Adaptation of feed-in tariff or remote mini-grids: Tanzania as an illustrative case

Abstract

Following the successful Feed-in Tariffs (FiTs) system worldwide, few countries have implemented FiTs explicitly tailored for off-grid or mini-grid systems.This study takes an integrated approach to examine the feasibility of an off-grid Feed-in Tariff (off-FiT) for existing and new remote mini-grids in Tanzania, using a combination of geographical analysis, technical, economic and institutional assessments. Based on detailed modelling of two community off-grid cases, (i) PV-diesel and (ii) mini-hydro,we identify least-cost rural electrification options that makes solar and mini-hydro energy competitive with diesel generators and potential effect of the supports chemeon rural electrification plans.In the first case,we illustrate where the off-FiT complements diesel generation of an existing mini-grid (PV-diesel).In the second case(mini-hydro),we illustrate conditions where the off-FiT policy brings mini-hydro generation to non-electrified communities and sells renewable electricity directly to new customers. Currently,Tanzania has Standardized Power Purchase (SPP) rates,which target generators connected to the national grid and distribution systems of mini-grid sor isolated grids. We found forth eoff-FiT tariff the total amount needed to support the same number of customers by solar and hydro-mini grids versus diesel would be of 31.5millionUS$, or a premium of 0.11US$/kWh to the present current SPP stariff of 0.24 US$/kWh for PV. We also found that ta technology specific FiT tariff would be most suitable to attract national and international investors by providing a rate of return that compensates the risk of the investment.The overall support is comparable to the 36 million US$ that the government currently subsidizes and allocates to diesel mini-grids in country, and this shows the potential for a long-term renewable energy strategy for mini-grid areas.