Future energy development in Tanzania

Future energy development in Tanzania The energy costs of urbanization

Richard H. Hosier, Mark J. Mwandosya and Matthew L. Luhanga

This paper utilizes the detailed energy balance data developed as part of the Tanzania Urban Energy Project to examine future energy use in Tanzania. The energy costs of urbanization are shown to be quite substantial. National energy balances demonstrate that the urban areas make up a large share of the consumption of all fuels except woodfuel. As urbanization continues into the future, it will be accompanied by dramatic increases in the consumption of petroleum fuels, electricity and charcoal. For example, using base case or business as usual assumptions, over a planning period stretching from 1990 to 2010, every 1% increase in the level of urbanization can be expected to lead to a 12% increase in electricity consumption, a 14% increase in the consumption of all petroleum fuels and a 14% increase in the consumption of charcoal. Finally, the paper examines different energy policy options which are consistent with the stated national energy policy. After the examination of a set of ambitious policy efforts, a set of feasible policies are tested and shown to have a significant impact on the goals of improving efficiency, obtaining the desirable national energy consumption profile and conserving indigenous woodfuel resources. Keywords: Urban energy; Energy scenario; Costs of urbanization Urbanization plays a critical role in economic development as rural emigrants leave their homes in Richard H. Hosier is with the Stockholm Environment Institute; Matthew L. Luhanga and Mark J. Mwandosya may be contacted at the Ministry of Water, Energy and Minerals, PO Box 2000, D a r e s Salaam, Tanzania.

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search of better employment opportunities in urban areas. 1 These cities amass large pools of labour, providing low wage labour inputs for the initial stage of industrial development and the subsequent creation of more jobs. In order for this process to advance, urban centres must be able to supply basic needs (food, water, shelter and, increasingly, energy) as well as the means to generate a sufficient level of local income to purchase or finance these goods and services. Investment by both the public and private sectors is necessary to support the urbanization process. 2 In general, public sector investment provides the infrastructure and private sector investment creates the industrial base which are necessary to make urbanization sustainable. But the provision of infrastructure and employment requires that certain investment costs be met. Although these costs of urbanization may be delayed, they cannot be avoided without urban areas deteriorating into large villages. 3 These costs of urbanization in various sectors of the national economy can be estimated, but not without considerable effort. 4 Although urbanization is closely intertwined with the process of industrialization, in many of today's developing countries urbanization has occurred without industrialization. 5 In Western European development, the two processes occurred simultaneously. 6 Eastern African cities have generally lacked adequate private investment, and so have grown large even in the context of small, often shrinking, industrial bases. 7 Tanzania, with weak industrial growth and strong urbanization patterns, proves no exception to this pattern. Even though Tanzanian urban growth appears to have slowed during the past decade in response to weak overall economic growth, its cities have nevertheless absorbed large numbers of immigrants, s 0301-4215/93/050524-19 © 1993 Butterworth-Heinemann Ltd

Future energy development in Tanzania

Among the many changes associated with the processes of urbanization and industrialization are changes in the way societies use energy. At present, both processes require increasing quantities of both electricity and hydrocarbon fuels. Industrialization requires electricity to run factories and either petroleum fuels or coal to provide process heat. Urbanization entails increased vehicular transport, requiring large quantities of petroleum fuels and a shift from traditional biomass fuels to processed biomass fuels and modern fuels to supply the subsistence needs of the population. Associated with these energy transitions are the costs of the modern fuels plus the cost of the capacity to utilize them. These costs are especially acute as they represent not only increases in the quantities of fuels being currently used, but also a shift from non-marketed to commercialized goods. This paper investigates the future of energy use and urbanization in Tanzania, paying particular attention to the energy costs of urbanization. A set of scenarios for future energy development explore the relationship between anticipated patterns of urban growth and energy use, placing the urban areas and their energy needs in the context of the national energy system. The impact of energy policy initiatives are tested and shown to be substantial. Pricing energy supplies at their marginal cost of supply emerges as an inexpensive way of moderating future energy needs. However, most of the other policies require a significant increase in energysector investment. Widening access to the electricity system, improving the efficiency of woodfuel conservation and use, and increasing the efficiency of road transport, are all policy initiatives which will serve to make urban growth in Tanzania more sustainable.

Methodology Very little original energy research had been undertaken in Tanzania prior to the initiation of the Tanzania Urban Energy Project. As part of the project, detailed energy assessments of the major energy using subsectors of the economy located in each of the case study cities were undertaken. Particular attention was paid to the energy-use patterns of the household, industrial, informal, commercial and transport sectors of the urban economy. Field work, in the form of sample surveys and detailed interviews, was undertaken for each subsector and city. The energy assessments each provide the basis for a detailed policy discussion presented elsewhere in this issue. As part of this analysis, the separate

ENERGY POLICY May 1993

analyses of each subsector were linked together into a detailed energy consumption picture for each case study. The energy consumption patterns of these three cities are analysed separately. 9 Since the late 1980s, the Energy Department of the government of Tanzania has maintained detailed energy-balance data on energy use in Tanzania. This database, making use of the Long-Run Energy Alternative Planning system ( L E A P ) , incorporates all previous field assessments of energy use in Tanzania, and provides a record of recent national energyuse patterns. The strengths of the database as it existed prior to the implementation of this project were in the areas of rural energy use, agricultural energy use, and a limited quantity of data from specific industrial energy audits. For the following analysis, the detailed energy-balance data for each city developed as part of this project were each used to represent a subset of Tanzanian cities. This provided an estimate of total national urban energy use which was then coupled with the non-urban component of the existing national database in the L E A P system. The known total supply estimates in turn were used to calibrate the total consumption figures so that consumption based estimates equalled the known supply totals. The net result is an end-use based representation of the Tanzanian energy system, which contains very detailed information about energy use in the urban areas. The resulting computerized energy-balance system provides the basis for the scenarios developed in the following pages. Although the database used in this analysis is by far the most detailed and precise ever developed for Tanzania, it has its own shortcomings which will require future refinement and development. In particular, the generalization of the energy-balance data from the three cities to all other urban areas is a precarious step, possibly leading to some inaccuracies in the overall representation of urban energy use. However, the verification of the estimated consumption with known control totals helps avoid the worst possible inaccuracies. Greater room for error perhaps exists in the case of rural energy use, for which there are no known supply totals. Previous surveys provide the basis for the estimates included in the database, but these rural data reduce to three basic estimates of rural household energy use. If these estimates are to be maintained as accurate and current, more effort is required to monitor and update the rural estimates. Although improvements can be made, the current database on energy use in Tanzania provides a useful and accurate basis for examining future energy consumption and supply.

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Future energy development in Tanzania

Future urban energy development in Tanzania The process of urbanization inev~'~ably induces important changes in energy use. Consumption of modern fuels (petroleum, coal and electricity) increases due to the increased requirements of the industry and transport sectors. Households begin substituting modern fuels for traditional fuels, and the household share of total energy use decreases. These shifts are central to the transition away from traditional toward modern fuels. 10 Industrialization, urbanization and economic development are interrelated processes driving this transition. This section examines possible energy futures for Tanzania by use of scenarios based on assumptions about economic and urban growth and technological change. The scenarios will also be used to demonstrate the ability of policy initiatives to influence the energy future of Tanzania, under a limiting set of assumptions. The goal of the analysis is to identify the role of urbanization in determining Tanzania's energy future, what that future would resemble in the absence of policy initiatives, and what policies might have positive impacts on the future energy system. The section immediately following presents the assumptions and estimates taken from a base case scenario for Tanzania's energy future. The succeeding section discusses how that scenario might vary with different assumptions and the final section discusses the role of urbanization in that energy future. Base case scenario

Moving from the urban to the national level requires some adjustments to be made for aggregation and representation. The data collection exercise did not include all cities in Tanzania, even though the primary, secondary and tertiary levels of the urban hierarchy were each represented independently. This simple breakdown of the urban hierarchy into the primate, secondary and tertiary cities was considered to be too simplistic to use for the estimation of urban energy use at the national level. Too many other factors, such as local ecology and industrial structure, were considered to be at least as important as population - the sole factor used here to determine level within the urban hierarchy. Instead, household energy use was linked to local ecology of each of the major cities in the country. The household consumption of each city was assumed to be similar to that of D a r e s Salaam, Mbeya or Shinyanga. 11 Industrial and commercial energy use was linked only to the industries found in

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Table 1. Base case scenario: assumed growth rates. Sector Dar es Salaam households Mbeya households Shinyanga households Rural households Informal, commercial and industrial sectors Transport and urban services Agriculture

Assumed growth rate (% pa) 5.0 6.0 8.0 2.8

3.0 6.0 5.0

either Mbeya or Shinyanga as no other city has an industrial sector judged to be of a similar level of sophistication as that of D a r e s Salaam. 12 Estimates of energy use in the rural, agricultural and other sectors of the economy, which had been developed for use with prior national energy accounts, complete the estimates of national energy use. In order to develop a scenario, it is necessary both to project demographic, economic and agricultural growth and to estimate how quickly the underlying activities which drive energy consumption will increase over the coming years. Although past trends may be indicative of near-term growth and are easily used to extrapolate growth trends, reliance on historical trends is not always the best way to project probable energy futures. For example, because recent economic growth has been slow, it may not provide a useful key to future energy demand growth. 13 Therefore, in the following analysis, growth rate assumptions have been made consistent with historical trends whenever that method appears appropriate, but have been evaluated and estimated at reasonable levels whenever historical indicators could be misleading. 14 Table 1 summarizes the assumed growth rates used in the primary or base case scenario for this analysis. The population growth rates for the three types of city were taken as approximately equal to the estimated growth rates for these cities between the 1978 and 1988 censuses. The cities in which the household sector resembles that of Dar es Salaam because of the coastal setting were assumed to grow at an exponential growth rate of 5% per year. Those households in Mbeya-like highland cities were assigned a growth rate of 6%, while those in semiarid environments like Shinyanga were given a growth rate of 8%. Rural households were taken to grow at a rate of 2.8% per year, reflecting the overall national population growth rate. For the other sectors of the economy, different growth rates were utilized to represent growth in the physical output of the sector, depending upon the Scenario assumptions.

ENERGY POLICY May 1993

Future energy development in Tanzania Fuel consumption 1400 Other

Charcoal

Firewood 1200

1000

80O

6OO

400

200

o 199o

1995

2000

2005

2010

Figure 1. Base case scenario: fuel consumption.

dynamism generated within the sector. For the informal, commercial and industrial sectors, a low growth rate of 3% per annum was used to represent a slow but steady growth rate. For agriculture, the growth rate was assumed to be 5% per annum, reflecting a more rapid recent growth. Urban services and transport were given the most rapid growth rates, at 6% per year. However, even in these two fast growing sectors, the growth in physical output barely keeps pace with population growth in cities such as Dares Salaam and Mbeya. In the cities modelled after Shinyanga, population growth is assumed to outpace the growth in urban services and transport.

Consumption requirements. The projections obtained from the scenario are presented graphically by fuel in Figure 1 and by sector in Figure 2. Total energy consumption grows at a rate of 3.7% per annum over the 20 year scenario horizon. This growth rate represents a doubling in total energy use over the 20 year time horizon. The most rapid growth occurs in the demand for gasoline and diesel, both fired by the same rapid increase in the demand ENERGY POLICY May 1993

for transport fuels. After transport fuels, the other fuels whose consumption requirements increase most rapidly are kerosene, LPG, coal, charcoal and animal wastes. The consumption of these fuels grows quickly because of the rapid growth of the urban household sector, particularly in wood-short cities, such as Shinyanga. Electricity consumption grows at the relatively slow rate of 4% per annum, reflecting the weakness of the growth in the industrial sector. Turning to consumption by the different sectors of the economy (Figure 2), the fastest growth in consumption takes place in the transport sector, followed by the urban household and service sectors. This is much as would be expected given the growth rates assumed, and the shifts in the consumption of fuels mentioned above. The fuel mixes resulting from these growth patterns are summarized in Figures 3 and 4. The figures demonstrate the overall shifts in energy consumption that would be expected on the basis of increasing urbanization. On the fuel-mix side, there is a slight reduction in the importance of firewood, which is counterbalanced by an increase in charcoal consumption. The relative

527

Future energy development in Tanzania Sectoral consumption lq00 Rural households 1200

Ag. rural ind.

t-r-r=r-r-n ~IIII",, T r a n s p o r t

W

Industry

Urban households Other

1000

800 .o 600

q00

200

1990

1995

2000

2005

2010

Figure 2. Base case scenario: sectoral consumption.

importance of firewood decreases largely as a result of the increase in the importance of kerosene and charcoal. On the sectoral side, the rural share of the energy balance (rural households plus agriculture and rural industry) decreases as a fraction of total energy requirements, largely as a result of the increase in the importance of urban households and transport.

Resource adequacy.

Two resources are required to supply these projected future energy consumption requirements: biomass and petroleum. Additionally, a small quantity of hydropower can supply the electricity needs of the country. The resource requirements for the base case scenario are presented in Figure 5. According to these results, the quantity of biomass needed to supply rural firewood and urban charcoal more than doubles over the 20 year scenario period. The petroleum requirements nearly triple over the same time period. 15 By the last years of the scenario period, coal, natural gas, and hydropower begin to become visible as critical energy resources. The last two of these resources become

528

important for the generation of electricity. 16 The peak power demand is estimated to increase from nearly 300 MW in 1990 to nearly 700 MW in 2010. The most striking component of this future energy scenario is the massive quantity of biomass which will be required to meet projected requirements. In the year 2010, the annual biomass requirement of 1200 million GJ is approximately equivalent to 75 million tonnes of biomass. The nation as a whole seems able to provide the estimated 35 million tonnes required for current consumption with only localized shortages. However, the projected doubling of demand will seriously tax the biomass production systems currently in place, expanding their spatial range and threatening their continued viability. In summary, the base case scenario assumes that the Tanzanian national energy system will remain relatively similar to its present structure. The changes which occur are shifts towards urban fuels and urban consumption, away from firewood use and rural consumption. However, any changes envisaged in the scenario will remain slight. For the next 20 year planning horizon, the development of

ENERGY POLICY May 1993

Future energy development in Tanzania Fuel mix

1.0 0.9

0.8 0.7

0.6 e-

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"

0.4 0.3

0.2

0.1

1990

[ •

1995

Firewood

I

Charcoal

Kerosene

~

Diesel/petrol

2000

2005

2010

Other J ~

Electricity

Figure 3. Base case scenario: fuel mix.

the Tanzanian national energy system is expected to remain largely dependent upon biomass and petroleum fuels, reflecting not only the general weakness of the industrial sector in comparison to the household sector, but also the continued viability of the country's hydropower resources which obviates heavy reliance on petroleum fuels for generation.

Sensitivity to growth rate assumptions In order to test the sensitivity of the future energy system to the different assumptions employed, two alternative scenarios were developed, one of which posited a higher economic and urban growth rate than the base case, while the other assumed lower economic and urban growth. The base case scenario is thus regarded as a moderate growth scenario. Assumed annual growth rates employed for the fast-growth scenario are all 2% per year higher than ENERGY POLICY May 1993

in the base case. For the slow-growth scenario they are all 2% per year lower. The results of these two scenarios are presented graphically alongside those of the base case in Figure 6. For the fast growth scenario, overall energy consumption is 8.3% higher than it is in the base case. For the slow growth scenario, overall consumption is 5.7% lower than in the base case. What this means is that even with notably higher and lower growth rates, the projected level of future energy consumption will just about double over the coming 20 years. Due to the large share of fuelwood in the total energy balance, the national energy system appears to be relatively insensitive to changes in the anticipated levels of urban and economic growth. Figure 7 demonstrates the differences between the three scenarios with respect to electricity, petroleum fuels and charcoal. The largest difference between

529

Future energy development in Tanzania S e c t o r mix

1.0 0.9 0.8 0.7 0.6 "~ 0.5 C o

I.

,,

0.4 0.3 0.2 0.1

1990

I

1995

Rural households

~

Ag. rural ind.

Transport

~

Industry

2000

2005

1~

2010

Urban households Other

Figure 4. Base case scenario: sectoral mix.

the scenarios is anticipated to occur in the case of petroleum fuels for transport and charcoal for urban households. As all scenarios postulate a similar development path, these differences will constitute differences in degree, not differences in kind. The changes in Tanzania's future energy system will depend to a large extent upon what happens in general to the Tanzanian economy. Shifts are primarily attributable to the increased need for transport across all sectors and the increasing urbanization of the population. With nearly 85% of the population presently living in the rural areas, even the most rapid urbanization rate projected will still leave 70% of the populace living in the rural areas 20 years hence. Dramatic investments in urban based industries would be necessary for urbanization to take place on this scale. Even so, the bulk of GDP would still be contributed by agriculture, which would also continue to provide employment for the majority of

530

Tanzanians. Although other scenarios may hypothesize more rapid industrialization and urbanization for Tanzania than that presented here, the small sectoral shifts presented in these scenarios are more likely to present a realistic assessment of Tanzania's future.

Energy implications of urbanization. Before turning to the scenario data to identify the relationship between energy consumption in its various forms and urbanization, it is useful to examine the historical record in this regard. Table 2 presents population changes between last two censuses together with changes in commercial energy consumption between those two years. According to the population estimates, the urban population of Tanzania increased by 58% between 1978 and 1988. This amounted to an increase in urbanization, from 13% to nearly 16%. During the same time period, electricity con-

ENERGY POLICY May 1993

Future energy development in Tanzania 1600

1400

Biomass

Petroleum

Coal

Natural gas

Hydropower

1200

1000

r-

._o

800

600

400

200

1990

1995

2000

2005

2010

Figure 5. Base case scenario: total resource requirements. sumption increased by 80% and overall petroleum consumption increased by almost 6%. This latter figure masks tremendous variations between the different petroleum fuels. In general, while consumption of those fuels used by transport (gasoline and diesel) increased, those fuels primarily used in industry (industrial diesel and fuel oil) decreased. This reflects the fact that transport growth was not as sluggish as industrial sector growth. 17 While gasoline and diesel consumption increased by 18% and 30% respectively, kerosene, industrial diesel and fuel oil consumption decreased by 4%, 33% and 7% respectively. In overview, the trends from the past decade show that a modest increase in the level of urbanization was accompanied by a large increase in electricity consumption, partially attributable to grid expansion and consolidation, and a slight increase in the consumption of petroleum fuels, partially attributable to a slight rise in income. For the scenario period, the steady increases in both urbanization level and economic growth can be expected to have an even more dramatic impact on energy consumption. TM The data presented in Table

ENERGY POLICY May 1993

3 reflect precisely this effect. According to the base case scenario's projections, the level of urbanization will increase from 16% to 29% during the 20 years from 1990 to 2010. During that same period, total energy use is expected to increase by 106%, electricity consumption by 162%, petroleum fuel consumption by 188% and woody biomass consumption by 110%. Although the variations between the different fuels are not so dramatic as those in the historical data, there is a wide range across the different petroleum fuels, from 92% for fuel oil to 315% for diesel. For woodfuels, the projected increase for firewood and charcoal (92% and 188%) differs by a factor of two. In these projections, the national energy requirements increase significantly as a result of increases in urbanization levels. The data in Table 4 compare more explicitly the percentage increases in energy consumption associated with increases in urbanization from the historical and scenario data. During the period from 1978 to 1988, a 1% increase in urbanization level was accompanied by a 31% increase in electricity use and a 2% increase in overall petroleum use. Given the

531

Future energy development in Tanzania

/ 1/400

/ 1300

/ 1200

/ 1100

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/ 800

/ 700

/

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1990

I

1995

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2000

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2010

Figure 6. Scenario projections: total energy use. weakness in the growth of the industrial and transport sectors, this represents a remarkable increase in conventional fuel use. For the scenario projections, a 1% increase in urbanization levels is anticipated to lead to an overall 8% increase in total energy consumption, a 12% increase in electricity use, a 14% increase in petroleum use, and an 8% increase in woody biomass requirements. With respect to transport fuel consumption, the estimate yields a rise of 20%; with respect to charcoal, consumption rises by roughly 14%. Although the scenario figures are notably higher than the historical figures (except in the case of electricity), they are not inconsistent with what might be expected on the basis of positive industrial-sector growth instead of the negative growth that has occurred throughout the recent historical period. The growth of the urban household sector leads to changes from fuelwood to charcoal, kerosene and electricity. Expansion of

532

vehicular transport requires at least a commensurately greater consumption of petroleum fuels. If industrial growth occurs, it could be anticipated to lead directly to an increase in fuel oil and electricity consumption and indirectly to further increases in the demand for transport fuels. Clearly, urbanization, even with limited industrial growth, requires a dramatic intensification of energy use at the low levels of urbanization found in Tanzania.

Policy interventions The energy future scenarios presented in the preceding paragraphs highlighted three major trends which will inform Tanzania's energy future: • a dramatic increase in the consumption of biomass resources brought on by a shift from firewood to charcoal;

ENERGY POLICY May 1993

Future energy development in Tanzania 140 Slow growth

~

Base case

~

Fast growth

120

100

80 r-

.2 o _

60

40

20 ¸

of Electric

Diesel and gas

Kerosene

Other

Charcoal

Figure 7. C o m p a r i s o n of scenario p r o j e c t i o n s for 2010: electricity, p e t r o l e u m fuels and charcoal.

Table 2. Changes in energy consumption accompanying urbanization.

Population 25 largest cities Smaller cities Total urban Total population % urban National electricity consumption (106 kWh) Total petroleum fuels (103 tonnes) Petrol/gasoline Diesel (gas-oil) Kerosene Industrial diesel Fuel oil

1978 estimate

1988 estimate

% change 1978--88

1 775 482 2 257 17 036 13.25 588.0 630.0 105.7 233.0 76.8 53.0 135.8

2 811 764 3 576 22 533 15.87 1060.1 665.2 124.6 301.9 73.8 35.5 126.0

58.4 58.4 58.4 32.3 2.6 80.3 5.6 17.8 29.6 - 3.9 -33.0 -7.2

218 703 921 498

954 604 a 558 758

aSignifies that the population in the smaller urban areas was not yet available for 1988, but was estimated by using the same ratio of large town to small town population as existed for 1978. Estimates for aviation gasoline and Jet A-1 were unavailable for both years and so were eliminated.

Sources: Population data were obtained from Census Reports. Electricity data for 1978 were obtained from the Central Statistical Bureau, Statistical Abstract 1987, Government Printers, Dar es Salaam, 1989. Electricity data for 1988 were obtained from TANESCO, Annual Report, Government Printers, D a r e s Salaam, 1988. Petroleum data for 1978 were obtained from M.J. Mwandosya and M.L.P. Luhanga, Energy Resources and Flows and End-Uses in Tanzania, D a r e s Salaam University Press, Dar es Salaam, 1983. The 1988 data were obtained from the figures presented by the Tanzania Petroleum Development Corporation in the 1991 budget speech. The scenario estimates are obtained from project estimates.

ENERGY POLICY May 1993

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Future energy development in Tanzania Table 3. Scenario estimates of energy use and urbanization.

Population 25 largest cities Smaller cities Total urban Total population % urban Total energy consumption (106 GJ) National electricity consumption (106 kWh) Total petroleum fuels (106 GJ) Petrol/gasoline Diesel (gas oil) Kerosene Fuel oil Woody biomass (106 GJ) Charcoal Firewood

1990 estimate

2010 estimate

Estimated % change 1990-2010

3 090 935 840 462 a 3 931 397 23 930 434 16.4 589.6 1255.5 43.62 4.91 16.4 6.8 6.6 595.2 24.82 480.9

9 943 203 2 703 676 12 646 879 42 997 755 29.4 1215.8 3294.4 125.45 17.4 68.0 18.7 12.7 1252.5 71.50 923.0

221.7 221.7 221.7 79.7 13.0 106.2 162.4 187.6 254.4 314.6 173.0 92.4 110.4 188.1 92.0

aSignifies that the population in the smaller urban areas was not yet available for 1988 or 1990, but was estimated by using the same ratio of large town to small town population as existed for 1978.

Sources: The 1990--2010 figures are obtained from project scenario estimates. Woody biomass refers to biomass resources going into both firewood consumption and charcoal production and consumption.

a steady rise in the demand for transport fuels; and • a gradual but steady increase in the demand for electricity.

•

The magnitude and timing of each can be affected by public policy. Most initiatives relevant to these trends originate or fall within the purview of the Tanzanian Department of Energy Development. As noted elsewhere in this issue, the framework established by the National Energy Policy sets out seven broad objectives:

open to the government of Tanzania. In particular, three different policy scenarios will be presented. The first simulates an all out urban fuel-modernization programme designed to replicate a deliberate substitution of modern fuels for traditional fuels. The second assumes a policy decision to use electricity pricing as a rationing device in order to encourage households and industries to make more judicious electricity consumption decisions. The third develops a composite scenario, combining elements of the first two scenarios with other feasible policy initiatives in order to demonstrate how Tanzania's

• to exploit the country's abundant hydro resources;

• to develop and utilize other indigenous resources such as natural gas and coal; • to intensify petroleum exploration; • to arrest the depletion of woodfuels; • to ensure the reliability and security of supplies; • to minimize fluctuations in energy prices; • to develop Tanzania's human resources energy sector. 19

energy

energy and in the

Through steering investments, carefully setting energy prices, and promoting energy-efficient equipment, the Energy Department can play a major role in influencing the future of energy development in Tanzania, both directly and indirectly. This section presents the results of an analysis simulating different energy development options

534

Table 4. Percentage change in fuel consumption accompanying a 1% change in urbanization level, a

Total energy consumption Electricity All petroleum fuels Gasoline Diesel Kerosene Industrial diesel Fuel oil Woody biomass Charcoal Firewood

Historical estimate 1978--88 na 30.9 2.1 6.8 11.4 - 1.5 - 12.6 -2.7 na na na

Scenario estimate 1990-2010 8.2 12.5 14.4 19.6 24.2 13.3 na 7.1 8.5 14.5 7.1

alndustrial diesel estimates were not kept separately for the scenario data. In addition, no meaningful data for historical estimates of wood and charcoal consumption exist, so they and the total energy consumption are considered not available as well.

ENERGY POLICY May 1993

Future energy development in Tanzania

energy future might be changed through policy interventions. Modernization scenario Some observers have argued that the best way for poorer countries to pursue energy development is to divert massive investments to their electricity sector. The ripple effects from expanded electrification are envisaged as being sufficiently positive and significant to stimulate the overall development of the nation. This position still has proponents, despite many examples of lessons to the contrary. Such suggestions ignore both the lessons of energy development in other countries and the complex nature of energy systems as social-technical systems. Although several cases of rapid national electrification exist, in most cases a generation or two has been required to develop the human resources and skills necesary to manage a national-level grid based energy system. 2° The scenario developed here demonstrates the level of investment in the energy system which would be necessary to provide all urban dwellers with energy supplies equivalent to those available in industrialized countries. The modernization scenario is designed to test the impact of the electrification of Tanzania's urban households on the consumption of woodfuels. It assumes that all urban households will rely upon electricity and petroleum fuels for cooking, lighting and water heating by the year 2010, the end of the scenario period. By then firewood and charcoal will be used only in a small percentage of households to meet these basic end uses. No attempt has been made to substitute modern fuels for firewood for beer brewing and other minor end uses. Nor has any attempt been made to alter the end-use fuel-mix pattern of other sectors. The modernization scenario focuses only on the household sector, and only upon the primary end use of that sector, cooking. It seeks to achieve the fourth objective of the national energy policy, arresting the depletion of woodfuels, while improving the living standards of urban Tanzanians. The results of the modernization scenario are compared to those of the base case scenario in Figure 8. The results clearly demonstrate two not unexpected patterns when compared to the base case: a decrease of 53% in charcoal consumption and an increase in electricity consumption of 32%. Petroleum consumption decreases slightly ( - 0 . 7 6 % ) as electricity begins to replace kerosene for household uses. The overall requirement for woody biomass resources decreases by 15% from the base case to this scenario. Thus, the modernization scen-

ENERGY POLICY May 1993

ario has the anticipated effects of increasing electricity consumption and decreasing woodfuel use. However, the cost of this household-sector modernization is very high. The most significant cost is attributable to the installation of new generation capacity. The 32% increase in generation also requires a 32% increase in installed capacity, from 672 MW for the year 2010 in the base case to 890 MW in the modernization scenario. Given the total cost of the new generation projects facing Tanzania, this additional 218 MW of capacity will cost approximately US$200 million. 2~ This large injection of capital will most probably have to be diverted from investment funds available to other sectors of the economy. Additional to these capacity costs are the gridextension and connection costs for all households not already connected to the grid. T A N E S C O claimed to have 132 700 household customers (or 19% of all urban households) connected to the grid in 1990. 22 Given the urbanization assumptions found in the base case scenario, an additional 160 000 households will have to be connected to the grid simply to maintain the same percentage of coverage at the end of the scenario period. In order to connect all urban households to the grid, an additional 1.4 million households will have to be connected to the grid over the coming 20 years. Assuming the current cost to the electric utility of connecting one household to the grid is approximately of the order of US$100 per household, then this policy would require an additional US$140 million for implementation. However, the utility's investment costs are only a small fraction of total electrification costs. The costs to individual households of wiring houses and purchasing the necessary electrical appliances can easily double this amount, making total costs almost equal to US$300 million over the course of the 20 year scenario period. It should be noted that this estimate may exaggerate the costs, as many households are tenants who rent rooms in a larger house from the owner. In such cases, one official connection may serve a multitude of households. According to the data gathered as part of the household energy survey, over 40% of households in D a r e s Salaam, 24% of Mbeya households, and 49% of Shinyanga households were able to utilize electricity. When generalized for all cities in Tanzania, this would mean that approximately 269 000 urban households are served by TANESCO. This implies that the average electricity connection serves two functional households. Given this finding (and if we assume that there is no unpacking of households), the target number of households to be

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Future energy development in Tanzania

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Charcoal

End-use consumption

Figure 8. Modernization versus base-case scenario, 2010. connected to the grid would be 700 000, which would cost the utility US$70 million. 23 Wiring and appliance costs to be met by householders would again double this figure. If unpacking of households occurs, then the costs of electrification will approximate the higher costs discussed earlier. In any event, this exercise establishes a range of the private and public costs of such an ambitious electrification programme. The modernization of Tanzania's urban household energy sector would have a positive impact on the country's forest supplies. The scenario projections estimate that national firewood requirements would be reduced by nearly 12.5 million tonnes of firewood annually by the year 2010. However, the cost of this additional interfuel substitution would be between US$340 and US$480 million in addition to the US$200 million already scheduled to be invested in capacity expansion alone by that year. During a

536

period in which the financing of electricity system expansion appears to be a major hurdle in energy development, this indicates that such a modernization programme is probably not viable. 24 However, if viewed as a firewood conservation programme, the programme saves firewood at a cost of between US$2 and US$3 per tonne of firewood conserved, depending upon interest rates and payback period. 25 This is actually a rather inexpensive method of making one tonne of firewood available, as afforestation costs are estimated to produce firewood at about US$10 per tonne. The financing for such an ambitious electrification programme is unlikely to be available to Tanzania for the foreseeable future. As a result, traditional fuels must be acknowledged as continuing to play an important role in the urban energy budget of Tanzania. Care should be exercised to carefully manage and augment existing forest supplies, for these will

ENERGY POLICY May 1993

Future energy development in Tanzania

continue to bear the burden of Tanzania's household energy needs. Limited urban electrification and fuel modernization can decrease the burden somewhat, but they cannot eliminate it entirely. Marginal cost pricing scenario

African energy authorities have shown a reluctance to use price as a rationing device. Although this is no different from the situation in other state-run electricity systems, a tendency remains to regard electricity as an entitlement ie everyone connected to the grid thinks of himself or herself as being entitled to use electricity. In Tanzania, electricity consuming households pay a small fraction of the cost to society of supplying that electricity. 26 Although this is accomplished through a cross-subsidy from industrial consumers, the average price paid per kilowatt hour across the range of all consumers was US$0.05 in 1990. 27 This figure is significantly lower than the long-run marginal cost ( L R M C ) price of electricity, estimated at US$0.08/kWh. 28 Although the recent fall in interest rates may have some impact on the price of electricity, it is unlikely to fall much below this level in the immediate future. If this L R M C price were enforced throughout the electricity system, a twofold effect on energy consumption patterns would result. First, downward pressure on the consumption of electricity would be exerted, and consumers would be encouraged to conserve. Second, it would encourage consumers to substitute other fuels for electricity whenever technically possible and economically attractive to do so. In addition to these direct effects, it would also improve the fiscal position of T A N E S C O , to the extent that it was able to collect these additional revenues. 29 In order to test the impact of this policy, two changes were made in the energy accounts. First, the average price of electricity to all consumers is set to increase in two steps to US$0.08/kWh by the year 2000. After this, it is allowed to rise at a rate of 1% per annum until the end of the scenario. Second, electricity use and the use of substitute fuels are assigned price elasticities. Although no reliable estimates of the elasticity of demand for electricity in Tanzania exist, estimates from other countries indicate that savings attributable to price effects would be substantial. 3° For the purpose of this analysis, the elasticity estimates are selected deliberately to underestimate the savings attributable to the feedback from electricity price increases. For all electricity demands, the own-price elasticity of demand is set at - 0 . 2 . Those fuels which can serve as viable substitutes within a given sector are assigned a

ENERGY POLICY May 1993

cross-price elasticity of +0.1. 3~ The prices of all other fuels are assumed to remain constant in real terms. The purpose of this analysis is not to make a definitive statement about the role of prices in determining electricity consumption; rather, it is to provide an indicator of how the energy picture might change given a shift toward L R M C pricing over the coming decade. The outcome of this scenario is compared to the results of the base case in Figure 9. Electricity requirements for the year 2010 decrease by 9.6%. In response to this decrease in electricity consumption, there is a corresponding increase of 3% in kerosene consumption, an increase of 3% in fuel oil consumption, an increase of 2% in L P G consumption, and an increase of 4.5% in charcoal use. The decreased electricity generation needs mean that installed capacity which was projected to reach 673 MW will only go as high as 608 MW, a saving of nearly 10%. This 65 MW reduction in forecast power requirements can be capitalized to a savings of about US$60 million. In addition, the revenue generated as a result of the increased tariff (taking into account decreased consumption) is on the order of US$100 million per annum in 2010 alone. Although this must be balanced against the cost of producing the electricity, the fiscal position of T A N E S C O would doubtless be enhanced greatly through the pursuit of this policy option. Although the policy of increasing the price of electricity to approximate the long-run marginal cost appears to be beneficial to the country as a whole, its feasibility is questionable. It should be noted that the scenarios represent adoption of L R M C pricing as an across the board price increase of 60% in real (constant dollar) terms. In actuality, it would probably make more sense to apply it as a smaller increase for those sectors bearing the cost of the subsidy (industrial and commercial consumers) and a larger increase for those consumers benefiting from the subsidy (largely households). Since household consumers use an average of between 200 and 300 kWh/month, the lifeline subsidy might be reduced to this level from the current effective level of 1000 kWh/month. 32 The average price can readily be raised to desired levels with minor impacts on the true socially beneficial component of the lifeline tariff. Industries and businesses would have to pay more, but not as much proportionately as would high income household consumers who can afford electricity intensive appliances. The shift to a L R M C tariff structure is clearly a policy option with some desirable impacts, but it requires careful consideration and analysis prior to implementation.

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Future energy development in Tanzania

+4.53

70

/

ooY / 50

~" .2

40

30

IC scenario e scenario o Electric

Petrol

Diesel

Kerosene

Charcoal

End-use consumption

Figure 9. LRMC versus base-case scenario, 2010.

Achievable futures The final policy scenario differs from the first two in that it incorporates more than a single policy effort. It is designed to demonstrate the extent to which a comprehensive energy policy might be expected to reduce woodfuel demand, to rationalize the electricity allocation through improved pricing, and to improve technical efficiency in the transport system and the electricity distribution system. It incorporates initiatives on both demand and supply sides, and it is designed to demonstrate what the Energy Department can expect to achieve with an ambitious but realistic policy over the coming 20 years. Three policies are incorporated on the demand side. First, LRMC pricing was continued as in the previous scenario. As a result, it is assumed that electricity consumption is decreased through ownprice effects and the consumption of substitute fuels

538

increased through substitution effects. Second, consumption by charcoal stoves used for cooking in the household sector is decreased by 25% in all households by the year 2010. For this to occur, this assumption implies that the improved ]iko or charcoal stove programme has managed to disseminate a stove which uses, on average, 25% less charcoal to cook the same quantity of food as was cooked previously. 33 The third demand-management policy that is incorporated involves a 25% decrease in the energy required for road transport by the year 2010. 34 This rather ambitious target is realizable as the outcome of a number of different policy initiatives. Improved road resurfacing is one component of an increased transport efficiency programme, especially as transport fuel is wasted currently through the avoidance of potholes on Tanzanian roads. Road congestion in Dares Salaam can also be

ENERGY POLICY May 1993

Future energy development in Tanzania

80 -I0.8~ -62.5~ 70

60

50

40

+3.0~

30 -16.1~ -9.6~ 20

10 y

Feasibility policy scenario

Base-case scenario Electric

Petrol

Diesel

Kerosene

Charcoal

End-use consumption

Figure I0. Feasible policy versus base-case scenario, 2010.

seen to contribute a significant waste of fuel, and any efforts to reduce this congestion would also improve transport efficiency. Finally, the improved efficiency incorporated into newer automobiles through weight reduction and better engine design can also be expected to contribute to reduced energy requirements for transport. On the supply side, two important policy initiatives are incorporated into the scenario. The first involves the reduction of electricity transmission and distribution losses, currently estimated at slightly more than 20% of total production to 15% by the year 2000, and 12% by the year 2010. This reduction in transmission and distribution (T&D) losses (both technical and non-technical losses) is an achievable goal, and builds upon existing programmes to improve efficiency in the electric power sector. The second supply-side initiative involves improving the efficiency of charcoal conversion. At present, it is

ENERGY POLICY May 1993

estimated that virtually 100% of the charcoal produced in the country is produced in traditional kilns, estimated to be 22% efficient in energy terms. By the year 2010 this policy goal would have about 40% of the nation's charcoal requirements produced in an improved efficiency kiln, such as the Casamance, estimated at an efficiency of 41%. Although the 40% target is ambitious, it is certainly achievable. The results of this policy scenario are compared to those of the base case in Figure 10, and the results of all scenarios are summarized in Table 5. In overall terms, total final energy consumption is reduced by only 1.3% in the year 2010. However, this very small overall reduction masks several significant decreases in strategic sectors. The total final consumption of electricity is reduced by 9.6%, and the final consumption of charcoal is reduced by 10.8%, with no notable decrease in energy service in either case. Consumption of gasoline and diesel are reduced by

539

Future energy development in Tanzania Table 5. Policy scenario versus base case scenario results.

Fuel/resource

Final energy consumption (106 GJ) Electricity Petrol Diesel Kerosene Charcoal Energy resource requirements Total petroleum imports (103 t) Total woodfuel use (106 t) Wood used for charcoal production (106 t) Peak power demand (MW)

Base case scenario

Modernization scenario

LRMC policy scenario

Feasible policy scenario

2010

2010

2010

2010

11.9 17.4 68.0 18.7 71.5

15.7 17.4 68.0 17.4 33.7

10.7 17.4 68.0 19.3 74.7

10.7 14.6 62.5 19.3 63.8

2995.0 78.3 20.6 672.9

2973.5 66.2 9.7 889.6

3018.9 79.2 21.5 608.0

2820.9 72.6 14.9 554.0

16% and 8% respectively, when compared to the estimated base case consumption for year 2010. In overall terms, the changes initiated in this scenario result in an estimated 5.8% decrease in total petroleum fuel requirements in the year 2010. Electricity generation needs falls from 4100 million kWh to 3700 million kWh, a reduction of 17.67/o. Power requirements are reduced from 673 MW to 554 MW due both to reduced consumption from price increases and to improved transmission efficiency. The wood required for charcoal production is estimated to fall by 27.6% due to the improvements in kiln efficiency. Woodfuel requirements including reduced charcoal consumption needs, reduced wood for charcoal production needs and unaltered firewood consumption requirements - fall by 7.8% when compared to base case estimated consumption. This policy scenario achieves notable energy savings when compared to the base case scenario. Its benefits can be measured in terms of foreign exchange savings from both reduced petroleum imports and reduced loan repayments for power plant construction. In addition, lower woodfuel requirements for charcoal production and consumption will have benefits measurable in terms of reduced consumption of forest resources. Whether reducing the woodfuel needed to meet urban charcoal demand or reducing transmission losses to supply urban electricity users, all of the initiatives included in this scenario are focused on urban energy needs. None of these policy options represents a radical departure from current policy directions. The net benefits appear to be sufficiently positive to justify the efforts and financial investments required to bring them about. One issue not immediately apparent involves the rural household sector. Attention and effort will be required to reduce its consumption to a manageable level given available forest resources. Rural households alone account for over

540

60% of current national energy requirements. In spite of the rapid urbanization projected to occur over the planning period, rural demands combined are expected to account for over 80% of national energy needs by the year 2010. In the policy scenario, rural consumption of woodfuel is expected to constitute over 75% of the national woodfuel consumption. Charcoal needs can be controlled through policy efforts focusing on the urban areas. Nevertheless, control of total woodfuel consumption and reducing the impact of overall forest harvesting will require efforts focusing on rural, as well as urban, production and use.

Conclusions: running fast to stay put This assessment of future energy needs demonstrates that with a continuation of historical urban growth rates, the energy needs of the transport, industrial and urban household sectors are going to increase the most rapidly over the coming years. While the role of fuelwood will decrease, that of electricity, liquid fuels and charcoal will increase largely as a reflection of urbanization. In resource terms, petroleum fuels, woodfuel and to a lesser extent, hydropower will remain the suppliers of Tanzania's primary energy supplies. Over the projection period, a 1% increase in urbanization is estimated to lead to a 12.5% increase in electricity consumption, a 14% increase in petroleum consumption and an 8.5% increase in woodfuel consumption. More rapid industrialization will make for a more dramatic increase in the demand for traditional fuels. Urbanization leads to a marked rise in national energy needs. If urbanization rates differ from those in these scenarios, these shifts may vary in degree, but not in kind. Three policy programmes were examined in detail, making use of scenarios. Policy initiatives can have a significant impact on this energy future, but

ENERGY POLICY May 1993

Future energy development in Tanzania

are unlikely to alter it dramatically. Although investments in the energy system are necessary to meet the energy needs of urbanization, the level of investment must in some way be commensurate with the desired quality of urban energy service. For example, an attempt to completely electrify the urban household sector might make significant progress toward reducing charcoal requirements. However, the costs, measured in terms of connection costs, grid extension costs and capacity costs, would be enormous. Although the environmental objective of reducing the unsustainable harvesting of forest resources for charcoal is implicit in this policy, such an initiative would be economically disastrous, drawing an inordinate share of investment out of other deserving sectors into the urban electricity system. In contrast, a more feasible policy would be one intended to raise the average price of electricity charged to consumers to a price closer to the marginal cost of electricity. This would serve not only to decrease expected consumption while increasing consumption of substitute fuels, but it would also help TANESCO finance its future expansion needs by forcing the consumer to pay the complete costs of increased electricity supplies. Getting users to meet the energy costs of urbanization is an attractive policy option as it reduces the financial burden of the public sector. Clearly, this policy bears greater investigation, particularly to mitigate potentially disastrous economic consequences for industry and poorer urban households. Finally, a feasible set of policies designed to reduce charcoal consumption, increase efficiency in the transport sector, increase electricity prices to their marginal cost levels, reduce electricity T&D losses, and improve the efficiency of charcoal production was tested, and found to have the desired effects. These efforts all have immediate positive benefits in the form of reduced petroleum imports, reduced forest resource harvesting, and reduced electricity generation requirements. Under this scenario, the full energy costs of urbanization can be met through a combination of increased user tariffs, cost-effective investments in improved energy efficiency, and the production of electricity through natural gas and hydroelectricity. Such an energy future is environmentally friendly and consistent with improved standards of living for both urban and rural populations. By focusing attention on these achievable efforts, the Energy Department stands a greater chance of realizing its policy goals and making both urbanization and energy development sustainable in Tanzania.

ENERGY POLICY May 1993

The authors would like to thank Charlie Heaps, Don Jones, Mike Lazarus and Tom Wilbanks for helpful comments received on an earlier version of this paper. Bashiri Mrindoko assisted with the LEAP database employed in this paper. The final contents remain the responsibility of the authors.

1j.R. Harris and M. Todaro, 'Migration, unemployment, and development: a two-sector analysis', Economic Development and Cultural Change, Vol 60, 1970, pp 126-142. 2Johannes F. Linn, 'The costs of urbanization in developing countries', Economic Development and Cultural Change, Vol 20, No 3, 1982, pp 625-648. 3Richard Stren, 'The ruralization of African cities: learning to live with poverty', in R. Stren and C. Letemendia, eds, Coping with

Rapid Urban Growth in Africa: An Annotated Bibliography, Centre for Developing-Area Studies, Bibliography Series, No 12, McGill University, Montreal, 1986. 4Harry W. Richardson, 'The costs of urbanization: a four-country comparison', Economic Development and Cultural Change, Vol 35, No 3, 1987, pp 561-580. 5Paul Bairoch, Cities and Economic Development: From the Dawn of History to the Present, translated by Christopher Braider, University of Chicago Press, Chicago, IL, 1988. 6jeffrey Williamson, 'Migration and urbanization', in H. Chenery and T.N. Srinivasan, eds, Handbook of Development Economics, Elsevier Science Publishers, New York, 1988. 7R.H. Hosier, 'Urban environmental management in Eastern Africa', Environment and Planning A, Vol 24, 1992, pp 12311254. 8R.H. Hosier, 'Urban development and resource management: a brief history of three Tanzanian cities', Stockholm Environment Institute, Stockholm, 1993 (abstract in this issue of Energy

Policy). 9R.H. Hosier, 'Urban energy systems in Tanzania: a tale of three cities', in this issue of Energy Policy. ~°Gerald Leach, 'The energy transition', Energy Policy, Vol 20, No 2, 1992, pp 116-123. l~Bagamoyo and Tanga were grouped with Dar es Salaam for household energy consumption because their physical environments are similar. The households in Arusha, Moshi, Iringa, Tabora, Songea, Morogoro, Kigoma, Mtwara, Musoma, Sumbawanga, Lindi, Korogwe, Ifakara, Bukoba, and Newala were assigned household energy consumption patterns similar to those of Mbeya. Mwanza, Dodoma, Singida, Mpwapwa, Tunduru, and a number of others were given household energy consumption patterns like those found in Shinyanga. 12Mwanza, Tanga, Morogoro, Moshi, Arusha, Tabora, Dodoma, Iringa, Mtwara and Musoma were assumed to exhibit industrial sectors similar to that of Mbeya. Kigoma, Songea, Sumbawanga, Singida, Mpwapwa, Lindi, Korogwe, Bukoba, Ifakara, Newala, Tundura and Bagamoyo were considered to be like Shinyanga. For those firms which had audit data available, their accounts were inserted independently. For example, all three cement factories in the country (Wazo Hill Portland Cement in Dar es Salaam, Mbozi Cement Factory in Mbeya, and Portland Cement in Tanga) were individually included. Some other industries which had been audited previously were included separately in the database. 13Although recent economic growth has been negative, such negative trends may not provide a good basis for projecting energy consumption as a function of economic activity. However, the fact that energy consumption has been rising through this period of negative economic growth sheds interesting light on the relationship between economic growth and energy consumption. a4It should be borne in mind, however, that the growth rates used are meant to be projections of changes in physical output, not necessarily the economic value of that output. That is to say, they assume that the output:energy ratios remain constant, and that the relationship between physical output and the economic value

541

Future energy development in Tanzania of that output remain constant as well. Variations in terms of trade are ignored. lSThese petroleum requirements must be met increasingly through the importation of refined products as the capacity of the TIPER refinery will soon be exceeded by the rapid increase in the demand for petroleum products. 16In the early scenario years, hydropower does not play a large role in generating electricity both due to the downtime forced upon the plants as part of their rehabilitation and the severe drought which has affected all of southern Africa. Natural gas from the off shore fields at Songo Songo is anticipated to become available for electricity generation in the period between 1995 and 2000. Note that the importance of hydropower would be dramatically emphasized if the convention of measuring the resource requirements of hydroelectricity as the comparable level of thermal efficiency, instead of as being 100% efficient, as is the convention within the LEAP programme. See J. Dunkerley, 'Understanding energy balances', in W. Ramsay, ed, Bioenergy Planning in Developing Countries, Westview Press, Georgetown University Center for Strategic and International Studies, 1985. 17During the 1978-88 decade, total Tanzanian GDP (measured in constant 1976 Tsh) increased by nearly 20%, or at an average annual rate of approximately 2% per year. However, the value of the output of the manufacturing industry sector decreased by 17.2% when measured in constant 1976 Tsh ( - 1 . 9 % per annum), and the value of the output of the transport sector decreased by about 2.8% in constant 1976 Tsh ( - 0 . 2 % per annum). The same figures when measured in current US dollars at the official exchange rate were - 2 . 7 % per annum for GDP, - 7 . 2 % per annum for manufacturing, and - 4 . 2 % per annum for transport. For economic trend data, see Economic Research Bureau of the University of D a r e s Salaam, Tanzanian Economic Trends: A Quarterly Review of the Economy, Vol 2, No 4, D a r e s Salaam: University of D a r e s Salaam, various years. 18For the scenarios no sectors were assumed to demonstrate negative growth trends. 19Ministry of Water, Energy and Minerals, The Energy Policy of Tanzania, Government Printers, Dar es Salaam, 1992. See also M.J. Mwandosya and M.L. Luhanga, 'Energy and development in Tanzania: issues and perspectives', in this issue of Energy

Policy. 2°For an outstanding discussion of electrification in the context of Western industrialized countries, see Thomas P. Hughes, Networks of Power, Johns Hopkins Press, Baltimore, MD, 1983. For an analysis of the Swedish energy policy options which brings in this perspective of socio-technical systems, see Arne Kaijser, Arne Mogren and Peter Steen, Changing Direction: Energy Policy and New Technology, Statens Energiverk, Stockholm, 1991. 21The price of new generation capacity for Tanzania varies tremendously across projects. On the low end of the range are US$0.292 × 106 per MW for the rehabilitation of Pangani Falls and US$0.718 × 106 for a gas fired plant in D a r e s Salaam (160 MW, assuming that the wellhead and pipeline to D a r e s Salaam are already built). On the high end of the range is Mpanga hydropower project (160 MW) at US$1.58 × 106 per MW, Rusomo Falls (80 MW) at US$1.5 × 106 per MW, and the redevelopment of Pangani Falls (42.5 MW) at US$2.1 × 106 per MW. The figure of US$1 × 106 per MW is used in the text for convenience. For more details, see Ministry of Water, Energy, and Minerals, Energy Master Plan and Programme (1990-2005), Ministry of Water, Energy, and Minerals, D a r e s Salaam, 1991. 22These data on the number of connections are obtained from TANESCO records. The US$100 per connection is simply an approximate translation of Tsh35 000 shillings per household, the

542

current TANESCO connection fee. In fact, this fee is only the amount charged to domestic consumers, not the entire cost to TANESCO of an average connection. It also fails to include internal wiring costs to be met by the households. 23The term unpacking of households refers to the process by which the demand for living space by households expands as their income rises. As household incomes rise, they are likely to move out of sublet quarters into their own private quarters which are not subdivided. This means that the actual figure for the number of households requiring connection to the grid will be somewhere between the two figures in the text. 24In total terms, there is estimated to be a shortfall of about US$ 10 billion annually to finance the electric power sector in developing countries. The total annual financial flow to developing countries is estimated at US$41 billion: see Andrew Barnett, 'The financing of electric power projects in developing countries', Energy Policy, Vol 20, No 4, 1992, pp 326-334. 2SThe estimated figure of between US$2 and US$3 per tonne of firewood saved is derived from the amortization of the incurred debt over a payback period of 20 years at 5% interest. The annual debt plus interest payment is then divided by the number of tonnes of firewood saved annually, 12.5 million, to get the costs ~6er tonne of conserved firewood. R.H. Hosier and W. Kipondya, 'Urban household energy use in Tanzania: prices, substitution and poverty', in this issue of Energy

Policy. 270p cit, Ref 19. The price in the paper is calculated at the 1990 official exchange rate of about Tsh196/US$1. At the parallel rate of 1990 (Tsh300/US$1), the average price would be about US$0.03 per kWh. 2SAcres International Ltd, Review of 1985 Power Sector Development Plan, prepared for the Energy Department of the Ministry of Water, Energy, and Minerals and TANESCO, Acres International Ltd, Toronto, 1989. 29The non-payment of electricity bills has been a major obstacle to the fiscal health of TANESCO. The worst offenders in this case were governmental and parastatal organizations. It is to be hoped that recent efforts to strengthen collection capabilities will make future revenues easier for TANESCO to capture. 3°For a discussion of elasticity estimates from a number of developing countries, see Robin Bates and Edwin Moore, Commercial Energy Efficiency and the Environment, World Development Report Working Paper Series, WPS972, World Bank, Washington, DC, 1992. 31The rationale for the selection of these elasticities is that own-price elasticities overall are considered to be small, but the own-price elasticity ( - 0 . 2 ) is considered to be larger than the cross-price elasticities (+0.1). The assumptions also hold the prices of all other fuels constant during this time period. These elasticities are at the weak end of the range established by a number of international studies cited in ibid. 32For more details, see op cit, Ref 26. 33The ]iko bora or improvbd ]iko currently being promoted has been estimated to reduce cooking requirements by 40%, so the overall reduction by 25% does not necessitate that all urban households use the improved ]iko. Rather, it is assumed that the overall impact on charcoal requirements for cooking is 25%. Other end-use requirements are assumed to remain unchanged. Also note that when the expectations of an increased charcoal cooking consumption in response to electricity price increases conflicted with the improved efficiency mandated through the improved stove efficiency, the latter was given precedence. 34Dennis Anderson, Economic Growth and the Environment, World Development Report Working Paper, WPS979, World Bank, Washington, DC, 1992.

ENERGY POLICY May 1993