Tanzania is set to establish a Renewable Energy Investment Facility (REIF), which will provide affordable finance to private sector clean energy projects providing energy access to rural communities.
To support this, the Sustainable Energy Fund for Africa (SEFA), administered by the African Development Bank (AfDB), approved a USD870,000 preparation grant for Tanzania’s Rural Energy Agency (REA) to structure REIF.
“The SEFA grant will include advisory support, development of operational guidelines, risk mitigation framework, fund manager identification, technical and institutional support for REA towards the establishment of REIF and capacity building for relevant public sector institutions/agencies and private sector project developers,” AfDB indicates in a press release from January 5th, 2016.
Tonia Kandiero, AfDB Resident Representative in Tanzania, stated that “the SEFA support to will help address existing financing gap in the market and accelerate private sector participation in off-grid electrification in Tanzania. We expect this initiative to make a real contribution to Tanzania’s ambitious energy access targets, ultimately improving livelihoods for all rural communities in the country.”
Launched in 2012, SEFA is a USD95m multi-donor facility funded by the governments of Denmark, the United Kingdom, the United States and Italy.
It supports the sustainable energy agenda in Africa through grants to facilitate the preparation of medium-scale renewable energy generation and energy efficiency projects, equity investments to bridge the financing gap for small- and medium-scale renewable energy generation projects, and support to the public sector to improve the enabling environment for private investments in sustainable energy.
About 70% of Tanzanians reside in rural areas whereas only 7% of the rural population is connected to electricity supply.
AfDB notes that the vastness of the country, coupled with low population densities, makes grid extension too expensive, creating a significant market potential for off-grid electrification schemes.
For this, the Government of Tanzania (GoT) has set an objective of increasing access to electricity by promoting renewable energy powered off-grid/mini-grid electrification schemes.
GoT estimates that about half of the country’s rural population could be served by off-grid options in a cost-effective manner, and that mini-grids could benefit 9.1m people in the country.
GoT plans to achieve about 1.3m connections in rural areas (including public facilities) and increase the average access rate to electricity (both urban and rural) to 35% by 2022.
REIF will thus contribute to expanding rural electrification and increase access to energy services by channelling appropriately tenured and priced finance to private sector companies developing and operating energy access projects in rural areas based on renewable energy technologies.