In Tanzania, PV development is supported by the government, which is looking to increase the share of renewable energy in the countrys electricity mix from 4.9% to 14% by 2015, according to Cossen.
Cumulative installed PV capacity in Tanzania is estimated to have increased from 100 kW in 2005 to more than 5 MW in 2012. Sales of solar energy were estimated at 2 MW in 2011 and are thought to have been higher in 2012 and 2013 due to large project initiatives and continued solar home system demand, Cossen adds.
"Most of the solar PV capacity installed is in rural electrification and donor-funded projects. This market is likely to continue to increase because, unlike Kenya, there are large economically-active and heavily populated parts of the country that will not be connected to the grid in the near future. This also provides opportunities for mini-grids based on renewable energy."
In addition, MW-scale projects that are either under discussion or in the development pipeline could dramatically change the market profile for solar energy in Tanzania, Cossen points out. A number of investors and solar entrepreneurs are seeking to develop solar farms that take advantage of Tanzanias Feed-in Tariffs and stable political climate."
Looking at rural electrification, "PV can play a crucial role in areas where connection to the main grid would is not economically viable," says Cossen. According to the latest Scaling Renewable Energy Program report, 14.9 million people are far off the grid. The figure accounts for 33% of the entire Tanzanian population, which is best served through stand-alone systems as mini-grids would mean too high costs in consideration of the low population density. According to a recent rural electrification study, 20% of the overall population may best be served using mini-grids.
By contrast, PV development in Mozambique is largely focused on off-grid applications given the low energy prices for on-grid customers, including a relatively stable supply service, says Cossen.
With only about 11% of the population electrified and in view of the large density of the country, the government is procuring a large portion of the imported PV equipment through its rural electrification agency (FUNAE). The government is thus dominating the market through procurements and tenders.
Tanzania has had a feed-in tariff scheme in place since 2008 for small power producers (100 kW to 10 MW). Above that size, the FIT is negotiable. Feed-in tariffs for small power producers are adjusted annually by the Energy and Water Utilities Regulatory Authority (EWURA) and are based on the avoided cost of the electricity. That means that they are undifferentiated by renewable energy technologies and that there is no guaranteed price over the long term even if a power purchase agreement (PPA) is signed for a 15-year period, says Cossen. Within the standardized FIT scheme there are tariffs for feeding into the main grid and into isolated mini-grids.
For balancing the higher generation costs in dry seasons, when the availability of hydropower is lower than in wet seasons and thermal power plants have to generate more expensive power, the standardized FIT is differentiated according to the season. In 2012, it averaged $0.093 per kilowatt hour, while the Standardized Small Power Purchase Tariff 2012 for mini-grids was at $0.294. The tariff is calculated on the basis of avoided and incremental costs in mini-grids.
"For the next 10 years, thermal plants will drive the avoided cost of the interconnected system," Cossen says. The planned development of thermal power plants using natural gas priced at extraction cost plus fee and not at the international price makes it uncertain that the avoided cost of the grid, and thus the feed-in-tariff, will remain above the levelized generation cost of renewable energy technologies such as solar PV and wind."
However, to mitigate this risk, a floor price limits the FITs downward variation. The levelized costs of solar PV are around $0.09 to $0.10, which is competitive, especially with regard to power generation from diesel ($0.30 to $0.32 per kilowatt hour).
In addition, a standardized PPA has been introduced for projects up to 10 MW in order to reduce the transaction costs associated with negotiating and signing a PPA. The standardized PPA is technology-neutral.
Unlike Tanzania, Mozambique has no feed-in tariff or other incentives in place. Nevertheless, the Ministry of Energy is developing FITs not only for PV but also for wind, biogas and other renewables. Hydro power accounts for 90% of generation capacity in Mozambique. The Cahora Bassa hydro power plant has a capacity of some 2.1 GW. As a result, the countrys experience with renewable energy besides hydro is still limited to pilot projects.
Among the established players in Tanzania is Zara Solar Ltd, a wholesale company for solar home systems. Funds from social investors as well as the government have allowed the company to build a name and provide quality components and service in the solar home system sector, according to Cossen. They offer a wide range of products, from 15 to 260 W and have a well-developed network of trained technicians that can distribute and install products throughout the country.
Cossen adds that the off-grid project market is largely driven by donors, NGOs and government procurement programs. There are applications in the off-grid commercial and industrial sector, such as tourism and telecommunicationss, where solar PV is usually combined with diesel generators (hybrid systems) to reduce the overall cost of energy.
Among the project developers selected by the Tanzanian Rural Energy Agency to supply modern energy services under the Lighting Rural Tanzania Grant Competition Programme are private enterprises such as Kakute Ltd., Alternative Energy Tanzania, Masotricity Engineering Company, RESCO Ltd. and Southern Corridor Company as well as NGOs like the Tanzania Traditional Energy Development Organization (TaTEDO).
Religious centers are interesting potential clients for suppliers of off-grid solutions. The German company Energiebau Solarstromsysteme installed an off-grid solar hybrid system with a vegetable oil generator for the Convent of the Vincentian Sisters back in 2006. The system comprises an 8.1 kW solar and a 30 kW electricity generator. InWent, now part of GIZ, servced as a partner on the project.
At the utility scale, TANESCO signed Small Power Purchase Agreements with 11 developers to supply 46 MW of power. NextGen Solar and Windpower Serengeti implemented two projects based on solar PV, 2 MW and 1 MW, respectively.
In Mozambique, the solar market is currently driven by governmental tenders for the off-grid segment. Most participating companies are from India or China and operate local subsidiaries or cooperate with local partners. Fosera is relatively strong in the market with its own production line in Mozambique. The Indian development cooperation is sponsoring a 5 MW PV module production line currently being constructed.
Although Kenya is seen as a business hub in East Africa, Tanzania has some advantages that make it an attractive long-term location for business development. It has a stable political climate and has enjoyed continued economic growth for over a decade. Secondly, the large off-grid areas make solar PV attractive in more economically active areas than in Kenya — both in stand-alone systems and as part of mini and micro-grids. The PV market in Tanzania is also much less congested than in Kenya; it would be easier for a company to gain a foothold than in the competitive Kenyan market. In addition to the ample room in the Tanzania market, there is a need to create the space for quality, Cossen says.
Likewise, Mozambique, compared to Kenya and South Africa, is small and in its infancy. Given the challenging on-grid situation, the focus now and in the near future will be the off-grid segment, which is looking for innovative products both for the price-sensitive household segment for rural electrification as well as new PV-diesel hybrid systems, especially if the installer can provide financial viability within a five-year term and bring along the debt financing.
Current projects and planned installations
Tanzanias Rural Electrification Master Plan estimates 32% of the countrys rural population will be electrified by standalone PV or mini-grids in the short and medium term. Therefore, commercial markets for solar home systems and pico systems will continue to carry on at more than 1 MW a year.
Mini-grids are estimated to provide approximately 20% of the rural electrification coverage. The Power System Master Plan envisages 120 MW of solar by 2017. Several private firms have expressed interest in investing in 50-100 MW of solar PV. NextGen Solawazi has signed a SPPA with TANESCO to supply electricity from 2 MW of PV to an isolated grid. TANESCO has also signed a letter of intent for a 1 MW isolated grid-tied PV project.
The Kenya Association of Manufacturers Regional Technical Assistance Program, expanding from its Kenya base, is targeted specifically at private-sector based renewable energy and energy efficiency activities in such sectors as agriculture, manufacturing and tourism. The program is currently building its project pipeline for the next two to three years. The largest project proposals received are in the order of $2 million to $3 million in the agriculture and tourism sectors. Solar energy projects have a high share of the projects in the pipeline.
Mozambique has no projections available, although upcoming projects are estimated at less than 1 MW.
Tobias Cossen will discuss Tanzania and Mozambique’s solar markets at the 14th Forum Solarpraxis on Nov. 22 at the Hilton Hotel Berlin. The Forum Solarpraxis runs Nov. 21-22.