In a significant move that could reshape Tanzania’s energy landscape, the Energy and Water Utilities Regulatory Authority (Ewura) is gearing up to conduct a comprehensive study to reassess electricity service delivery costs. This isn’t just a routine check—it’s a response to a transformed energy sector, now bolstered by major projects like the Kinyerezi gas-powered plants and the Julius Nyerere Hydropower Project (JNHPP). The last cost review, done in 2016, is now outdated, given the substantial infrastructure investments since then.
The implications of this study could be profound. For starters, it could lead to a significant overhaul of the electricity tariff structure. Tanesco, the national utility, has been posting profits for three consecutive years, a stark contrast to its previous financial struggles. This turnaround is largely thanks to the government converting Tanesco’s Sh2.4 trillion debt into equity, significantly improving the company’s liquidity. However, the current tariffs do not reflect the improved financial health and enhanced infrastructure.
Historically, Tanzania has seen steep tariff hikes, such as the 40 percent increase in 2011 and 39 percent in 2013, largely due to the reliance on rented power-generating equipment. Despite phasing out these costly generators, tariffs were never revised downward. The upcoming study could rectify this, potentially leading to more competitive electricity prices. This would not only benefit consumers but also stimulate economic activity, as energy costs are a significant factor for businesses.
The study also comes at a time when Tanzania’s electricity generation capacity has surged by approximately 26 percent, reaching 4,032MW. This increase, coupled with a 15 percent growth in distribution infrastructure, suggests that the country is better equipped to meet rising demand. The resolution of electricity shortages by February 2025, thanks to the JNHPP, further underscores this point.
However, the sector is not without its challenges. Deputy Prime Minister Doto Biteko highlighted a concerning trend: 31 signed power purchase agreements (PPAs) that have never been operationalised, 21 of which are solar-based. These stalled projects were expected to deliver 157MW, a significant addition to the grid. Biteko’s call for Ewura to assist in reviewing these dormant agreements is a clear indication that the government is serious about addressing these bottlenecks.
The implications for the renewable energy market are particularly thought-provoking. With electricity demand projected to reach 4,878MW by 2030 and 8,055MW by 2035, Tanzania must continue investing in renewable sources like solar and wind. The stalled PPAs represent a missed opportunity, but they also highlight a systemic issue that needs addressing. If Ewura and Tanesco can streamline the process and ensure that future agreements are operationalised, it could open the floodgates for renewable energy investments.
Moreover, the increase in natural gas usage, with 15,000 vehicles now using compressed natural gas (CNG) and a 49 percent rise in household connections, suggests a diversifying energy mix. This trend could attract investors interested in the natural gas sector, further boosting the country’s energy security.
The upcoming study by Ewura is more than just an administrative exercise; it’s a potential catalyst for change. It could lead to more competitive pricing, stimulate economic growth, and drive investment in renewable energy. However, the real test will be in the implementation. Can Tanzania capitalise on these opportunities, or will it be bogged down by bureaucratic hurdles? The energy sector is watching closely, and the outcomes could shape the country’s development trajectory for years to come.
