The African Development Bank (AfDB) has announced the injection of an US$870,000 preparation grant for Tanzania's the Rural Energy Agency (REA) through its Sustainable Energy Fund for Africa (SEFA) trust fund.

The money will be used to structure the Renewable Energy Investment Facility (REIF), which will provide affordable finance to private sector clean energy projects providing energy access to rural communities in Tanzania, according to the Bank.

Tonia Kandiero, AfDB Resident Representative in Tanzania, said "the SEFA support to will help address existing financing gap in the market and accelerate private sector participation in off-grid electrification in Tanzania. We expect this initiative to make a real contribution to Tanzania's ambitious energy access targets, ultimately improving livelihoods for all rural communities in the country. We are also pleased to provide this support in the context of African Development Bank's New Deal on Energy for Africa Strategy, which stresses universal energy access through increased adoption of clean energy technologies and partnership with the private sector."

The AfDB says the SEFA grant will include advisory support, development of operational guidelines, risk mitigation framework, fund manager identification, technical and institutional support for the REA towards the establishment of REIF and capacity building for relevant public sector institutions/agencies and private sector project developers.

The bank's analysis of Tanzania's national electricity coverage estimates coverage to be at a little over 20% with transmission grid covering a minor part of the country and leaving out most of the territory. It also found that access is even lower for the rural population at 7% with nearly 30 million people lacking a connection to the electricity grid.

"The vastness of the country, coupled with low population densities, makes grid extension too expensive, creating a significant market potential for off-grid electrification schemes. The REIF will thus contribute to expanding rural electrification and increase access to energy services by channelling appropriately tenured and priced finance to private sector companies developing and operating energy access projects in rural areas based on renewable energy technologies," the Bank noted in its announcement.

Previous SEFA beneficiaries include Chad for a Starsol 40 MW Solar PV Power Plant and Rwanda for which is currently rolling out a Green Mini-Grid Support Programme. SEFA has revealed its commitment to projects on the African continent to be $52.953.155 in the 4 years of operation up to 2015.