Tanzania’s power struggle: Why investments in power sector are stalling

The Julius Nyerere Hydroelectric Power Plant (JNHPP), which is expected to generate approximately 2115 megawatts when is completed.

What you need to know:

  • Many investors are highly interested in putting money into the power generation sector in Tanzania. What we call demand, they call opportunities.

Tanzania is suffering from the worst power blackouts on record. People used to complain about a few hours of power cuts in weeks, but now they are forced to go for 24-hour-long blackouts, even twice per week. 

The situation has been worsening with time and it is certain that the political risk for the government due to these power cuts is increasing by the day.

The government has blamed insufficient power generation for the ongoing blackouts. For the past decade, while demand has grown significantly (I conservatively estimate it to be 5 to 10 times), supply has not increased one iota.

It is a catastrophic failure in leadership, but at least the government has finally come clean about the real cause of the problem: insufficient power generation. This is a huge step in the right direction.

The government cites insufficient rainfall, power plant maintenance issues, and the delayed Nyerere Dam (JNHPP) commissioning as reasons for the current power crisis. Indeed, heavy El Nino rains notwithstanding, areas feeding Mtera, Kidatu, and Kihansi dams received lower rainfall, contributing to the shortfall. Moreover, while the government acknowledges inadequate maintenance, it has not admitted how serious the state of the disservice of power plants is (my sources tell me that the situation is dire).

Finally, the JNHPP, originally scheduled for completion in 2022, is significantly behind schedule. Despite two years' delay, only the first turbine is undergoing testing, with an uncertain 225MW potential contribution if successful.

The government's narrative, attributing the power crisis to insufficient rainfall, inadequate maintenance, and JNHPP delays, fails to address the critical issue of stalled private investments.

While these factors undoubtedly contribute, some of us wonder why solutions seemingly hinge solely on the mentioned trio and further government spending.

The reality, often left unsaid, is that there are investors who are eager to contribute. Their participation could significantly bolster power generation capacity.

However, these investments remain unrealized, raising questions about potential roadblocks or disincentives hindering their involvement.

Considering the current power crisis, exploring swiftly deployable solutions like wind and solar power could have been crucial. I asked my electrical engineering PhD friend regarding construction timelines for 100MW power plants.

By his estimation, when all issues related to site acquisition and compliance are excluded, it is possible to acquire this capacity within 3 months.

Tanzanians have suffered for years, but 3 months is all it takes to inject an additional 100MW at strategic locations. One can do 400MW in a year, or much more across multiple sites.

For perspective, China, a global leader in renewable energy, brought into operation a total capacity of 216 GW of solar power in 2023 alone. In other words, China was commissioning solar capacity equivalent to two JNHPPs every week. But, for two years, no one in the whole Tanzanian government has thought of such possibilities.

Don’t we have enough suitors? Quite the opposite. Many investors are highly interested in putting money into the power generation sector in Tanzania. What we call demand, they call opportunities.

While in Paris last year, I talked to the president of Africa’s operations about one such suitor; the offer that they gave to Tanesco was quite competitive, possibly beating the best offer that Tanesco has today. Yet, no further developments are seen.

We have heard of similar interests from Masdar, an Emirati firm proposing to build a curious 2 GW of renewable energy capacity in Tanzania. A year and a half in, we only have a few sites being mentioned for development while not a single unit of power has been generated.

There are many other suitors, and Songas is one of the better-known ones to have publicly expressed interest in expanding its power generation portfolio in Tanzania beyond gas. Many suitors are unknown to the public. I have talked to two interested investors who informed me of their discouraging experiences trying to break into Tanzania’s power generation sector. One of them, after submitting a highly competitive price offer to Ewura, was asked to increase it by 60 percent by other players. Increase it, not lower it.

Is it any wonder that, after years of chasing shadows, they have decided to pursue other endeavours?

Meanwhile, Tanzanians still languish in power struggles. Businesses suffer—a friend who has launched his new very promising business in Mwanza was telling me how the power issue jeopardises his investments.

Production suffers—lost productivity and increased cost of production. And families suffer—darkness, waste, and all inconveniences. This is all quite preventable.

We will dive deeper into the question of why private investments in the power generation sector in Tanzania are stalling next week.