Renewable Energy Irrigation

November 2022

Indicative Return:

20% – 25%

Investment Timeframe

Short Term (0–5 years)

Ticket Size

Less than USD 500,000

Business Model Description

Manufacture, distribute and install affordable solar-powered irrigation pumps utilising modern technologies for the production of high-value crops throughout the year and sale of products to high end domestic as well as export markets.

Expected Impact

Enhance agricultural productivity and support the sustainable commercialization of the horticulture industry.

Regions

Southern Highlands, Northern, Lake

Sector
Renewable Resources and Alternative Energy > Alternative Energy

Direct Impact SDGs:

Indirect Impact SDGs:

Sector
Renewable Resources and Alternative Energy

Development need: Energy is important in promoting Tanzania’s industrial development. This applies particularly to transforming productive sectors like agriculture, which are beset by challenges of low productivity. However, the energy sector itself is faced with challenges, including unreliability and inefficiencies in supply (1, 2, 3).

Policy priority: The Tanzanian government recognizes energy as important in promoting socio-economic development. It is committed to promote improved performance and spur prudent and optimal use of the energy resources so as to tap into unutilized potential in the productive sectors. Over the medium to long run, the government seeks to implement its 100% renewable energy policy (1, 4).

Gender inequalities and marginalization issues: Energy is a critical enabler in reaching socio-economic development goals for men and women. However, the benefits of increased access to modern and cleaner energy services often fail to accrue evenly to both gender. Women bear the burden of inefficient energy technologies, which in turn affects their health, time and productivity (5).

Investment opportunities introduction: Tanzania is endowed with diverse energy sources, including natural gas, biomass, hydro, geothermal, solar and wind power, much of which is untapped. Significant opportunities exists in the exploration of new and renewable energy resources and promotion of energy efficiency technologies and conservation initiatives (6).

Key bottlenecks introduction:
About 50% of the Tanzania’s population lives in poverty, out of which 35% is unable to access all of the basic needs, including energy services. The poor spend about 35% of their household income on energy, compared to 14% for other socio-economic groups, which may result in limited purchasing power (7).

Subsector
Alternative Energy

Development need: Tanzanian energy sector is faced with several challenges including: lack of adequate and sustainable energy diversification systems; insufficient promotion and use of energy efficient technologies and behaviors; inability to optimally utilize the renewable energy potential across the country (1,4,28)

Policy priority: Tanzania’s government is committed to increase power generation predominantly by using renewable sources, such as hydropower, wind, solar and thermal energies. The emphasis is premised on the fact that if renewable energy is produced and utilized in a modern and sustainable manner, it will help to eliminate energy shortages and inefficiencies in the country (8).

Gender inequalities and marginalization issues: Less than 10% of the solar irrigation pumps are purchased by women, and most of the major decisions on crop choices and income use continue to be made by men. These findings vary from type of crop, with men making major decisions concerning high-income crops like tomatoes, and women commanding relatively more autonomy over crops like leafy vegetables (9).

Investment opportunities introduction: Alternative energy opportunities exist in the manufacturing and distribution of drip irrigation kits, photovoltaic (PV) panels and frames, surface and submissible solar water pumps, water level switches, polyvinyl chloride (PVC) piping, connectors and vales, as well as water storage tanks and filters (10).

Key bottlenecks introduction: Solar has not been utilized fully as energy sources in Tanzania, even though the country is in one of the major global solar belts, with 2,800-3,500 hours of sunshine per year and a global radiation of 4-7 kWh/m2 per day. Despite this potential, solar energy has predominately been used for drying to date (11).

Market Size and Environment
Critical IOA Unit

The market size for all types of irrigation technologies in Tanzania was estimated to be USD 86.2 million in 2018 and expected to grow to USD 151.3 million by 2022 (13).

The market size for solar powered irrigation pumps is estimated at USD 25 million, which is split between small, medium and large scale farm operations (13).

Indicative Return

20% – 25%

Investment Timeframe

Short Term (0–5 years)

Solar water pumps have higher capital costs and lower operating costs than competing pump technologies. The payback for solar water pumps is 4-6 years, while for a diesel pump is less than a year. However, the life cycle cost of a diesel pump can be up to six times more than the life cycle cost of a solar water pump (13).

In terms of replacement, the life span of diesel pumps is approximately 7-12 years, whereas the life span of solar panel modules, which are the most delicate components in solar water pumps, is 20-25 years (13).

Ticket Size

Less than USD 500,000

Market Risks & Scale Obstacles

Capital – CapEx Intensive

Market – Highly Regulated

Business – Supply Chain Constraints

Sustainable Development Need

One of the critical weaknesses in Tanzanian agriculture is low productivity of land due to over dependency on rain-fed agriculture and low and underdeveloped irrigation potential. Out of 10.8 million hectares under cultivation only about 450,392 hectares are currently under irrigation. Irrigation development is constrained by low investment by both the government and the private sector. In general, Tanzania lacks the necessary infrastructure that could provide for a wide range of crops and efficient water use. Furthermore, the technical capacity of most producers for the development and sustainable management of irrigation schemes is still inadequate (29,30).

Tanzania has a low rural household electrification rate of 16.9%, which together with erratic grid power supply, fuel scarcity and price volatility, hinders many farmers from obtaining conventional irrigation systems (13).

Expected Development Outcome

Renewable energy irrigation increases the productivity of Tanzania’s agriculture sector. It can reduce food imports, which with 80% take the largest share of Tanzania’s total merchandise imports (14).

The adoption of modern irrigation technologies moves farmers from subsistence to market-based, commercial production, partly achieved through the improvement in yields and crop quality. Additionally, once a farmer has adopted irrigation, he/she is likely to implement other productivity-enhancing measures, including farming higher-value crops and expanding cropped areas (13).

Investing in water resource management in Tanzania has huge potential to reduce the adverse impact of climate variability and extremes, such as drought, which has posed a considerable risk to agricultural production, and hence poverty reduction and economic growth. Irrigation is increasingly viewed as a strategy to mitigate the impacts of climate variability and change. Improved irrigation systems can have positive impact to the planet owing to the fact that if facilitates and promotes water recycling and reuse and rainwater harvesting (31).

Irrigation is increasingly viewed as a strategy to mitigate the impacts of climate variability and change. In particular, large-scale irrigation schemes have the potential to buffer farmers from dependence on food aid in times of crop failure and drought. Small-scale irrigation is seen as key to improving agricultural productivity and incrementally increasing the resilience of rural livelihoods (31).

Primary SDGs addressed

Secondary SDGs addressed

Directly impacted stakeholders

People: The general population gets increased access to reliable food supplies throughout the year.

Gender inequality and/or marginalization: Women and youth obtain employment opportunities in the irrigated farms because of expanded production potential and in other farm and non-farm activities, such as sorting, grading, processing and transportation.

Planet: The environment experiences lower emissions from irrigation activities and food production, and the water levels are managed more sustainably.

Corporates: Food processing companies obtain reliable raw material for their operations, solar water pump distributors and maintenance providers obtain new market opportunities.

Public sector: The government benefits from progress towards agricultural transformation and its commercialisation agenda.

Indirectly impacted stakeholders

Gender inequality and/or marginalization: Rural communities are able to grow crops in more than one season, hence increasing their food security and incomes.

Planet: Marginal lands enjoy greater utilisation, which improves resource efficiencies.

Corporates: SMEs get access to horizontally and vertically integrated activities along the agriculture value chains.

Outcome Risks

Enhanced irrigation activities may deplete scarce water sources, especially surface water bodies, if not managed sustainably.

The production and maintenance of renewable energy irrigation systems is resource intensive, and may negatively impact on the environment especially if the end of life stage is not managed sustainably.

Impact Risks

Renewable energy irrigation depends on external factors affecting production, such as soil character, weather conditions and availability of water resources, and requires stable supply chains for equipment and inputs, which may affect the expected impact.

If the required advisory and technical assistance services are not available to support farming practices and agronomy knowledge, such as regarding water use, the impact of renewable energy irrigation may be limited.

Impact Classification

B—Benefit Stakeholders

What

Renewable energy irrigation enhances agricultural productivity and supports the sustainable commercialization of the horticulture industry.

Who

Farmers and farmer households benefit from greater agricultural productivity with new job opportunities for the general population, and the planet enjoys lower externalities from food production through renewable energy irrigation.

Risk

While the renewable energy irrigation system is proven, external factors affecting production and supply chains as well as advisory and technical assistance require consideration.

Impact Thesis

Enhance agricultural productivity and support the sustainable commercialization of the horticulture industry.

Policy Environment

National Irrigation Policy 2013: Sets a target of reaching coverage of 1,243,230 hectares under irrigation in the year 2025, up from the current 694,715 hectares (34).

Tanzania Revenue Authority 2019: The Government of Tanzania provides targeted incentives, including the exemption of import duty and VAT on some components, such as panels, batteries, inverters and regulators, which also apply to renewable energy irrigation (13).

The Water Sector Development Programme (2006 – 2025): Is designed to address shortfalls in urban and rural water supply infrastructure, to improve water resource management primarily through upgrading the country’s Basin Water Sources and to strengthen the sector institutions and their capacities (33)

Financial Environment

Other incentives: The Tanzania Renewable Energy Association (TAREA) is partnering with the Energy Transition Facility of the Kingdom of the Netherlands to create enabling environment (e.g provision of fiscal incentives) for more affordable solar irrigation pumps for smallholders (20).

Fiscal incentives: Tanzania offers 0% import duty on project capital goods, raw materials and replacement parts for agriculture, animal husbandry and fishing, including for edible oil production. It also offers 100% capital expenditure in the agricultural sector (21).

Fiscal incentives: Exemption of import duty and VAT on some components, such as panels, batteries, inverters and regulators, which also apply to renewable energy irrigation (13).

Regulatory Environment

National Irrigation Act, 2013 (No. 5 of 2013): Makes provision with respect to the management, use and maintenance of irrigation systems. It establishes the National Irrigation Commission and defines its functions and powers (17).

The Water Resources Management ACT,2009: This Act makes provision with respect to the management, use and protection in Tanzania of water resources, i.e., water courses, surface water, groundwater and estuary waters. The Act sets out fundamental principles of water use and conservation. It also states preferences in water allocation (35)

Plant Health Act, 2020: Has come into play following the dramatic spread of transboundary plant pests and after diseases have increased dramatically in recent years (19).

Investment Promotion Act No. 6, 2004: Promotes and facilitates investment by assisting investors in obtaining the licences necessary to invest and by providing other assistance and incentives and for related purposes (18).

Energy and Water Utilities Regulatory Authority (EWURA) ACT 2001, (CAP 414). An Act to establish a Regulatory Authority in relation to energy and water utilities and to provide for its operations. (36).

Power Providers provides a pumping system for irrigation in Iringa. With a total dynamic head (TDH) of 30 m and solar generator of 18.7 kWp, the flow rate of the pump amounts to 450 m3 per day, which enhances agricultural productivity and output in the region (12).

Private sector

Wade Rains Ltd, Balton International

Nabaki Africa

BioKube A/s.

Government

Tanzania Rural Energy Agency (TAREA)

Ministry of Agriculture, Tanzania Engineering and Manufacturing Design Organisation (TEMDO)

National Irrigation Commission.

Multilaterals

Food and Agricultural Organisation (FAO)

International Fund for Agricultural Development (IFAD)

African Development Bank (AfDB).

Non-Profit

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)

Kingdom of Netherlands

United States Agency for International Development (USAID)

UKAid

Low Energy Inclusive Appliances (LEIA).

Sector & Subsector Sources

1) United Republic of Tanzania, Third National Five-Year Plan (FYDP 3), 2021

2) United Republic of Tanzania, National Energy Policy, 2015

3) World Future Council, Climate Action Network for Tanzania, Policy Road Map for 100% Renewable Energy and Poverty Eradication in Tanzania, 2017

4) Institute for Sustainable Futures,100% Renewable Energy for Tanzania, Access to Renewable Energy all within One Generation, 2017

5) African Development Bank, Gender Country Briefs – Tanzania, 2017

6) UNDP, Tanzania’s Se4All Investment Prospectus, 2015

7) GTZ (2007: Eastern Africa Resource Base: GTZ Online Regional Energy Resource Base: Regional and Country Specific Energy Resource Database: IV – Energy Policy

8) Clean technologies, The Potential Renewable Energy for Sustainable Development in Tanzania: A Review, 2018

9) Jemimah Njuki et al, A Qualitative Assessment of Gender and Irrigation Technology in Kenya and Tanzania, 2014

10) USAID, Feed the Future Innovation Lab for Collaborative Research on Horticulture,

http://horticulture.ucdavis.edu.

11) Mashauri Adam Kusekwa, Biomass Conversion to Energy in Tanzania: A Critique

IOA Sources

12) SmartSolar Tanzania, https://www.lorentz.de/en/references/africa/tanzania/841

13) UKaid, Tanzania Market Snapshot, Horticulture Value Chains and Potential for Solar Water Pump Technology, 2019

14) World Integrated Trade Solution (WITS), Tanzania Food Products Imports, 2018

15) The World Bank, Tanzania’s Path to Poverty Reduction and Pro-Poor Growth, 2019

16) International Trade Administration, Energy Resource Guide, Tanzania, 2021

17) URT, National Irrigation Act, 2013 (No. 5 of 2013).

18)  URT, Investment promotion Act No. 6 of 2004:

19) URT, Plant Health Act 2020

20) Tanzania Renewable Energy Association (TAREA)/ Kingdom of the Netherlands, Increasing the use of solar powered pumps for Irrigation in Tanzania, 2020

21) EAC Investment Guide, United Republic of Tanzania Standard Incentives for Investors

22) EU/GoT: Joint Press Release, 2021, https://eeas.europa.eu/delegations

23) Netherlands Enterprise Agency, Tanzania Horticulture Tanzania Horticulture Sector Outlook Opportunities and Challenges, 2015.

24) USAID/TAHA, Potential areas to invest in Horticulture in Tanzania

25) Tanzania Horticulture Association, Horticulture Industry Markets Access Strategy (HIMAS), 2021

26) Tanzania Horticulture Association, Industry Position Paper, 2020

27) Global SDG Indicator Platform,

28) United Republic of Tanzania, Intended Nationally Determined Contributions (INDCs), 2021

29) United Republic of Tanzania, National Agriculture Policy, 2013

30) The United Republic of Tanzania, National Irrigation Commission, Proceedings of the Workshop on “New Directions for Irrigation Development in Tanzania: The Context of Public Private Partnership” 2016

31) FANRPAN, Pathways for Irrigation Development: Policies and Irrigation Performance in Tanzania, 2017

32) Tanzania: Carbon dioxide (CO2) emissions, https://www.theglobaleconomy.com/Tanzania/carbon_dioxide_emissions/

33) United Republic of Tanzania, Water Sector Development Programme 2006 – 2025

34) United Republic of Tanzania, National irrigation Policy 2013

35) United Republic of Tanzania, The Water Resources Management ACT,2009:

36) Hydrology Research, Evaluation of Recharge Areas of Arusha Aquifer, Northern Tanzania: Application of Water Isotope Tracers, 2020