Introduction to development assistance to clean energy

57 Document 3:12 2013–2014 Report into electricity. Statistics on production 39 therefore provide important additional infor- mation about the energy authorities’ ability to supply power. Figure 6 Total power generation in Tanzania in 2000–2012 GWh 1000 2000 3000 4000 5000 6000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Oil and gas private Oil and gas TANESCO Hydropower TANESCO Sources: Joint Energy Sector Working Group 2012 and 2009 Joint Energy Sector Review; REPOA 2010 The Potential for Job Creation and Productivity Gains Through Expanded Electrification; statistics received from TANESCO; TANESCO’s website; The United Republic of Tanzania Ministry of Energy and Minerals 2012 Power Sector Master Plan update 2012; US Energy Information Administration http:www.eia.govcountriescountry-data. cfm?fips=TZtrk=m. Figure 6 shows that the total power generation in Tanzania increased from just over 2,500 GWh in 2000 to just under 5,800 GWh in 2012. The increase in power genera- tion comes solely from oil and gas production. 40 Production from hydroelectric plants has recently been very unstable, mainly due to more periods of drought than normal, especially in 2006 and in 2011–2012. In an interview, the embassy in Tanzania stated that many of the power plants are almost 40 years old, and that the authorities have placed a low priority on maintenance because of the poor economy. In recent years, huge gas deposits have been discovered of the coast of Tanzania, which has made gas-ired power a main priority in the energy plans of the Tanzanian authorities. The Ministry of Energy and Minerals in Tanzania stated in an interview that reducing dependence on hydropower and oil-based power is a main goal, and that primarily natural gas and coal will contribute to this. New renewable energy sources, particularly wind power, solar power and geothermal power, will also be developed. The national targets are to increase the use of such energy sources by two percentage points, from 4 to 6 per cent during the period 2010–2015. 41 The Ministry of Foreign Afairs pointed out that while Tanzania’s energy minister prioritises gas production higher than previous ministers, renewable energy is still part of the country’s energy plans. Among other things, the Ministry pointed out that the Tanzanian authorities plan to build wind power capacity of 50–100 MW for production for the central grid, while hydropower and bioenergy will be prioritised as the cheapest alternatives for production for isolated grids. In an interview, Norfund pointed out that the authorities in Tanzania expect that the supply of cheap gas will solve the country’s power problems in the near future, and 39 Joint Energy Sector Working Group 2012 Joint Energy Sector Review 20112012. 40 Oil includes diesel, heavy oil and jet fuel. 41 The United Republic of Tanzania Ministry of Energy and Minerals 2011: Medium term strategic plan 201213–201516, p. 14, United Republic of Tanzania President’s Office, Planning Commission 2012 Long term perspective plan 201112–202526 – Roadmap to a middle-income country, p. 71. 58 Document 3:12 2013–2014 Report that this, according to Norfund, is undermining investment in renewable resources. A number of donors want to support clean energy, but according to the US develop- ment agency, the Millennium Challenge Cooperation, development of clean energy is not a key priority for the government. Norwegian support for development of the Kihansi hydropower plant The Kihansi hydropower plant was completed in 2000 and is the most recently opened state-owned hydropower plant in Tanzania. In 2012, it produced 588.2 GWh, one-third of Tanzania’s total hydropower production. 42 Kihansi is also the latest big state-owned hydropower plant in Africa built with Norwegian aid. The plant has a capacity of 180 MW, 10 per cent of the country’s total generating capacity. Construction was funded by the Ministry of Foreign Afairs, the Swedish International Development Coopera- tion Agency, the German development bank KfW, the European Investment Bank EIB, the World Bank and the Tanzanian authorities. The Ministry contributed a total of NOK 380 million in 1995–2002. 43 The power plant increased the national hydropower capacity in Tanzania by over 30 per cent and has been an important contribution to the total power generation in the country. The Kihansi hydropower plant in Tanzania is the latest state-owned power plant in Africa built with the help of Norwegian development assistance. The power plant was completed in 2000 and accounted in 2013 for a third of Tanzanias hydropower production. Photo: Norplan Norwegian support for emergency repairs of Tanzania’s hydropower plants In 2011, the embassy in Tanzania signed an agreement with TANESCO for necessary repairs of the nation’s ive largest hydropower plants. The agreement includes institu- tional cooperation between the Norwegian Water Resources and Energy Directorate NVE and TANESCO in the areas of assistance for repairing the power plants and training in this relation, capacity building in TANESCO and support and coordination 42 Information received from TANESCO. 43 Source: http:www.norad.nonoresultaterkraftutbygging-ga-mer-energi. 59 Document 3:12 2013–2014 Report from NVE. 44 In an interview, NVE stated that the project manager in TANESCO is part of the management team for hydropower generation, and that the manager actively contributes to the project’s activities and reporting to the embassy. While the project initially had a budget of NOK 25 million, this has since increased to NOK 67.5 million due to a signiicant price increase for maintenance work and the expense for a hired consultant. The cost analysis was prepared in a feasibility study in 2009. It was, according to NVE, the basis of the original budget for the project, but turned out to be incorrect. The tenders that came in were over twice as high as the estimate. This is partly due to real inlation and partly because it was not suiciently taken into account that the old power plants need spare parts that are no longer in production. 45 The embassy agreed on this basis to increase the budget to a total of NOK 67.5 million. Since the maintenance work has not yet begun, just NOK 2.3 million had been spent at 31 December 2013 on the project, mainly on courses. 46 The maintenance work was advertised internationally as a single contract in March 2012, but resulted in one incomplete tender. It was then decided to split the invitation to tender into ten diferent contracts. Negotiations with the tender winners were held in the autumn of 2013. 47 Start-up of the maintenance work was thus delayed by almost two years. 48 NVE stated that at the time of the decision to split the contract into ten contracts, it was also determined that NVE would, on behalf of TANESCO, hire an external consultant with an engineering background to quality assure the work. This resulted in a NOK 7 million increase in the project budget. The embassy in Tanzania stated in an interview that NVE does not have core compe- tencies in upgrading power plants, but that it was chosen as the Norwegian partner on the basis of relevant experience with facilitating similar projects. In addition, NVE could be engaged on short notice without extensive and time-consuming tendering processes. NVE stated in an interview that they assist TANESCO in obtaining the necessary technical expertise for the project, and that in this connection, they have signed a framework agreement with the Norwegian power company Nord-Trøndelag Elektrisitetsverk NTE. This is in addition to the consultant who is to follow up the agreements for TANESCO. NVE also pointed out that the embassy itself could have entered into consulting agreements directly, but that it wanted to take advantage of NVE’s expertise in capacity development and project management. According to the Ministry of Foreign Afairs, the agreement with NTE has not yet been used in NVE’s collaboration with TANESCO. For there to be any long-term beneit of maintenance work, TANESCO must prioritise adequate maintenance. In an interview, NVE pointed out that TANESCO’s failure to prioritise the maintenance of power plants over the past ten years raises questions. According to NVE, it is important to ensure the sustainability of the project to prevent a new application for support and maintenance in ten years’ time. The embassy in Tanzania pointed out in an interview that TANESCO’s inancial crisis will continue to create uncertainty about whether required maintenance will be prioritised and executed. The embassy stressed that it still makes economic sense to inance the maintenance of power plants, because the power crisis in Tanzania will worsen if the hydropower plants break down due to decay. 44 Only the first part of the agreement is discussed here. 45 Interview with NVE on 12 September 2013 and TANESCO 2013 Meeting with officials from Auditor General of Norway, p. 3. 46 TANESCONVE 2013 Capacity building and emergency repair project of existing hydropower plants in Tanzania. Annual pro- gress report 2013, p. 7. 47 TANESCO 2013 Meeting with officials from Auditor General of Norway, p. 2; TANESCONVE 2013: Capacity building and emergency repair project of existing hydropower plants in Tanzania. Annual progress report 2013, p. 5. 48 TANESCONVE 2013 Capacity building and emergency repair project of existing hydropower plants in Tanzania. Annual progress report 2013, p. 8.