PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: 67688 Project Name Tanzania Renewable Energy CDM Program of Activities Region Africa Country Tanzania Sector Renewable energy (100%) Lending Instrument Carbon Finance Project ID P127585 {If Add. Fin.} Parent Project ID N/A Borrower Government of Tanzania Implementing Agency Rural Energy Agency Environmental Screening [ ]A [X]B [ ]C [ ]FI [ ]TBD (to be determined) Category Date PID Prepared March 22, 2012 Estimated Date of Appraisal April 10, 2012 Completion Estimated Date of Board May 10, 2012 Approval Concept Review Decision Following the review of the concept, the decision was taken to proceed with the preparation of the operation. I. Introduction and Context At present, the national electricity coverage in Tanzania is less than 15% and mostly covers urban areas while rural coverage is below 6%. Despite the relative high technical potential for small scale renewable projects, particularly of small hydro power plants, the exploitation of renewable resources up to date has been very slow in Tanzania. Acknowledging the direct link between energy access and development, the Government of Tanzania (GoT) has established a Rural Energy Agency (REA) by the Act of Parliament in 2005 to lead the development of a rural access strategy which encompasses grid and off-grid expansions and promoted the concept of Rural Energy Fund (REF) to finance rural energy projects, with a particular focus on renewable energy. The World Bank funded Tanzania Energy Development and Access Expansion Project (TEDAP) has assisted REA in supporting small rural and renewable energy initiatives in several ways: (i) through an enabling policy and regulatory framework, including standardized power purchase agreements and simplified regulatory rules which ease some of the transaction costs for small renewable power projects, (ii) through a subsidy scheme for new connections in rural areas (performance grants) and technical assistance/pre-investment support (matching grants) for project developers; and (iii) through a line of credit to Tanzanian financial institutions for long- term on-lending to small renewable energy projects. However, despite this support, the Tanzanian renewable energy sector is still in very early stages, its development still being constrained by enduring administrative and financial barriers and uncertainties. Within the current rural electrification development framework, a typical grid- based renewable energy power project faces three main constraints that impede its implementation: (i) the difficulty for private investors to mobilize the required equity for the financing closure, (ii) the power sector regulations for distributed power and tariffs setting methods, (iii) insufficient technological capacity about renewable energy power project. Among the three listed barriers, mobilizing the needed equity appears to be particularly challenging for investors. To further assist projects developers to invest in and implement renewable energy projects, REA is developing a Renewable Energy Programme of Activity (PoA) under which individual projects could claim carbon credit benefits . The PoA will mainly help to develop a platform for overcoming institutional, financial and structural hurdles for the development of small scale renewable energy projects including hydro, solar, wind and biomass power projects. II. Proposed Development Objective(s) The objective of the proposed Carbon Development Mechanism (CDM) Program of Activities is to increase access to modern energy services in Tanzania promoting both isolated mini-grids and national grid renewable energy projects in the country using hydro, solar, wind and biomass technologies for electricity generation. III. Preliminary Description REA is currently responsible for coordinating all rural energy activities in Tanzania. REA has been set up to promote investment in modern energy services by working with key partners and collaborators from the project developers, banks, NGOs, CBOs, and Government agencies to mobilize resources in order to promote and facilitate improved access to modern energy services in Tanzania, particularly utilizing local renewable energy resources. REA has been coordinating several projects and activities with a large number of donors involved in the rural energy sector. REA will implement the PoA and act as a coordinating and managing entity (CME). As the coordinating/managing entity for the proposed small-scale PoA, REA will undertake the following main activities: (i) coordinate the implementation of the PoA, (ii) screen and accept CDM programme activities (CPAs), (iii) support effective commercialization of carbon emission reductions (CERs), (iv) liaise with project developers to maintain the required database for verification, (v) any other functions that are required to be performed as per the PoA rules. The CPAs will be implemented by different project developers, building on REA’s existing relationship with individual project developers. REA will enter into a contractual agreement with each individual power projects (CPAs). The contract would give REA the legal rights to deal with the carbon credits that will be generated from these projects and monitor the project implementation and all necessary parameters that are required for the calculation of emission reductions from each CPA. The conditions for participation shall be in line with the eligibility criteria of the projects for inclusion in the PoA following the United Nations Framework Convention on Climate Change (UNFCCC) regulations and shall be elaborated in the agreements between REA and the project developers. IV. Safeguard Policies that might apply As the type and size of projects supported by the proposed activity are the same as those already targeted by TEDAP’s small power project (SPP) component, the same instruments and procedures already in place for TEDAP (SPP component), including the Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF), will apply. TEDAP’s ESMF and RPF were publicly disclosed on July 1, 2007 and re-disclosed under the TEDAP Additional Financing on July 26, 2010. TEDAP triggers the following safeguards policies: Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Involuntary Resettlement (OP/BP 4.12) X Indigenous Peoples ( OP/BP 4.10) X Forests (OP/BP 4.36) X Safety of Dams (OP/BP 4.37) X Projects in Disputed Areas (OP/BP 7.60)* X Projects on International Waterways (OP/BP 7.50) X TEDAP’s compliance with safeguards policies has been satisfactory. REA will screen the compliance of CPAs with the safeguards procedures already in place for TEDAP's SPP component. REA has recently hired an experienced environmental and social specialist, former National Environment Management Council (NEMC) staff. External expertise also complements REA's capacity for safeguards implementation. Environmental and Social Impact Assessment (ESIA) training has been provided to REA under the institutional capacity building program financed by SIDA in order to enhance the expertise in screening and practical operational exposure. Moreover, REA and the local safeguards consultants have received support from international consultant for the simplification of ESMF and the RPF, which provide guidance to developers on how to screen the projects under TEDAP and develop mitigation measures. NEMC’s staff from the districts and project developers have also received environmental and social training, administered by NEMC and funded under TEDAP. The proposed PoA will increase and improve energy supply in the rural areas through the implementation of renewable energy projects. Thus, the PoA will contribute significantly to the improvement of the livelihoods of the rural population and the attainment of sustainable economic growth of the country. More specifically, the successful implementation of proposed activity will contribute to Tanzania’s sustainable development as follows: a) the PoA provides * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas employment opportunities in areas where CPAs are located, which will give an increase in local community’s income in general and poverty alleviation; b) the PoA encourages generation of electricity from renewable resources, which otherwise would have been generated from alternate fuels (most likely fossil fuels), contributing to reduction in GHG emissions, c) the PoA facilitates the economic development process through the provision of modern energy sources and enhances the local investment environment; d) the implementation of energy projects using domestic renewable resources diversifies the sources of electricity generation, which is important for meeting the growing energy demand, as well as for improving energy security in the country. V. Tentative financing Source: ($m.) Borrower/Recipient - IDA - Carbon Financing 10 Total 10 VI. Contact point World Bank Contact: Raluca Golumbeanu Title: Operations Officer Tel: (202) 458 9879 Email: rgolumbeanu@worldbank.org Borrower/Client/Recipient Contact: Mr. Jerome Buretta Title: Assistant Commissioner, Multilateral Aid, Ministry of Finance Tel: +255 754 257121 Email: jburetta@mof.go.tz Implementing Agencies Contact: Mr. Lutengano U. A. Mwakahesya Title: Director General, Rural Energy Agency Tel: +255 22 2412001 Email: dg@rea.go.tz VII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop