The $420,000 grant has been awarded to Jumeme Rural Power Supply Ltd, which is a joint venture company formed by German energy supply systems firm Inensus GmbH, Austria-based renewable energy project developer TerraProjects and Tanzania’s St Augustine University in Mwanza.

Solar power is among a number of energy sources being explored to boost power supplies across Tanzania. The AfDB said Sefa’s grant will finance the costs related to technical studies, lenders’ due diligence support and legal and financial advisory services.

Helen Bone of Pinsent Masons, the law firm behind Out-Law.com, said: “The reason solar in Africa is exciting is twofold. It is suited to clean energy grants from funds such as Sefa while also being a feasible generator for relatively small ‘off-grid’ systems with the potential to provide a favourable yield.”

Bone said: “It is in countries like Tanzania, where grid extension would be costly, that these types of green energy developments can become particularly attractive.”

The Jumeme project is expected to expand electrification and increase access to energy services, using mainly solar, in some 16 villages in the first phase, which the AfDB said would include 82,000 residents, 11,000 households, 2,600 businesses, 42 public offices, 32 schools, 12 health centres and 77 religious buildings.

“It is expected that a minimum of 500 new businesses will be created following the implementation of the first phase of the project,” the AfDB said.

According to the AfDB said: “Tanzania’s national electricity coverage is estimated at about 21%, with the transmission grid covering a minor part of the country and leaving out most of the territory, particularly in western and southern regions.”

In the 2012 update of the Tanzania Power Master Plan (146-page / 2.35 MB PDF), the government said it wants to see 250,000 new connections to the grid annually from 2013 to 2017.

“However, the vastness of the country, coupled with low population density, makes grid extension too expensive for many difficult-to-reach areas, creating a significant market potential for mini-grid systems,” the AfDB said.

Sefa is a multi-donor facility designed to unlock private investments in small to medium-sized clean energy projects in Africa. The fund is endowed with $60 million from the governments of Denmark and the US.

A report published by the UN’s Economic Commission for Africa (278-page / 10.4 MB PDF) last year recommended boosting ‘energy trade’ in Eastern Africa, by encouraging private investors to develop the energy infrastructure of individual states to maximise regional economic growth.

According to the International Monetary Fund, Tanzania also has “good prospects” over the next decade of becoming a major producer and exporter of natural gas.