Lighting Africa Tanzania Market Intelligence Report, with Support from the Rural Energy Agency in Tanzania
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Tanzania Market Intelligence Final Report December 2013 GREENMAX CAPITAL ADVISORS 1 The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the Lighting Africa Program, its affiliated organizations, or the governments they represent. CORPORATE HEADQUATERS 540 President Street 3rd floor Brooklyn, NY 11215, USA Phone: +1 646 – 564 3500 Fax: +1 646 – 998-8023 www.greenmaxcap.com EAST AFRICA REGIONAL OFFICE Rue Akagera P.O Box 3446 Kigali, Rwanda Phone: +25) 252 577757 Fax: +250 252 577758 GREENMAX CAPITAL ADVISORS 2 ACKNOWLEDGEMENTS Partners GreenMax Capital Advisors prepared the Lighting Africa Tanzania Market Intelligence Report, with support from the Rural Energy Agency in Tanzania. Surveys and interviews were conducted with a wide range of stakeholders, among them representatives from the energy sector in Tanzania, private enterprises and civil societies dealing with off-grid lighting products and services, and local community members in various regions within Tanzania. GREENMAX CAPITAL ADVISORS 3 Table of Contents ABBREVIATIONS & ACRONYMS ............................................................................................................. 6 EXECUTIVE SUMMARY ............................................................................................................................ 8 1.0. INTRODUCTION ................................................................................................................................. 17 2.0. RESEARCH GOALS & METHODOLOGY ..................................................................................... 20 3.0. STATE OF ELECTRIFICATION IN TANZANIA ........................................................................... 21 3.1. Access to Electricity ............................................................................................................. 21 3.2. Electricity Generation ......................................................................................................... 23 3.3. Power System Development Plans ....................................................................................... 25 3.4. Rural Renewable Energy Projects ....................................................................................... 26 4.0. BOTTOM OF THE PYRAMID CONSUMER PROFILE ................................................................. 28 4.1. Rural and Peri-Urban Populations ...................................................................................... 28 4.2. Income Generation among BOP .......................................................................................... 29 4.3. Household Budget ................................................................................................................ 33 5.0. EXISTING LIGHTING SOLUTIONS .............................................................................................. 36 5.1. Common Lighting Options .................................................................................................. 36 5.2. Characteristics of the Prevalent Lighting Options for the BOP .......................................... 37 5.3. Alternative Lighting Devices in the Tanzanian Market ...................................................... 39 6.0. LIGHTING ECONOMICS ............................................................................................................... 42 6.1. Comparative Life Cycle Costs of Lighting Solutions ........................................................... 42 6.2. Consumer Attitudes Toward Financing Alternatives .......................................................... 44 7.0. MARKET SIZING AND POTENTIAL ............................................................................................ 47 7.1. Market Potential and its Key Characteristics ..................................................................... 47 7.3. Estimation of market size for the next five years ................................................................. 50 8.0. EXISTING DISTRIBUTION MODELS FOR SOLAR LIGHTING PRODUCTS ............................. 53 8.1. Supply Chain Configurations .............................................................................................. 53 8.2. Other Important Players in the Value Chain ...................................................................... 55 8.3. Commercial Distribution Models for Off-Grid Lighting and their Benefits ....................... 59 8.4. Most Promising Distribution Models ................................................................................... 62 8.5. Underlying Barriers to Scaling up Distribution of Solar Lanterns ..................................... 64 9.0. COMPETITIVENESS OF THE MARKETS .................................................................................... 66 9.1. Distributors of Solar Lighting Products .............................................................................. 66 9.2. Key Commercial Distribution Partners in the Regions ....................................................... 66 9.3. Common Products in the Market……………………………………………………….67 ..... 66 9.4. Direct and Indirect Competition…………………………………………………………… ... 68 9.5. Demand trends .................................................................................................................... 70 9.6. Competition from Alternative Lighting Products ............................................................... 71 GREENMAX CAPITAL ADVISORS 4 Tanzania: Market Intelligence 10.0. KEY STAKEHOLDERS FOR THE OFF-GRID LIGHTING MARKET AND POLICY ISSUES . 73 10.1. Key Stakeholders for the Off-Grid Market ...................................................................... 73 10.2. Policies for Lighting Products .......................................................................................... 75 10.2.1 Bonded Warehousing Policy in relation to Lighting Products ......................................... 76 11.0. CONCLUSIONS AND RECOMMENDATIONS .......................................................................... 77 APPENDICES…………………………………………………………………………………………………80 GREENMAX CAPITAL ADVISORS 5 ABBREVIATIONS & ACRONYMS AfDB African Development Bank BOP Bottom of the Pyramid BOT Bank of Tanzania BRELA Business Registration & Licensing Agency CBO Community Based Organization COSTECH Commission for Science &Technology CRDB Cooperative Rural Development Bank DANIDA Danish International Development Agency ESRF Economic &Social Research Foundation EWURA Energy Water Utilities Regulatory Authority FIT Feed-in Tariff GoT Government of Tanzania GWh Gigawatt-hour HBS Household Budget Survey IFC International Finance Corporation IPPs Independent Power Producers KWh Kilowatt-hour kWp Kilowatt-peak LA Lighting Africa Program LAMIM Lighting Africa Market Intelligence Materials LCC Life Cycle Cost LED Light Emitting Diode LV-Tariff Low-Voltage Tariff MEM Ministry of Energy and Minerals M&E Monitoring and Evaluation MFIs Micro financing Institutions MITM Ministry of Industry Trade & Marketing MOF Ministry of Finance MSME Micro, Small and Medium Enterprises MW Megawatt NBS National Bureau of Statistics NEM National Environmental Management Council NGOs Non-Governmental Organizations NSGRP National Strategy for Growth and Reduction Poverty PPPs Public Private Partnerships PV Photovoltaic REA Rural Electrification Agency REB Rural Energy Board REPOA Research on Poverty Alleviation SACCOS Savings & Credit Cooperative Organization SIDA Swedish International Development Cooperation Agency SHS Solar Home System SPP Small Power Producers SME Small& Medium Size Enterprise TANESCO Tanzania Electricity Supply Company TAREA Tanzania Renewable Energy Association TaTEDO Tanzania Traditional Energy Development and Environment Organization TBS Tanzania Bureau of Standards TIC Tanzania Investment Center TIRDO Tanzania Industrial Research and Development Organization TRA Tanzania Revenue Authority TSD Tanzania Socioeconomic Database TSHs Tanzania Shillings GREENMAX CAPITAL ADVISORS 6 Tanzania: Market Intelligence USD United States Dollar UDSM University of Dar es salaam UNFCCC United Nations Framework Convention on Climate Change UNDP United Nations Development Programme URT United Republic of Tanzania CURRENCY EQUIVALENTS Currency Unit = Tanzanian Shilling (TSh) USD 1 = TSh 1,6001 1 In 2008, following the financial crisis the exchange rate fell to TSh 1162 = USD1. It has been fluctuating around TSh 1600 = USD1 for the past 3 -4 years, and this is the rate that is used in the report GREENMAX CAPITAL ADVISORS 7 EXECUTIVE SUMMARY GreenMax Capital Advisors (GreenMax) was contracted by the Lighting Africa Program to perform the Tanzania Market Intelligence study. The purpose of the study is to provide detailed information on the utilization and cost of current forms of lighting found amongst the “Bottom of the Pyramid (BOP)” population in Tanzania, the off-grid sustainable lighting products that have been introduced into the Tanzanian market, consumer attitudes towards these products and the supply and distribution chains that deliver them to the rural and peri-urban areas where the vast majority of the BOP consumers live and work. The goal is to inform stakeholders of key market issues and recommend how program interventions can support viable distribution models that will significantly increase the use of off-grid sustainable lighting products in Tanzania. Key Findings of the Tanzania Market Intelligence Study Include: State of Electrification