Adaptation of Feed-in Tariff for remote mini-grids: Tanzania as an illustrative case

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 make solar and mini-hydro energy competitive with diesel generators and potential effect of the support scheme on 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-grids or isolated grids. We found for the off-FiT tariff the total amount needed to support the same number of customers by solar and hydro-mini grids versus diesel would be of 31.5 million US$, or a premium of 0.11 US$/kWh to the present current SPPs tariff of 0.24 US$/kWh for PV. We also found that a technology specific FiT tariff would be most suitable to attract national and international investors by providing a rate of return that compensates the risk of the investment. The overall support is comparable to the 36 million US$ 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.JRC.F.7-Renewables and Energy Efficienc