M a r k e t N e w s
Hydropower supporting mini-grid development in Tanzania
Posted on : Thursday, 27th July 2017
The 5MW Tulila Hydroelectric Plant in the Ruvuma region of Tanzania is helping to reduce dependence on diesel generators and providing valuable power to local rural communities. The plant is run by the Benedictine Sisters of St Agnes, who already operate a smaller plant, Lupilo (400kW), on the Ruvuma River.
Based on this experience, and thanks to a favourable regulatory framework for small, private renewable energy projects in Tanzania, the sisters were keen to build another plant at Tulila Falls.
After initial studies in 2010, construction began in 2013. With support from Swiss entrepreneur Albert Koch, the Tulila Hydro-Electric Plant Company Limited was established in Tanzania to act as buyer, owner and borrower for the project.
All engineering work, support for licensing, finance and insurance was provided by AF-Iteco, which delivered the complete technical project from the initial studies, up to commissioning in 2015. Commercial operations began in September 2015, with all works completed in August 2016.
Tulila is a run-of-river hydroelectric plant with an earth-fill dam and a weirsystem to divert water to the plant and increase the naturally available head.
The project uses the natural base slope of the Ruvuma River at Tulila, and has a total gross head of 22.5m. The penstocks leading to the powerhouse have different diameters, a decision made to reduce transport costs, as one pipe could be nested into the other.
These lead to a powerhouse, designed for three identical 2.5MW turbines but currently equipped with two, due to demand considerations and the capacity of the mini-grid transmission line. This means the plant has provision for expansion up to 7.5MW.
Mini-grid development
All electricity generated by the plant is sold to national public utility, TANESCO, through a standardised power purchase agreement. This feeds into the local mini-grid, supplying over 27,000 households in Mbinga and Songea.
The plant has helped increase power supply in rural areas, with many of the villages along the 85km transmission line now connected to the mini-grid. Dependence on diesel-generated power has significantly reduced and, as a result, one 4MW generator park is expected to close.
Financing proved challenging, although the commitment of the project sponsor, Albert Koch, and the nuns’ excellent reputation helped attract investors. The total cost was around $28.3 million, financed in combination by a bank loan, subordinated loans, equity and a Green Performance
Grant, approved by Tanzania’s Rural Energy Agency. Securing the necessary insurance was also a complex process, with credit dependent on the issuance of an export risk policy.
This was provided by Swiss Export Risk Insurance (SERV), and the credit contract was concluded after 16 months. When it came to insuring the project against technical risks during construction and operation, Tulila was too small for many international insurance companies.
This was overcome with support from a Swiss insurance broker. The project reached financial close in 2014, and financing costs, including fees, interest and the insurance premium, amounted to $5.1 million, around 18% of the total project cost.
Community involvement
Tulila is now operated mostly by the nuns themselves, with support from local electricians and engineers. TANESCO provided two resident engineers and training for the nuns and other local contractors over a two year period. Major maintenance, tax and legal issues are contracted out, but local construction companies are able to carry out general repair works and maintenance.
As well as providing valuable power to local communities, the plant supports the nuns’ charitable work, including providing healthcare and education to local villagers.
Source : https://www.esi-africa.com
