Presented onNational Workshop on TAREA Renewable

day. 6th June 2012 Dar Es Salaam.

Private sector Initiative in Pre-finance RETs in Tanzania.

By Mr. Manyanga Livinus Executive Director KAKUTE

The Content.Energy sector in TanzaniaCurrent government FYDP

Objectives 2015The use of RETs in TanzaniaThe challenge and

potential marketFinancial mechanism for

RETs the lessonMobisol typical RETs pre-

finance business ModuleCommunication structuresKey principlesExperience and lessonsCritical issues.Conclusion.

Energy sector in Tanzania

Tanzania has a per capita electricity consumption of 46/KWh per annum. Approximately 14 percent of the population has access to electricity and consumption is growing at the rate of 11–13 percent annually.

Where electricity is available, the quality of supply is poor and blackouts and other service interruptions are common. Currently, maximum demand is 833 MW and installed capacity is 1006 MW but average availability is 650MW.

There is no reserve margin, and hence during breakdowns and droughts load shedding of about 160 MW is common 12 hours a day.

Current government FYDP Objectives 2015

The goalDevelop reliable, economically accessible and

appropriately priced energy supplies to facilitate the development of other activities in the economy while ensuring environmental sustainability

Operational ObjectiveExplore the possibility of utilizing other potential of

energy – e.g. geothermal, solar, wind, coal, etc;Enhance Tanzania’s regional trade share by connecting

to at least 50 percent of grids of its riparian countries;Improve the institutional management of power

generation, transmission and supply.

The use RETs in TanzaniaMost of Tanzania depends on non-conventional

source of energy. These include biomass (wood, crop residues, animal waste), animal power and solar.

RETs in Tanzania have concentrated on biomass and solar energy. Wind energy and micro-hydro technologies are present, but not on a wide scale.

There has been a lot going on in rural electrification in the past several years, but nonetheless, little has changed. On the contrary: the number of people who have to live without electricity continues to grow. Has the time come for a new approach?

The challenge and potential market.

Energy policy state that one of the challenges facing the government is to reach rural households: Around 80% of the population has very low purchasing power and depends mainly on wood-fuel for cooking and kerosene for lighting, which have negative consequences to the environment and the quality of life, especially to the rural poor

The deployment of renewable energy technologies in Tanzania is at various stages of advancement, although it is not well quantified and its documentation is outdated. The policy focuses on renewable deployment on biomass, solar, micro/mini hydro and wind since as it was felt that technologies for these energy sources could be disseminated in the short term.

The company and marketFirms face difficulties operating in rural areas Transportation cost is extremely high Extra costs arising from unanticipated maintenance,

component replacement, outreach efforts and trainingSeveral companies are well developed but others are out

of business.

The main factor which affect the dissemination of RETs in Tanzania includeAwareness about renewable energy institution/associationGovernment policiesThe poverty levelSuitability of the technologiesThe level of public education andThe existence of an enabling environment

Financing mechanism the lesson

Financial mechanism could be one solution but

Credit access difficult, but not insoluble, Credit risk a serious concern - risk sharing is helpful

Diversify riskCredit guarantees

Longer credit terms are needed to stimulate demand – but few MFIs are willing

Credit can be expensive

Mobisol typical RETs Pre-finance module. The Mobisol Solar Home System Project aims to provide affordable

solar home systems to people living without access to electricity. This project follows on from the installation of 200 Mobisol Solar Home Systems (SHS) in 2011 and 2012 in Tanzania and Kenya.

In Tnzania KAKUTE and Mobisol GbmH introduce the business July last year and in six months 97 customers receive SHS of different size 60W, 120W and 200W on credit and warrantee for three years. 56 customer are from two villages in Arusha district and 41 in two villages from Meru district.

What does the business involve?Selling four different size systems payable in affordable

repayment amounts.Customers can install the solar home systems on their

own roofs because it is so easy.Business provides pre-finance and three years of free

service to customers.

Pilot Phase - Partnerships

Pilot Phase – Partnerships

Kakute, Arusha, TZ100 households/ businesses

SCODE, Nakuru, KE100 households/

businesses

Communication Structure

User

Technician

Project Manager

Question, request, complaint

Direct reply if possible

Technica

l issue

Technical service

Survey results,

Open issuesDirect reply if possible

M-PESA IssuesAggregated su

rvey resu

lts,

Open issues

The key principlesStrong Business Principles

Pricing, credit terms, product quality, flexibility product offerings.

Capacity to Meet Needs of ClientsSupply energy products best suited to the

needs and purchasing power of the client.

Technical TrainingEnergy company must agree to train staff,

particularly technical and marketing personnel who has direct contact with customers.

The experienced lesson.Development of the value chain of actors in different level

is very important this include Manufacture, supplier and distributer, promoter and trainer, technical service and end user.

RETs Promoter need to identified common factors related to customer, staff, and manufacturer relationships that contributed to the early success of their RETs lending programs. First, the importance of determining the specific energy needs and preferences of customers through market research, and using research findings as a basis for selecting energy technologies and designing loan products.

Product demonstration should be the centerpiece of an Enterprise marketing strategy, since customers require exposure to products in order to gain confidence in their benefits.

Critical issues.The successful dissemination if any technology is

accompanied by a favorable environment. This is especially the case where new technologies being introduce. Most RETs can be placed in the category, Part of this environment is the markets, the people and the economic climate of the country.

Sales messaging should prioritize cost savings and product capabilities over environmental impacts.

Cultivating a sales force that is knowledgeable and enthusiastic about the product is critical, which means that investments in staff training and education are essential.

Cultivating active partnerships with quality manufacturers who can provide technical and logistical assistance both prior to and after product sales was considered indispensable.

Demand assurance that manufacturers will honor warrantees and prove dependable in supplying products to meet growing customer demand as their energy lending programs increase in scale over the long-term

Conclusion,Tanzania has an abundance of renewable energy

resources limited exploitation has bedeviled efforts to transform the promise of renewable energy into reality. Expanded exploitation will require several fundamental changes and policy interventions.

Some of the measure that would encourage large scale dissemination of renewable energy include education in school curricula, vocational Training centre and other relevant learning institutions; emphasis should be on practical aspects including physical demonstration, installation and operation. establishment of micro enterprises linked together with MFI and investors.

Benefits and LimitationsQ: What are the advantages and

disadvantages we have already spoken about?

No more kerosene for lighting! No ironing…

NO MORE UPFRONT PAYMENT.

Thank you for your attention