Outline

1. Guidelines for Developers of Small Power Projects (SPP) in TanzaniaMain features of a draft for discussion25 Feb 2009Chris Greacenchrisgreacen@gmail.comPrepared with financial assistance from ESMAP

2. Outline • Small Power Producer (SPP) international examples • Tanzania SPP program • Objectives • Table of SPP documents • “Guidelines for Developers of Small Power Projects (SPP) in Tanzania” • Tariffs for different SPP cases • Main grid, mini grid, wholesale and retail sales (discussion, lunch) • Required permissions and approvals, procedures for application; process rules

3. Small hydropower • 1 MW • Mae Ya, Thailand

4. Small hydropower • 2 MW • “Eco Power” • Sri Lanka

5. Micro hydropower • 40 kW • Mae Kam Pong, Chiang Mai, Thailand

6. Rice husk-fired power plant • 9.8 MW • Roi Et, Thailand

7. Biomass (wood chips) • 1 MW • Landhanavi, Sri Lanka • Wood is grown specifically for electricity production

8. Biogas from Pig Farms • 8 x 70 kW generator • Ratchaburi, Thailand

9. Windfarm • Each wind turbine is 1.5 MW • Texas, USA

10. Solar Photovoltaic (PV) • 1 MW • Bangkok Solar, Thailand

12. SPP program objectives • Facilitate development and interconnection of SPP projects • Light-handed regulation • Minimize amount of information that is required. • Minimize the number of separate regulatory requirements and decisions. • Use standardized documents, or perhaps documents used by other agencies, to the maximum extent possible (reduce need for case-by-case negotiation)

13. Definitions • DNO: the licensee responsible for the operation of a distribution network in Tanzania. (Currently Tanesco) • SPP: a power plant using a renewable energy source or waste heat, or cogeneration of heat and electricity, with an export capacity of up to ten (10) MW • Embedded Generator: a single generator or a group of generating plant of total export capacity between 100 kW and 10 MW, connected to a Distribution Network in Tanzania, at 33 kV or below.

14. Table of SPP documents Approved and proposed SPP documents will be made available at: www.ewura.go.tz/sppselectricity.html

15. What are the Guidelines for Developers of Small Power Projects in Tanzania? • Audiences: SPP developers, EWURA, Tanesco, bankers… • Purpose: Guide to steps necessary to acquire necessary permits and clearances to develop and operate a SPP • Selling electricity to the DNO (Tanesco) main grid • Selling to an isolated mini-grid and/or • Selling directly to retail customers (main grid-connected & isolated SPPs) • Guidelines: roadmap to rules. There will be a separate ‘rules’ document.

16. Contents of Guidelines for Developers of Small Power Projects in Tanzania

17. Tariff determined by SPP type * DNO: Distribution Network Operator (currently TANESCO)

18. Tariff Case 1: selling wholesale to main grid • Where Clrmc is the long run marginal cost as defined by Tanesco’s long-term power plan; and Csrmc is the budgetedcost of thermal generation in the next year. • Note: the actual calculations are somewhat more complicated, taking into account: • Transmission losses • Seasonality • Price floor & cap • They are available in: Standardized Tariff Methodology Under the Standardized Small Power Purchase Agreements available from EWURA. Order 08-015 on Dec 30.2008

19. Tariff Case 2: selling to wholesale to a mini-grid Where CLmrcGrid is the long run marginal cost for grid-power (adjusted for losses), and CAveMini is the average incremental cost of mini-grid power (calculated as the levelized cost of electricity from a new mini-grid diesel generator). Note: the actual calculations are somewhat more complicated than this – and available in: Standardized Tariff Methodology for the Sale of Electricity to the Mini-grids Under the Standardized Small Power Purchase Agreements available from EWURA.

20. Tariff Cases 3 and 4: selling at retail to end use customers • Tariff is proposed by SPP generator, subject to EWURA review • Less oversight demanded in cases in which community is in agreement with proposed tariff • Where possible, EWURA draws on financial analysis submitted to REA for rural electrification subsidy

21. Necessary permits, clearances and procedures for application Land title or lease Resource Rights (e.g. water rights from River Basin Water Office) Letter of Intent (LOI) with DNO (Tanesco) Sequence is important to avoid competing claims on project sites Business license, tax registration, etc. Building Permit Environmental and Social Clearance (NEMC) SPPA EWURA license

22. Necessary permits and clearances and process for application • For each permit… • Description • Project types exempt • Issuing authority and application procedure

23. LOI request Land title or lease • Name and Address • Locations • Fuel type (hydro, biomass, wind, gas, etc.) • Power capacity (MW), planned power export (MW), annual energy generation (GWh). • Copy of deed of title or lease agreement • Rights to resource Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc. Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license

24. Proposed rules regarding LOI process #1 • Acknowledgement of receipt: The rules require that within seven days of receiving the LOI request, the DNO will acknowledge receipt of the request. • Notice of decision: Within 30 days of receiving the complete LOI request, the DNO will send the project developer notice of its decision. Approval for the project will be in the form of a Letter of Intent (LOI). • A template is shown in Appendix 2: Template for Letter of Intent. •  Reasons for disapproval by DNO stated: If DNO disapproves of the project, the reasons for disapproval must be clearly stated in writing. • Site Reference Number: The LOI shall include a Site Reference Number designated by the DNO. • The Site Reference Number will be used to refer to the Site in all subsequent documentation and correspondence

25. Proposed rules regarding LOI process #2 • Reservation of Network Capacity: The LOI in the case of sites operating on hydroelectric or wind power, or any other primary source of energy which is site-specific by way of its availability, will also imply the exclusivity of the interconnection to the Developer, within the period of validity of the LOI. • Point of Interconnection: The LOI shall specify the Point of Common Coupling and the Point of Supply, to enable the Generating Company to develop the cost estimates for the interconnection. • Estimate of interconnection costs: Within 30 days of sending the LOI, the DNO shall send the Seller a rough initial estimate of the interconnection costs and an engineering assessment of whether the identified interconnection point can absorb the full power amount proposed by the SPP. • Information exchanged between Seller and DNO: While the LOI is still valid, the Seller and DNO shall exchange technical information on its proposed generator and expected fault levels.

26. Proposed rules regarding LOI process #3 • Upgrades to DNO system: If the interconnection point, in its present state, cannot absorb the amount of power that the Seller proposes to export then the DNO will also estimate the costs to upgrade the distribution system (lines, substations, etc.) to sufficient capacity such that the full proposed amount of electricity exported by the Seller can be safely injected at the identified interconnection point. • The rules allow the Seller to upgrade the DNO’s facilities as an alternative to construction by the DNO as long as the upgrade meets the same standards that the DNO would have used. In the event that the Seller upgrades the DNO’s distribution system, ownership of all improvements beyond the Interconnection Point (as defined in the PPA) will be transferred to the DNO upon commissioning.

27. Proposed rules regarding LOI process #4 • Maximum allowable generation capacity: If the Seller’s proposed generation capacity exceeds 10 MW, even if the Seller’s proposed export capacity does not exceed 10 MW, then the DNO may propose a maximum allowable generation capacity allowed to interconnect at the proposed interconnection point. • LOI expiry: The rules require that within twelve (12) months from receipt of the LOI from the DNO, an “Application for Interconnection and Sale of Electricity” must be completed and submitted to Director General of Transmission of DNO (or some other individual designated by the Managing Director of DNO). At the sole discretion of the DNO, the validity of the LOI may be extended six (6) months at a time, for a maximum of two (2) years from the date of the LOI. • If the Developer does not apply for Interconnection and Sale of Electricity before the validity of the LOI expires, the DNO may issue an LOI to a different Developer for the same site.

28. Environment and Social Clearancefrom National Environmental Management Council (NEMC) Land title or lease • SPP developer approaches NEMC for opinion on the need for EIA, preliminary EIA or Scoping Report. • After appropriate report (EIA, etc.) is written and submitted, NEMC evaluates and, if acceptable, gives clearance. • In the event that the NEMC is delayed in issuing a full clearance, NEMC may issue a ‘no objection’ letter allowing the developer to proceed with the project including acquiring bank loans, procuring equipment, and site development. • In its licensing determination, EWURA will consider NEMC ‘no objection’ letter a sufficient substitute for NEMC clearance provided that the developer commit to inform EWURA upon final NEMC clearance. Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc. Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license

29. Power Purchase Agreement (PPA) Land title or lease • To initiate the PPA agreement process, the Seller completes and submits to Tansco an “Application for Interconnection and Sale of Electricity” • technical engineering information (one-line diagrams, specifications of key equipment) that DNO needs in order to determine if the proposed project is in compliance with the Interconnection Rules and Guidelines • Includes information submitted in the ‘exchange of information’ as part of the LOI process. Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc. Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license

30. Proposed rules related to PPA #1 • The rules specify that the DNO’s decision to sign or reject the standardized PPA is based solely on its evaluation of whether the design of the Seller’s facility as described in the Appendix 4: Application for Interconnection and Sale of Electricityis in compliance with the “Guide for Grid Interconnection of Embedded Generators to the Main Grid and Isolated Mini-Grids in Tanzania”. • Within 30 days from the date the DNO receives all the required information specified in the application form the DNO will notify the applicant whether the application is accepted and will indicate the DNO’s willingness to sign the PPA. No later than 30 days after this, the DNO shall make itself available for signing the PPA. • The DNO will then provide the applicant with details of interconnection costs within 90 days from the date of sending acceptance notification. Seller will pay mutually agreed-upon interconnection costs, including costs, if any, of upgrading DNO’s system to accept capacity proposed by Seller. (As noted in LOI section, Seller has the option of undertaking the upgrade of the DNO facilities.)

31. Proposed rules related to PPA #2 • If the DNO and Seller cannot agree on interconnection costs, then parties shall pursue the arbitration process described in Article 8 of the SPPA. • The Seller and DNO must sign a PPA within 60 days from the date that the DNO sends details of interconnection costs or acceptance notification (whichever comes last). If the Seller fails to sign the agreement within this time frame, the application submitted will be considered void. • The Seller who has signed the power purchase agreement may dispatch power into the grid only after the DNO has checked whether the interconnection as well as the installed connection equipment meets the standards specified in the application form and the PPA. Such compliance will be indicated in an ‘interconnection certificate’ granted by the DNO upon satisfactory installation of the required equipment. • The DNO shall complete the testing within30 days from the date the Seller has completed the installation of all required equipment. • If the Seller is required by law to obtain a license from EWURA, it must show the DNO that it has been issued a license prior to the commencement of the sale of electricity.

32. Proposed rules related to PPA #3 • The rules require that Commissioning Date shall be within two years from the date of signing the SPPA. The developer is required to submit quarterly progress reports indicating progress towards this goal. In an exceptional circumstance, the SPPA at the time of signing may state a time longer than two years allowed for construction. If the developer does not commission the project within the agreed upon timeframe, the SPPA will be considered void unless both parties agree to an extension.

33. EWURA license Land title or lease • SPPs up to 1 MW are exempt from EWURA’s licensure requirements • Must submit completed registration form • Location, business registration, capacity of facility, GWh/yr, date of planned construction • Non-exempt (>1 MW) • Submit license application • Same as registration, plus • Section on managerial competence • Feasibility study • Business plan. • Permits and clearances (NEMC, water rights, etc.) Resource Rights (e.g. water rights from River Basin Water Office) LOI with DNO (Tanesco) Business license, tax registration, etc. Building Permit Environmental and Social Clearance (NEMC) PPA EWURA license

34. Proposed rules related to EWURA license • The rules require that EWURA will respond with a license or an explanation of why a license was denied within 45 days. The rules specify that an initial license will be granted for fifteen years. Subsequently, renewed licenses will be granted for fifteen years. All generators are also required to submit, on an annual basis, a completed SPP Annual Reporting Form. • The EWURA license application requires a fee of Tsh 100,000 paid to EWURA.

35. Thank you For more information, please contact chrisgreacen@gmail.com This presentation available at: www.rea.go.tz www.ewura.go.tz