In a strategic move signaling Tanzania’s growing independence in energy production, the Tanzania Electric Supply Company Limited (TANESCO) has officially announced the termination of its 20-year power purchase agreement with Songas, a company that has been a key electricity provider using natural gas.
The deal, which expired on October 31, 2024, marked the end of an era in which Songas played a significant role in Tanzania’s electricity supply.
As the nation leans more heavily on domestic energy sources, particularly hydropower, this decision reflects shifting priorities within Tanzania's power sector and could have significant implications for the future.
The Decision to End the Agreement
In its official statement, TANESCO assured the public that the expiration of the Songas contract will not compromise the stability of electricity supply in the country.
The company emphasized that Tanzania now possesses the capacity to meet its power demands, thanks to increased investment in alternative energy projects and infrastructure development.
This decision is rooted in the government’s strategic goal to protect national interests by reducing reliance on external power suppliers and fostering self-sufficiency in energy production.
"This move reflects a fundamental shift in Tanzania’s approach to energy, where we are focusing on maximizing our own resources, especially in hydropower," says a press release shared by TANESCO on November 1, 2024.
"We are working to secure stable, sustainable, and reliable power for Tanzanians by optimizing home-grown solutions," TANESCO explains.
Background and Importance of the Songas Agreement
Signed in 2004, the power purchase agreement with Songas was intended to help stabilize Tanzania’s then-vulnerable electricity sector, which relied on aging infrastructure and limited power generation capabilities.
Songas leveraged Tanzania's rich natural gas reserves, primarily located in Songo Songo Island, to produce electricity, providing a much-needed boost to the national grid.
Over the years, Songas became an important player, helping to power households, businesses, and industries at a time when the country was grappling with power shortages.
For two decades, the partnership with Songas provided an alternative to the hydropower resources that Tanzania relied on heavily.
The collaboration allowed TANESCO to diversify its sources of power and bridge the gap in supply, especially during dry seasons when water levels in reservoirs dropped, reducing hydropower generation.
However, the landscape of Tanzania's energy production has changed significantly since the early 2000s. The country has invested in large-scale energy projects, including the much-anticipated Julius Nyerere Hydropower Project, which is now a central pillar of the national grid.
The Rise of Domestic Energy Solutions
A major factor behind the decision not to renew the Songas agreement is the development of the Julius Nyerere Hydropower Project, which has been a game-changer for Tanzania’s electricity landscape.
Officially launched earlier this year, the project currently contributes 940 megawatts to the national grid, a substantial increase in capacity that has bolstered TANESCO’s ability to meet national demand independently.
Once fully operational, the project is expected to generate more than 2,115 megawatts, placing Tanzania in a favorable position to meet its electricity needs through domestic sources.
This shift is part of a broader strategy by the Tanzanian government to diversify its energy sources.
While hydropower remains a crucial component, other renewable sources such as solar and wind are also being explored to create a balanced energy mix.
The government aims to not only reduce dependence on fossil fuels but also reduce Tanzania’s carbon footprint, aligning with global trends toward clean and renewable energy.
Ensuring Stability and Continuity
While TANESCO has committed to maintaining a stable power supply, the transition comes with challenges. Power demand in Tanzania is growing rapidly due to population growth and economic expansion.
Ensuring that the Julius Nyerere Hydropower Project and other domestic projects can reliably meet this demand will require careful planning and continued investment in maintenance and grid infrastructure.
TANESCO is also focusing on enhancing its ability to respond to fluctuations in water levels due to climate change, which could affect the performance of hydropower plants.
To further secure the stability of electricity supply, the Ministry of Energy and TANESCO are now closely overseeing smaller power producers.
By tightening the regulatory framework and establishing oversight mechanisms, TANESCO aims to ensure that these smaller producers maintain quality and reliability standards in their operations, providing a dependable backup to the national grid.
Implications for the Energy Sector
The expiration of the Songas contract is likely to have a ripple effect across Tanzania's energy sector. For one, it underscores a shift away from dependency on gas-based power generation.
While Tanzania has significant natural gas reserves, the government’s strategy now leans more towards using gas selectively, mainly to supplement other sources when needed, rather than as a primary source of power.
Moreover, the termination of the Songas agreement could open up new opportunities for investment in renewable energy.
With the government’s focus on sustainable solutions, international and local investors in solar, wind, and hydroelectric power might find Tanzania an increasingly attractive market.
The country has set ambitious goals to achieve universal electricity access, and renewable projects will play a vital role in reaching underserved rural areas where grid expansion is challenging and costly.
A New Phase for TANESCO and Tanzania’s Energy Independence
The decision to conclude the Songas agreement marks a pivotal moment in Tanzania’s journey toward energy self-sufficiency.
TANESCO is taking steps to ensure that this shift is smooth, efficient, and beneficial to Tanzanians.
The organization is expected to intensify its efforts in both generation and grid infrastructure to support the growing demand while providing reliable and affordable electricity.
The government’s continued investment in large-scale projects and regulatory oversight highlights its commitment to creating a robust and resilient energy sector that meets the demands of an expanding economy.
With a mix of hydropower, natural gas, and renewable energy sources, Tanzania is on track to secure its energy future, providing stable power for its citizens and fostering economic growth.
As the country enters this new phase, industry experts will be watching to see how Tanzania leverages its domestic resources to achieve sustainable energy independence.
The termination of the Songas contract, while symbolic of progress, also serves as a reminder of the challenges and opportunities that lie ahead in Tanzania’s ambitious energy transformation journey.