring that Tanzanians benefit from its massive natural gas resources.

Apart from completing the construction of the 2,115MW Julius Nyerere Hydropower Project, the government will continue with the preparations for the execution of the $42 billion liquefied natural gas (LNG) plant and completing the task of connecting all villages to electricity.

Mr Makamba said the government will implement at least ten electricity generation projects and start execution preparations of several others during the next fiscal year as part of its wider goal of producing at least 5,000MW by 2025.

Currently, the various plants, connected to the national grid have the capacity of producing 1,872.04MW, being a 10.5 percent improvement from the 1,694.55MW that were reported at the end of the 2021/22 financial year.

He exuded confidence that implementation of at least ten of the ongoing projects - which will cost taxpayers over Sh1.985 trillion – will put the country on the right path to attaining the desired production in line with the CCM Manifesto for 2020 elections.

In fact, out of the entire Sh3.049 trillion being sought, a staggering Sh2.96 trillion – which translates into 97.1 percent of the ministry’s total budget for the fiscal year 2023/24 – will be spent on development projects.

The Julius Nyerere Hydropower Project will get the lion’s share of development funds, with Sh1.5 trillion planned to be spent on the remaining aspects of its implementation.

Mr Makamba told the House that the Sh6.55 trillion – which is fully financed by the government - project has so far reached 86.89 percent.

“The dam will reach power generation level in one week period because as of May 23, 2023, the dam’s water depth has reached 160.51 metres above sea level while to initiate electricity generation, the water level has to reach a minimum of 163 metres above sea level,” he said.

The government has also set aside Sh40 billion for the Kinyerezi 1 Power Plan Expansion Project that will produce 185MW, and Sh6.27 billion for the Ruhudji Hydroelectric Power Station for 358MW hydroelectric power station.

Over Sh5.25 billion for 222MW Rumakali Hydroelectric Power Station, Sh500 million for 321 MW Kikonge hydropower project, and Sh15.52 billion for the Malagarasi hydropower project for 44.8MW hydropower plant.

For 87.8MW Kakoko project the government has set aside Sh39.15 billion, and Sh27.63 billion for the solar power project in Shinyanga.

The government has also set aside Sh345 billion for the major 150MW Mawe project and Sh6.5 billion to continue the maintaining the Hale hydropower plant.

According to the minister the implementation of these project is significant considering the skyrocketing of power demand in Tanzania.

Mr Makamba said, “ The electricity demand has rapidly increased in the ending year, where the record for peak demand has broken eight times, which is unprecedented in the country’s history.

“Moreover, the current electricity production in the country does not align with the rapidly growing economic and social activities, resulting in a significant infrastructure deficit for electricity transmission and distribution,” he said.

The minister revealed that despite the considerable achievements in rural electrification, there are still approximately 36,101 hamlets out of the total 64,760 hamlets are yet to be connected to the electricity grid.

“The electricity demand in the country has continued to grow, where during the period of 2022/23, the average electricity demand was 1,363.94 MW, representing a 6.9 percent increase compared to the average of 1,276.43 MW in 2021/22,” he said.

“During this period, the peak electricity demand has increased to 1,431.59 MW (as of May 15, 2023, at 2:00 AM), showing a 6.8 percent increase compared to the 1,340.68 MW reached in 2021/22 (as of May 26, 2022, at 2:00 AM),” said the minister.

According to him this increase in demand is attributed to the rise in large customers, especially industries and businesses, which have increased by 5.6 percent, as well as the growth in economic and social activities.

Mr Makamba said as the world struggles with the impact of climate change, focus globally and Tanzania has been on the clean energy transition, using sources with little carbon or no carbon at all.

“We now have to implement strategies to strengthen the use of energy sources with low impact on the environment such as water sources, renewable energy and natural gas which has been identified as a source of transitional energy that can be used until the year 2050,” he said.

This came as after years of intense negotiations, the highly anticipated liquefied natural gas (LNG) project in Tanzania came to an end earlier this month, and the minister reveal that a special legislation is underway.

Mr Makamba said the proposed legislation will soon be submitted to the parliament for thorough discussion and eventual approval.

“Likewise, considering the magnitude and uniqueness of this project, and as a measure to ensure its coordination, monitoring, and effective facilitation for timely and intended benefits, the Government has established a Special Project Office under the Ministry of Energy,” he said.

Earlier this month, Equinor and Shell Tanzania agreed to a deal with the government of Tanzania for the development of the LNG plant after President Samia Suluhu Hassan’s administration decided to expedite the Host Government Agreement (HGA) talks that had stalled for years in the past administration.

The project’s cost is estimated at $42 billion (equivalent to Sh98.7 trillion).