Page 1 CEO Endorsement Template-Aug 29, 2007.doc 1 Submission Date: October 25, 2007 Re-submission Date: PART I: PROJECT INFORMATION GEFSEC P ROJECT ID: GEF AGENCY P ROJECT ID: P092154 C OUNTRY ( IES ): Tanzania P ROJECT T ITLE : Tanzania Energy Development and Access Project (TEDAP), former Energizing Rural Transformation (ERT) GEF A GENCY ( IES ): World Bank O THER E XECUTING PARTNER ( S ): Ministry of Energy and Minerals GEF F OCAL A REA ( S ): C LIMATE C HANGE GEF-4 S TRATEGIC PROGRAM (S) : Strategic Program 3 N AME OF PARENT PROGRAM / UMBRELLA PROJECT : N/A A. P ROJECT FRAMEWORK Project Objective : To abate greenhouse gas emissions through use of renewable energy in rural areas for provision of electricity. GEF Financing* Co-financing* GEF Supported Project Components Indicate whether Investment , TA, or STA** Expected Outcomes Expected Outputs ($)M % ($)M % Total ($) B.1 Small Power Generation and Distribution (SPGD) Investments, including pre- investments and market development 12 MW of grid- connected renewable projects installed 4 MW of isolated grids installed 5,000 household electricity connections 2.2 6.7 30.5 93.3 32.7 B.2 Sustainable Solar Market Development (SSMD) Investments, including pre- investments and market development Increased electricity access in rural and peri- urban Tanzania to productive enterprises, service delivery facilities (in health and education), and to households with the capacity to pay for electricity; Removal of barriers to, and reduction of costs of implementation of renewable energy technologies to help mitigate greenhouse gas emissions. 1 MW of solar PV installed capacity 1,200 solar PV systems for public institutions, 10,600 solar PV systems for households and enterprises installed, 2.3 12.5 16.1 87.5 18.4 REQUEST FOR CEO ENDORSEMENT/APPROVAL P ROJECT T YPE : F ULL S IZED P ROJECT Expected Calendar Milestones Dates Work Program (for FSP) June 06 GEF Agency Approval December 20, 2007 Implementation Start March 1, 2008 Mid-term Review ( if planned) March 1, 2020 Implementation Completion February 29, 2012 42463 Page 2 CEO Endorsement Template-Aug 29, 2007.doc 2 B.3 Technical A ssistance TA Establishment of a f unctioning institutional and regulatory framework for commercially oriented, sustainable service delivery for rural e lectrification and renewable energy that can be scaled up; and SPPAs adopted and i n use; SPPAs used to sign 20MW of additional renewable energy capacity; R EA fully functional as demonstrated by 5 transactions completed by REA; REA fully functional as demonstrated by a pipeline of 40,000 connections in REA. 2.0 32.2 4.2 67.8 6.2 4. Project management / operating costs 0 0 2.3 100 2.3 Total Project Costs 6.5 12.2 53.1 87.8 59.6 * List the $ by project components. The percentage is the share of GEF and Co-financing respectively to the total amount for the component. ** TA = Technical Assistance; STA = Scientific & technical analysis. B. F INANCING P LAN S UMMARY F OR T HE P ROJECT ($) Project Preparation* US$M Project US$M Agency Fee US$M Total at CEO Endorsement For the record: Total at PIF GEF 0 6,500,000 650,000 7,150,000 6,500,000 Co-financing 1,600,000** 53,100,000 0 53,100,000 32,300,000 Total 1,600,000 59,600,000 0 60,250,000 38,800,000 * Please include the previously approved PDFs and PPG, if any. Indicate the amount already approved as footnote here and if the GEF funding is from GEF-3. Provide the status of implementation and use of fund for the project preparation grant in Annex D. ** Project Preparation was financed through a SIDA trust fund C. S OURCES OF CONFIRMED C O - FINANCING , including co-financing for project preparation for both the PDFs and PPG. (expand the table line items as necessary) Name of co-financier (source) Classification Type Amount ($M) % * SIDA (Energizing Rural Transformation Trust Fund) Bil. Agency Grant 1.0 1.9 SIDA (REA capacity building) Bil. Agency Grant 1.8 3.4 Government National Government Budget 6.8 12.8 World Bank Multil. Agency Soft loan 16.0 30.1 ESMAP SME program Multil. Agency Grant 0.4 0.8 Private sector** Private sector Private sector 27.1 51.0 Total Co-financing 53.1 100 * Percentage of each co- financier’s contribution at CEO endorsement to total co-financing. **All co-financing is confirmed in the Minutes of Negotiations. The private sector leveraged financing, however, cannot be committed in the same manner as IDA, Government or donor funds. Nevertheless, the private sector financing amount is backed by detailed project preparation and feasibility studies, and consultations with private sector and local banks, The sub-projects are already well-advanced and therefore, the co-financing estimates are considered reliable. This amount is “subsequent” co-financing and is being leveraged throughout the project life. Page 3 CEO Endorsement Template-Aug 29, 2007.doc 3 D. GEF R ESOURCES R EQUESTED BY F OCAL A REA ( S ), A GENCY ( IES ) OR C OUNTRY ( IES ) - N/A (in $) GEF Agency F ocal Area Country Name/ Global P roject Preparation Project A gency Fee Total (select) (select) (select) (select) Total GEF Resources * No need to provide information for this table if it is a single focal area, single country and single GEF Agency project. E. P ROJECT MANAGEMENT B UDGET / COST The project is fully mainstreamed into the Government institutional structure. All project management costs are covered by the Government (US$2 million) and IDA contributes US$0.3 million for project-related operating expenses, such as costs of fuel, advertisements, per-diem etc. No GEF funds were used for project management. Cost Items Total Estimated person weeks GEF ($) Other sources ($) Project total ($) Local consultants* - 0 0 0 International consultants* - 0 0 0 Office facilities, equipment, vehicles and communications** 0 2.0 2.0 Travel** 0 0.3 0.3 Total 0 2.3 2.3 * Provide detailed information regarding the consultants in Annex C. ** Provide detailed information and justification for these line items: REA operating costs include primarily REA staff, office facilities, fuel and transportation, per-diem, communication and advertising expenses. F . C ONSULTANTS WORKING FOR TECHNICAL ASSISTANCE COMPONENTS : Component Estimated person weeks GEF($)M Other sources ($)M Project total ($)M Local consultants* 2,100 1.3 1.9 3.2 International consultants* 600 0.7 2.3 3.0 Total 2,700 2 4.2 6.2 * Provide detailed information regarding the consultants in Annex C. G. DESCRIBE THE BUDGETED M & E PLAN : Please refer to Annex 3 of the GEF Project Document for details on the Monitoring and Evaluation Plan including detailed indicators and targets for the project. A confirmed budget for monitoring and evaluation is US$700,000, of which US$300,000 comes from GEF. See Table 14 of Annex 4 of GEF Project Document for detailed break-down of the technical assistance sub-component, and Annex C of this Memorandum for a break-down of consulting services expected to be procured for Monitoring and Evaluation. PART II: PROJECT JUSTIFICATION A. DESCRIBE THE PROJECT RATIONALE AND THE EXPECTED MEASURABLE GLOBAL ENVIRONMENTAL BENEFITS: Please refer to Annex 1 of the GEF Project Document for a detailed description of the main sector issues, Annex 4 for detailed component description, and Annex 3 for key outcomes and indicators. B. D ESCRIBE THE CONSISTENCY OF THE PROJECT WITH NATIONAL PRIORITIES / PLANS : Page 4 CEO Endorsement Template-Aug 29, 2007.doc 4 Refer to the section 1C (Higher Level Objectives to which the Project contributes) of the GEF Project Document for details. C. D ESCRIBE THE CONSISTENCY OF THE PROJECT WITH GEF STRATEGIES AND STRATEGIC PROGRAMS : Please see Section I.C, para 24 and Part II, para 26 of the GEF Project Document. D. O UTLINE THE C OORDINATION WITH OTHER RELATED INITIATIVES : Refer to the paragraphs 63-65 of the Annex 11 (Incremental Cost Analysis) of the GEF Project Document for further details on the related projects and the coordination mechanism. E. D ESCRIBE THE INCREMENTAL REASONING OF THE PROJECT : Please refer Annex 11 of the GEF Project Document. F. I NDICATE RISKS , INCLUDING CLIMATE CHANGE RISKS , THAT MIGHT PREVENT THE PROJECT OBJECTIVE ( S ) FROM BEING ACHIEVED AND OUTLINE RISK MANAGEMENT MEASURES : Please refer to Section III. E for the risk analysis and mitigation measures for the project G. EXPLAIN HOW COST - EFFECTIVENESS IS REFLECTED IN THE PROJECT DESIGN : The cost effectiveness of the project as reflected through the global benefits of the project are about 1 million tons of CO2 over a period of fifteen years. The largest benefits will come from the grid-based hydro systems (expected to displace in 70% natural gas and in 30% diesel), about 0.84 million tons of CO2; followed by the isolated hydro based power projects with 0.15 million tons CO2; and the solar components of about 40 thousand tons of CO2. The average cost of a ton of CO2 for this Project is US$6.5/ton CO2. Additionally, please refer to the Annex 9 of the GEF Project Document: Economic and Financial Analysis. PART III: INSTITUTIONAL COORDINATION AND SUPPORT A. P ROJECT I MPLEMENTATION A RRANGEMENT : Please refer to Annex 6: Implementation Arrangements of the GEF project Document for the implementation arrangements for the project. Detailed implementation arrangements for individual sub-components, including eligibility criteria, grant thresholds, monitoring and reporting requirements etc. are included in the Project’s Operating Guidelines. PART IV: EXPLAIN THE ALIGNMENT OF PROJECT DESIGN WITH THE ORIGINAL PIF : Changes have been made to some aspects of the project design. This section provides justification for the changes in the project since the work program entry in June 2006 . Project Objectives, Outcomes and Indicators Objectives: The Global Environmental Objective (GEO) has not changed. The GEO remains to abate greenhouse gas emissions through the use of renewable energy in rural areas for the provision of electricity. The IDA project development objective has been modified. The original Energizing Rural Transformation Project (ERT), as approved by the Council for the Work Program Entry, was prepared in 2005. In 2006, Tanzania experienced a severe energy crisis with massive load shedding, with an estimated impact on the economy of a 2% drop of GDP. The crisis revealed the underlying vulnerability of a hydro-dominated generation system to droughts and the resulting importance of adequate diversified generation planning and timely investments, to reduce technical losses and improve overall reliability of the system. The Government priorities had to shift from a large-scale rural access expansion Page 5 CEO Endorsement Template-Aug 29, 2007.doc 5 (originally contemplated under the ERT project) to sector stabilization, quality improvements and TANESCO ’s cost recovery. It became clear that TANESCO’s technical and financial situation has to improve before it can undertake a massive rural electrification expansion. As a result, there have been some changes in the components (not related to the GEF) – the original grid extension activities have been replaced with grid rehabilitation works, and ICT component was removed. Consequently, the IDA Project Development Objective has been modified to read: The original objectives of the ERT Project at Council WPE The current objectives of the TEDAP project at CEO endorsement Global Environmental Objective (GEO) to abate greenhouse gas emissions through use of renewable energy in rural areas for provision of electricity. … remains unchanged Project Development Objective (PDO) (i) increase electricity access in rural and peri-urban Tanzania to productive enterprises, service delivery facilities (in health, education, and water), and to households with the capacity to pay for electricity, and (ii) establish a functioning institutional framework for commercially oriented, sustainable service delivery for rural electrification that can be scaled up. to improve the quality and efficiency of the electricity service provision in Tanzania and to establish a sustainable basis for energy access expansion. Outcomes The key outcomes of the GEF-related activities remain practically the same as in the Council-approved Energizing Rural Transformation Project: • increase electricity access in rural and peri-urban Tanzania to productive enterprises, service delivery facilities (e.g. in health and education), and to households with the capacity to pay for electricity; • establish a functioning institutional and regulatory framework for commercially oriented, sustainable service delivery for rural electrification and small renewable power projects that can be scaled up; and • removing barriers to, and reduction of costs of implementation of renewable energy technologies to help mitigate greenhouse gas emissions The only difference is an inclusion of the reference to small renewable power projects under the second outcome to reflect increased focus on grid-connected renewables of the new project. This new focus was brought by the 2006 energy crisis, which highlighted the need for a more diversified grid supply. Results framework and key indicators There have been some changes in the results framework and key indicators for GEF related activities. While the overall outcomes have not changed, the result framework has been simplified to concentrate on a smaller number, measurable indicators. The original results framework included 28 performance indicators, which would be difficult and costly to track. These indicators were therefore consolidated into nine, easier measurable, indicators/targets. The new indicators still track the same progress towards the achievement of the above-referenced outcomes (which have not been changed), focusing on: (i) MW of renewable energy installed (and resulting CO2 reductions), (ii) new electricity connections, (iii) improved functionality of the Rural Energy Agency (REA), (iv) new regulatory framework developed and in use, and (v) development of a pipeline of new sub-projects and electricity connections. For detailed indicators, refer to the Annex A to this Memorandum: Project Results Framework and Annex 3 of the GEF Project Document. Physical targets The reorientation of the project support to grid-connected renewables has also permitted to increase project’s physical outputs in terms of MW of renewable energy from 13MW to 17MW and of CO2 emission reductions from 0.75 million to 1 million tCO2. A number of new connections also increased through an introduction of grid-connected mini-grids with renewable generation, with lower-costs per connection, through focus on smaller PV systems, which market surveys found to be more demanded, through obtaining higher co-financing, which allows spending a greater portion of IDA and GEF proceeds on investments (as opposed to TA). Page 6 CEO Endorsement Template-Aug 29, 2007.doc 6 ERT (At WPE) # systems # users MWs TEDAP(At CEO) # systems # users MWs A.1 Grid connected systems 1 - 3 B.1a SPDG for grid connected generation 3 - 12 A.2 Independent grid electricity connections (renewable) 9 600 9.0 B.1.b, c Grid-connected and isolated mini-grids 9 5,000 4 A.3 Sustainable solar market packages for public services 600 600 0.6 B.2 a SSMP for public institutions 1,200 1,200 0.6 A.4 Solar energy for individual end users and enterprises 8.600 8,600 0.25 B.2 b SSMP for individual end users and enterprises 10,600 10,600 0.4 Total -- 9,800 12.85 -- 16,800 17.0 Emission reductions: 0.75 million tCO2 Emission reductions: 1 million tCO2 Project costs and financing Considering the above described country background, the offgrid component has undergone some adjustments during the pre-appraisal and appraisal. The table below compares the project costs and financing of the original ERT and the current TEDAP project. ERT (At WPE) IDA GEF Other TEDAP (At CEO) IDA GEF Other A. Rural Electrification 15.6 6.5 16.7 B. Offgrid component A.1 Grid based electricity connections 0 0 3.6 B.1a SPDG for grid connected generation 0 0.6 18.3 A.2 Independent grid electricity connections 8.5 1.5 4.5 B.1.b, c Grid-connected and isolated mini-grids 7.0 1.6 5.2 A.3 Sustainable solar market packages for public services 7.1 1.2 2.8 B.2 a SSMP for public institutions 6.4 1.2 2.5 A.4 Solar energy for individual end users and enterprises 0 0.8 5.3 B.2 b solar PV for individual end users and enterprises 1.6 1.1 5.6 A.5 Technical Assistance 0 3.0 0.5 B.3 Technical Assistance, including operating costs 1 2.0 5.5 Total renewables 15.6 6.5 16.7 Total renewables 16.0 6.5 37.1 As discussed above, specifically, greater attention has been placed on mobilizing resources for grid-connected renewables under the standardized power purchase agreements and tariffs. Consultants contracted under the Bank- administered SIDA trust fund for the project preparation have helped the Government to draft these SPPAs and tariff methodology. Considerable interest has been created among the private sector, with the first 6 sub-projects in Page 7 CEO Endorsement Template-Aug 29, 2007.doc 7 advanced stage of preparation. These sub-projects are least-cost (as standardized tariff is based on avoided costs of TANE SCO’s generation) and would not need IDA or GEF investment subsidies. As this is a new field in Tanzania, however, considerable support is needed for pre-investment and market development to overcome initial market barriers. Therefore, the new TEDAP project assigns US$0.6 million of GEF resources for this new category to be disbursed in the form of Matching Grants. This change has also helped to mobilize more private sector resources, as reflected in the amount of co-financing increased from US$32.3 million to US$49.8 million. Of this amount, US$27.1 million is attributed to the financing leveraged from the private sector. This amount is estimated on basis of project preparation studies, including feasibility studies of potential small renewable power projects, and detailed discussions with project sponsors and local banks. The sub-project designs are already well-advanced and, therefore, the co- financing estimates are considered reliable. GEF cost break-down As for the GEF allocation, given that the current projects includes higher co-funding resources for TA (compared to the WPE), US$1 million of GEF resources originally included in the technical assistance component has been reallocated to support directly sub-projects through the provision of performance grants for investments and matching grant for pre- investment and market development. This market-driven support is expected to have better impact than traditional TA. Consequently, the grid-connected renewable category was increased by US$0.6 million, the mini-grid category by US$0.1 million and solar PV category by US$0.3 million. Implementation arrangements Implementation arrangements for the project have been slightly modified compared to the original ERT project. In particular, they have been simplified to support agile implementation. The ERT project contemplated one coordination agency: (Ministry of Finance), two oversight agencies (Ministry of Energy and Minerals) and (Ministry of Communications and Transport) and three implementing agencies: Rural Energy Agency/Fund (passing funds to TANESCO and private sector), Rural Communications Access Agency (RCAA) and CIT, a private sector apex organization. TEDAP proposes a more streamlined structure. There will be only two implementing agencies. The grid component would be directly executed by TANESCO. The GEF-supported offgrid component will initially be implemented by MEM. Once REA becomes fully operational, MEM will pass implementation responsibilities for the offgrid component to REA. PART V: AGENCY(IES) CERTIFICATION This request has been prepared in accordance with GEF policies and procedures and meets the GEF criteria for CEO Endorsement. Steve Gorman Executive Coordinator The World Bank GEF Agency Coordinator Christophe Crepin Regional GEF Coordinator Africa Region Date: October 25, 2007 Tel. and Email: x39727, ccrepin@worldbank.org Page 8 CEO Endorsement Template-Aug 29, 2007.doc 8 A NNEX A: P ROJECT R ESULTS F RAMEWORK For GEF-related activities: PDO Project Outcome Indicators Use of Project Outcome Information (a) to establish a sustainable basis for energy access expansion. (b) to support the global objective of reducing CO 2 emissions by reducing barriers to renewable energy development. • REA fully functional as demonstrated by (i) capacity to develop, finance and implement scale up of pilot schemes; and (ii) pipeline of 40,000 new rural household connections. • 17 MW of renewable energy installed resulting in CO 2 emission reductions. • to evaluate the progress towards goals established in the MKUKUTA; and • to evaluate the longer-term prospects of the sector and its economic and fiscal impact on Tanzanian economy. Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Offgrid Investments (i) Increased electricity access in rural and peri-urban Tanzania to productive enterprises, service delivery facilities (in health and education), and to households with the capacity to pay for electricity; (ii) Establishment of a functioning institutional and regulatory framework for commercially oriented, sustainable service delivery for rural electrification and renewable energy that can be scaled up; and (iii) Removal of barriers to, and reduction of costs of implementation of renewable energy technologies to help mitigate greenhouse gas emissions. · 15,000 new rural household and business connections to electricity services through new offgrid models. · 1,200 new public institutions electrified through new offgrid models. · 12 MW of grid connected renewable energy delivered by small private power developers (SPPs) under Standard PPA/Ts. · Use of Standard PPA/Ts in signing additional 20 MW of renewable energy. · At least 5 sub-project transactions concluded by REA. • Serves as inputs to policy and regulation development, sector-wide access expansion program and design of REA’s subsidy guidelines. Page 9 CEO Endorsement Template-Aug 29, 2007.doc 9 Target Values Data Collection and Reporting Project Outcome Indicators Baseline YR1 YR2 YR3 YR4 YR5 (or at Closing Date) Frequ ency and Repor ts Data Collection Instrume nts Res pons ibilit y for Dat a Coll ectio n Improving REA functionality as demonstrated by capacity to develop, finance and implement scale up of pilot schemes REA has an in-complete functional organizatio n Director General and Key Staff appointed Technical, Procuremen t and Safeguards Capacity added Transfer of Offgrid Component implementa tion to REA REA identifies and approves new connections REA identifies and approves new connections Annual World Bank Supervision Mission Reports, Ongoing sector dialogue REA Improving REA functionality as measured by a pipeline of new rural household connections 0 0 5,000 15,000 27,500 40,000 Annual World Bank Supervision Mission Reports, Ongoing sector dialogue REA CO2 emission reduction (as measured by MW of renewable energy installed) 0 0 3 6 11 17 Annual SPPA implementa tion REA CO2 emission reductions estimated over the life of the renewable energy projects 0 0 170,000 340,000 640,000 1,000,000 New rural household and business connections to modern electricity services through new offgrid electrification models with PSP - Models and Regulatory Framework developed 3,000 6,000 11,000 15,000 Annual MEM/REA reports, verification reports and surveys ME M/R EA New public institutions electrified through new offgrid electrification models with PSP - Models and Regulatory Framework developed 200 500 800 1,200 Annual MEM/REA reports, verification reports and surveys ME M/R EA Delivery of renewable energy by grid connected SPPs under Standard PPA/Ts 0 0 3 6 10 12 Annual MEM/REA /TANESCO reports ME M/R EA Standard PPA/Ts methodology for small renewable power projects adopted and in use - SPPA/Ts formally adopted SPPA/T signed for first 12 MW SPPA/Ts signed for additional 5 MW SPPA/Ts signed for additional 10 MW SPPA/Ts signed for additional 20 MW Annual MEM/REA reports ME M/R EA Transactions completed by REA 0 0 0 1 3 5 Annual REA reports REA Page 10 CEO Endorsement Template-Aug 29, 2007.doc 10 A NNEX B: R ESPONSES TO P ROJECT R EVIEWS (from GEF Secretariat and GEF Agencies, and Responses to Comments from Council at work program inclusion and the Convention Secretariat and STAP at PIF) (I) Detailed responses were provided to the STAP review at Work Program Entry - please refer to Annex 12 of the GEF Project Document. (II) GEF SEC REVIEW SHEET (APRIL 12, 2006) COMMENTS Comment : Clear strategy for substitution of GEF subsidies for institutional and household PV systems, and isolated grids. Response: Component B.1 Small Power Generation and Distribution Sub-Projects The GEF supported activities of the sub-component include GEF performance grants for renewable energy generation investments supplying independent mini-grids, to partially offset high upfront costs of the renewable power generation, as well as matching grants for pre-investment and market development for both grid-connected and isolated renewable energy. The purpose of the GEF grants is to jump-start small-scale renewable power projects in Tanzania. It is expected that the GEF grants can be phased out by the end of the project. By that time at least 16MW would have been installed, including at least 6 isolated mini-grids, and local capacity strengthened. The grid connected renewables should be economically viable through the Standardized Power Purchase Agreement and Tariff approach, and would therefore not require grants. Renewable power mini-grids will be mainstreamed fully into the REF funding, with sustainable finance through a sector-based levy, established by the Rural Energy Act of 2005, and would therefore also not require additional /continued GEF support. Component B.2 Sustainable Solar Market Development GEF support for this component consists of a support of US$2 per Wp (on average) of installed PV capacity. In addition, solar providers will be eligible for technical support through the matching grant window. GEF support is expected to be phased out by the end of the project as (i) reduction of the PV system prices is expected due to enhanced competition and increased volumes, as well as the targeted TA and facilitation of commercial channels with lower-cost producers (e.g. in Asia); and (ii) increased co-financing from the local governments for institutional systems Comment : Please update the status of the other projects. Agreement on clear-cut rules as to the division of labor between the projects, in particular which business support services to PV suppliers should e provided by which project Response Several donor supported activities are under implementation or under preparation and complement the proposed project. To ensure coordination, two working groups will assist the Ministry and REA with the implementation of the Off-grid Component: (i) the Rural Energy Working Group (REWG), focusing particularly on solar PV and (ii) the Working Group on Small Power Development (WGSPD), focusing on small renewable projects, involving various Government institutions, utility, regulators and private sponsors. The main ongoing related activities include: Solar PV programs in Tanzania: UNDP/GEF - Transformation of the Photovoltaic (PV) Market in Tanzania project has been operating in the Mwanza region since March 2004. In 2006, Sida initiated a similar scale-up project, which operates in additional four regions. Both projects had initial positive results in helping PV companies develop retail networks in rural areas, and significantly increasing sales in these areas. Both are now moving into the replication phase. Reported remaining challenges include: (i) concerns about sustainable servicing of institutional systems; (ii) micro-finance remains under-utilized; (iii) product and installation quality remains a concern, despite the attention given to the development of standards, (iv) rural sales are still fragmented, with resulting high costs of systems, installation and post-installation services. The proposed TEDAP project builds on experiences and lessons learnt of these ongoing PV operations projects in Tanzania. It would complement these activities through o the Sustainable Solar Market Packages approach aiming at improving sustainability of institutional systems; Page 11 CEO Endorsement Template-Aug 29, 2007.doc 11 o the market aggregation approach, aimed at a reduction of transaction costs through aggregating demand, e.g. through major rural firms, such as tea/coffee processors, sugar cane millers etc. o targeted focus on micro-finance o promotion of smaller lighting systems benefiting the poor, in coordination with the Lighting Africa Initiative (which TEDAP project is a part of) The TEDAP market development support will focus on these areas, complementing, not duplicating the existing support from other projects. Coordination will be done by MEM/REA and the Rural Energy Working Group. A launch workshop with all interested PV and microfinance companies is scheduled for December 2007. Other main related regional programs promoting renewable energy include: UNEP/GEF Greening the Tea Industry in East Africa, supporting small hydros, and UNEP/AfDB/GEF assisted Cogen Africa, supporting co-generation. Coordination is established through MEM and the above referenced Working Group on Small Power Development. Please refer to Part II, section D of this memorandum and paragraphs 63-65 of Annex 11: Incremental Cost Analysis of the GEF Project Document for more details. (II) RESPONSE TO COMMENTS FROM THE COUNCIL MEMBERS -INTERSESSIONAL WORK PROGRAM, APPROVED AUGUST 1, 2006 (REFERENCE TO GEF/IS/15) Comment from France: In a general point of view, this project is relevant and helpful for Tanzania. Nevertheless, one question rises: what to do with the 0.75MtCO2 saved thanks to the project? Tanzania is on the annex 1 of Kyoto protocol and so can conclude Joint Implementation Agreement. Will Tanzania sell this CO2 in order to optimize all the efforts done? Response: The project will assist the developers in marketing CO2 emission reductions (for those sub-projects not supported by GEF). The first potential sub-projects are currently under analysis by the Community Development Carbon Fund (CDCF). Comment from Switzerland: The project mentions a structured awareness creation programme for productive use of electricity to be implemented. This should be reinforced by a more global approach with actual support for productive use development (with financing). TANESCO should be supported in its activities in this domain. Utilities are usually initially neither competent nor interested in such activities. This could be developed with the help of NGOs, or even dealers for given standardized packages. Response: Special attention will be given to educate the users of the benefits of productively using the electricity provided by the new systems. This applies in particular to the village based systems and the stand-alone systems for entrepreneurs and households. A structured awareness creation program will be implemented to improve the general awareness of the benefits of electricity as well as a more specific program for the new users of electricity. In addition, productive uses have been incorporated as one of the eligible activity under the matching grant window. In the updated project design, these activities will not be implemented by TANESCO but by private sector developers and NGOs, with technical assistance provided by the project. See Annex 4, Component B.3 Description of the Project GEF Document for details. Comment from Switzerland: It is not clear yet how the sustainable solar market packages for public services will be designed and which model is going to be applied. It seems that there are not many recorded successes of similar approaches. Response : The sustainable solar market package model builds on experiences of solar PV projects world-wide and in Tanzania in particular. These are summarized in the Box 2: “Lessons learnt from the past PV projects in Tanzania and SSMP approach” of Annex 4 of the GEF Project Document. SSMP approach has been already successfully implemented Philippines, where it is currently being replicated and scaled up. The proposed project also draws on lessons learnt from the Philippines experience. One of the key problems of the past projects in Tanzania has been low sustainability of PV systems in public institutions, and low volumes and high prices for domestic systems, also with sustainability problems. By bundling institutional, community and household applications in particular area, SSMP approach addresses some of the key affordability and sustainability issues of the past PV projects: • SSMP creates a critical mass to induce reduction in system prices and operating costs; • the SSMP approach buttresses the sustainability of the institutional systems by linking them with medium-term Page 12 CEO Endorsement Template-Aug 29, 2007.doc 12 maintenance obligations, and capacity building for the local authorities and communities, • bundling institutional and household applications will create a critical mass for the household market as well, allowing substantial increases in rural electrification in the remote areas with only modest subsidies. The SSMP operator will have an obligation to commercially sell a target number of household systems. • the SSMP operator will also be required to establish a rural outlet network which will help with trouble shooting and maintenance services support for the PV systems installed in the institutional facilities, and allow for further access expansion. Annex 4 of the GEF Project Document, Component B.2 description contains a detailed description of the SSMP approach and the first indicative SSMP packages. Comment from Switzerland: Biomass is mentioned as a major potential source for cogeneration and other energy applications. It is however not integrated in the project design. It is recognized that PV has limited capabilities for productive use of electricity. Recent developments in the domain of biomass based small power generation should be taken into account and considered at least at a pilot level. In many cases, this option would be a least cost option when compared to PV for small clusters. Response : Biomass sub-projects have been integrated in the Component B.1 – Small Power Generation and Distribution. Project preparation studies have identified first two projects to be developed under this category: a 7- 11MW bagasse fired co-generation facility to sell power to the main grid (available 8-8.5 months of the year), and a waste-wood, 200kW (first phase) project to replace TANESCO’s diesel generation on the Mafia Island. See Annex 4 of the GEF Project Brief, Component B.1 description for more detail, including Box 1: Examples of Eligible SPGDs Page 13 CEO Endorsement Template-Aug 29, 2007.doc 13 A NNEX C: CONSULTANTS TO BE HIRED FOR THE PROJECT Position Titles $/ person week Estimated person weeks Tasks to be performed For Project Management Not requested For GEF-funded Technical Assistance Local Average 1,500 Sociologist 42 Design of sustainable solar market packages Economist 40 Design of sustainable solar market packages Financial analyst 30 Design of sustainable solar market packages Anthropologist 30 Design of sustainable solar market packages Solar specialist 70 Design of sustainable solar market packages NGO staff 200 Preparation of village micro-hydro schemes Renewable energy specialists 40 Renewable energy assessment Renewable energy specialists 30 Advisory services to REA Rural access specialists 20 Advisory services to REA Solar specialists 30 Advisory services to REA Investment analyst 60 Awareness building PR specialist 60 Awareness building Rural electrification specialist 30 Productive uses Productive use specialist 50 Productive uses Engineer 40 M&E Social scientist 40 M&E Environmental specialist 40 M&E International Average 4,000 Solar specialist 20 Design of SSMPs Economist 15 Design of SSMPs Financial analyst 10 Design of SSMPs Renewable energy specialist 25 Renewable energy assessment Engineer 20 Renewable energy assessment Economist 15 Renewable energy assessment Regulatory specialist 25 Advisory services to REA Subsidy specialist 20 Advisory services to REA M&E specialist 10 Monitoring and evaluation Renewable energy specialist 10 Monitoring and evaluation Access specialist 10 Monitoring and evaluation Page 14 CEO Endorsement Template-Aug 29, 2007.doc 14 A NNEX D: STATUS OF IMPLEMENTATION OF PROJECT PREPARATION ACTIVITIES AND THE USE OF FUNDS N/A : GEF FUNDS HAVE NOT BEEN UTILIZED FOR P ROJECT P REPARATION . A. EXPLAIN IF THE PPG OBJECTIVE HAS BEEN ACHIEVED THROUGH THE PPG ACTIVITIES UNDERTAKEN . B. DESCRIBE IF ANY FINDINGS THAT MIGHT AFFECT THE PROJECT DESIGN OR ANY CONCERNS ON PROJECT IMPLEMENTATION . C. PROVIDE DETAILED FUNDING AMOUNT OF THE PPG ACTIVITIES AND THEIR IMPLEMTATION STATUS IN THE TABLE BELOW : GEF Amount ($) Project Preparation Activities Approved Implementatio n Status Amount Approved Amount Spent To- date Amount Committed Uncommitted Amount* Co- financing ($) (Select) (Select) (Select) (Select) (Select) (Select) (Select) (Select) Total * Uncommitted amount should be returned to the GEF Trust Fund. Please indicate expected date of refund transaction to Trustee.