Last edited: September 2018
When it comes to finding external financing for initiating energy projects, a possible course of action is to look for subsidies. Public institutions and NGOs alike provide energy subsidies in Tanzania. There are various types of both direct and indirect subsidies available for solar power. Tanzanian organizations as well as international ones regularly have funds available for solar grants. In addition, the Tanzanian government supports solar projects in several ways; through legislation as well as by providing financial support. Projects which qualify for such funding might take different forms, and range from lighting initiatives to large-scale solar PV fields.
Growth of the Solar Market
The aim of a subsidy, in this case for the installation of a solar power system, is to help businesses and communities with limited funds to gain access to such systems nonetheless. This helps the targeted market to grow. In the case of (solar) energy subsidies, the aim is to increase the amount of systems installed and hence the energy output. Subsidies can either raise the price received by energy producers, or lower the price paid by energy consumers. There are many different types of energy subsidies. Some have a direct effect on the price paid for a system, like grants and tax exemptions, while others act indirectly. The latter include regulations that skew the market in favor of a particular energy sources or a generating technology, or support for research and development.
In Tanzania, there are several options when one is looking for solar subsidies. A number of national and international development organisations and NGOs are active in the (renewable) energy sector in Tanzania. They continuously provide funding opportunities for solar projects.
Rural Energy Agency – Rural Energy Fund
To begin with, there is the Rural Energy Fund, made available by the Rural Energy Agency (REA). This fund is part of the Tanzanian government and operates under the Ministry of Energy and Minerals. They promote and facilitate improved access to modern energy services in rural areas. Through the Fund, the REA financially supports renewable energy projects, including solar projects. While the programme initially focused on solar home systems, it has now expanded its range to also include off-grid solar PV installations, for instance through the Result Based Finance (RBF) grants programme for mini and micro-grids.
African Development Bank
The African Development Bank, too, has grants available for solar projects, and it also acts as an implementation agency for other international organizations. Through the Sustainable Energy Fund for Africa (SEFA), the Sustainable Energy for All (SE4ALL) programme, the Climate Investment Funds (CIF) and similar initiatives, it has already funded various solar energy projects in Tanzania, and it will continue to do so. An example of such projects is the Green Mini-Grid Market Development Program, which focuses on enhancing energy access in rural areas through the adoption of mini-grids, primarily solar-based.
Duty and VAT exemption on solar products
In the East African Community there is an import duty and VAT (value added tax) exemption on certain solar products. Acting as an indirect government subsidy for solar-powered electricity generation equipment, the regulation ensures that Tanzanian companies do not have to pay the standard import duties when buying solar equipment from abroad. It also means there is no payment of value added tax on the sale of solar products. Important to note is that this legislation concerns development and generation equipment only. Solar powered appliances (such as lights) are not eligible for tariff exemption in the EAC region. Products used for the storage of power, such as batteries, do qualify for the tariff waiver. The exemptions (when applicable) are automatically applied and do not require any action from the companies for which they are made.
You can find the original legislation here (p.165).
Tanzania introduced a feed-in tariff scheme for small power producers (100 kW to 10 MW) in 2008 and a revision of the framework in 2015. The agency responsible for the tariff is EWURA, the Energy and Water Utilities Regulatory Authority. According to the 2015 framework, EWURA applies two approaches depending on the technology. The first applies small hydro and biomass projects in the Renewable Energy Feed-In Tariffs. Solar and wind projects apply a bidding approach.
Financing a solar power system
Find more information about financing your solar power system here.
Further subsidy sources
Additionally, many NGOs and international organizations (including foreign governments) work together to financially support solar projects in Tanzania. What follows is a (non-exhaustive) list of some of the subsidy programs such organizations run.
The Africa Solar Fund
Through the Africa Solar Fund, non-profit organizations can gain funding up to $50,000. This to implement solar projects for the benefit of villages and (public or private) institutions such as schools or hospitals.
The Energy and Environment Partnership for South and East Africa (EEP Africa)
The EEP Innovation fund co-finances clean energy initiatives, including solar projects. Financing requests up to EUR 500,000 are in most cases treated as non-repayable grants.
The GEF Small Grants Programme
This United Nations Development Programme (UNDP) manages, in cooperation with the Global Environment Facility, this program. Sustainable development projects, including renewable energy / solar initiatives, can apply for financial support up to $50,000, provided a community-based organization (CBO) or non-governmental organization (NGO) runs the project.
The Green Climate Fund
Set up by the 194 countries who took part in the United Nations Framework Convention on Climate Change (UNFCCC) in 2010, the GCF finances climate-resilient initiatives, including clean energy projects. Part of the available funds is a grant.