TECHNICAL ASSESSMENT - ADDENDUM I. Assessment of Program Strategic Relevance and Technical Soundness A. Strategic Relevance 1. The technical assessment of the Parent Program at the time of Board Approval (May 2016) remains highly relevant. The Government’s NREP Program requires a substantial increase in financing to support (a) grid extension works, densification, and new connections; (b) TA to scale up renewable energy generation; and (c) sector capacity strengthening. The Parent Program was restructured to increase the overall targeted connections supported by the Program (Results Area 1), address key challenges related to scaling up renewable energy (Results Area 2), provide additional support under Results Area 3, remove time limits specified under the DLRs, and extend the closing date to ensure that the Program can achieve its development objective. 2. The AF is proposed to be a four-year operation (2022–2026) and will follow a result-based approach in line with the Parent Program. The proposed AF complements key actions already introduced in the Parent Program and will help expand on the three results areas of the Parent Program to influence the equity, efficiency, and outcomes of the Program. Along with supporting the NREP, the proposed AF is also fully aligned with the World Bank’s CPF FY18–FY22, Tanzania Development Vision 2025, and the (draft) REMP (2022–2030)—which supports operationalization of Tanzania’s ambitious goals for expanding access to modern energy services in rural areas, in line with SDG 7 and the Government’s SEforAll Action Agenda. B. Technical Soundness 3. The AF will continue to support the Government’s rural electrification efforts according to the NREP. The technical assessment conducted during preparation of the Parent Program remain substantially relevant and valid for the AF. Infrastructure works for on-grid electrification are based on technically proven concepts and experiences of the REA and TANESCO. The AF Program features are not unique nor does the technical design include new or untested technology. In particular, the REA3-R2 involves construction of 28,297.10 km of MV (33 kV) lines and 3,448 km of LV lines (0.4 kV) and installation of 3,448 distribution transformers of different sizes. Densification Round 2C involves construction of 7,207.8 km of LV lines and installation of 1,837 (50 kVA) and 487 (100 kVA) transformers. The construction and installation of the aforementioned REA3-R2 and Densification Round 2C will be based on experiences of the REA and TANESCO in implementing the NREP and will be informed by lessons learned from earlier rounds of on-grid electrification under the NREP and Parent Program. 4. The off-grid component is designed in line with international best practice, developed by the World Bank, IFC, and ESMAP Lighting Global program, as well as other donors, aid agencies, and governments. Only products that meet recognized international quality standards, such as International Electrotechnical Committee Technical Standard 62257-9-8 for off-grid solar lights and home systems, will be eligible for financial support under the RBF or CL. Rigorous due diligence will be carried out on companies before they can qualify to receive financial support. The project’s approach leverages private sector capability and co-investment to achieve energy access at scale and speed, ensuring efficient use of public funds and building a sustainable market. The RBF facility, CL, and proposed TA regarding policy/regulatory issues and quality standards are all designed based on lessons learned from similar World Bank project components and financing facilities across Sub-Saharan Africa over the last decade. 5. The clean cooking subcomponent will align with the Government’s upcoming CEAP and incorporate international global best practices. The subcomponent will be in line with the CEAP, which is an integral part of the REMP and intended to be operationalized as a guiding tool specifically related to access to clean cooking options in rural Tanzania for the MoE through the REA. The clean cooking RBF window will support all eligible cooking technologies based on stove performance and include solutions such as improved charcoal and wood stoves and clean fuels stoves. The RBF facility, CL, and proposed TA will be designed based on the World Bank’s operational experience in the efficient and clean cooking sector over the last 10 years, as well as the local contexts with stakeholders from a variety of positions and roles (public sector, civil society, and private sector) at all levels (provincial, national, and international) involved. The RBF incentives amount will be linked to the verified output-, outcome-, and impact-level results; differentiated by cooking technology performance levels and consumer income categories; and reviewed and adjusted periodically. C. Updated Results and DLI Framework 6. The proposed additional loan aims to finance expenditures associated with the scale-up of Program results to enhance the impact of a well-performing Program. The Results and DLI Frameworks and end targets will be updated to reflect the expanded scope. The revised Results and DLI Frameworks can be found in tables 2.1 and 2.2 and the revised allocation in table 2.3. Table 2.1 Revised Results Framework with Updated Targets Results Area Baseline Current Current Revised Result End Target End Target Results Area 1: Expanding Rural Access to Electricity PDO Indicator 1: People provided with access to electricity 0 2,925,000 2,925,000 7,925000 under the program by household connections (Number, Custom) (Number) IR Indicator 1.1: Cumulative number of grid electricity 0 585,000 585,000 1,585,000 connections, including those under mini-grids, made under the program (Number) IR Indicator 1.2: Transmission and distribution lines 0 28,000 28,496 60,000 constructed or rehabilitated under the program (Kilometers) IR Indicator 1.3: Households connected to the grid that 24 21 24 24 are female-headed (Percentage) PDO Indicator 2: Non-residential connections implemented 0 30,000 31,524 80,000 under the Program (Number) IR Indicator 2.1: Educational facilities connected under 0 1,500 5,900 10,000 the program (Number (Thousand)) IR Indicator 2.2: Health care facilities connected under 0 1,500 1,664 4,000 the program (Number (Thousand)) IR Indicator 2.3: Business connected under the 0 9,000 14,316 20,000 program (Number (Thousand)) IR Indicator 2.4 (new): IR Indicator 2.3: Female owned 0 — — 6,000 Business connected under the program (Number (Thousand)) Results Area 2: Increasing Supply of Renewable Electricity in Rural Areas PDO Indicator 3: Cumulative number of proposed MWs 0 13 13 13 covered by SPP and renewable energy sub-loans reaching financial close under the CL (Megawatt) Results Area Baseline Current Current Revised Result End Target End Target IR Indicator 3.1: Cumulative value of eligible SPP and 0 400,000 16,500,000 16,500,000 renewable energy sub-loans reaching financial close (Amount(USD)) PDO Indicator 4: People provided with access to electricity 0 0 100,000 1,350,000 via off-grid supplies under the Program (SPP and renewables, including solar PV) (Number) IR Indicator 4.1: Cumulative number of off-grid 0 0 20,000 70,000 electricity connections made under the program (Number) IR Indicator 4.2: Households connected to the off-grid 24 24 20 24 solutions that are female-headed (Percentage) IR Indicator 4.3 (new): Households provided with clean 0 — — 200,000 cooking solutions (Number) IR Indicator 4.4 (new) Amount of private investment 0 — — 3,250,000 mobilized for clean cooking solutions (Amount (USD)) IR Indicator 4.5 (new) Policies and regulations adopted 0 — — 1 by the government to support clean cooking market development (Number) Results Area 3: Strengthening Capacity of the Sector to Deliver the NREP PDO Indicator 5: Capacity for delivery of energy access and No No Yes Yes renewable energy generation strengthened (Yes/No) IR Indicator 5.1: Annual capacity building and project No No Yes Yes preparation activities completed (Yes/No) IR Indictor 5.2: Implementation of the National Energy No No Yes Yes Policy of 2015 to enhance access to modern energy services completed (Yes/No) IP Indicator 5.3 Contractors that have prepared and 0 — — 100 operationalized stakeholder engagement plan through conducting at least three stakeholder meetings in project village (Percentage) Table 2.2. Status and Proposed New DLIs and DLRs to Be Supported by the TREEP AF Results Area DLIs Current Results Current DLR/Targets Revised DLR/Target Expanding DLI 1 (scale up): DLR 1: 585,000 DLR 1: 585,000 DLR 1 (scale up): Rural Access Cumulative number of 1,000,000 to Electricity grid electricity connections made under the Program Increasing DLI 2 (new): Cumulative — — DLR 2 (new): 250,000 Supply of number of quality- Renewable verified off-grid Electricity in electricity systems Rural Areas and/or efficient cookstoves made under the RBF Program DLI 3 (new): — — DLR 3 Up to six Implementation of the preparatory studies Renewable Energy completed pursuant Strategy completed to the renewable Results Area DLIs Current Results Current DLR/Targets Revised DLR/Target energy strategy roadmap DLI 4: Annual capacity DLR 4.1: Achieved. DLR 4.1: Annual DLR 4.1: No change building and project Capacity Building preparation activities Plan for FY 2016/17 completed (linked to 13 submitted not later DLRs) than three (3) months after Effective Date DLR 4.2: Achieved. DLR 4.2: Annual DLR 4.2: No change Capacity Building Plan for FY 2017/18 submitted by July 31, 2017 DLR 4.3: Plan to DLR 4.3: Achieved. DLR 4.3: No change strengthen the capacity of the department for planning and preparation of REA approved by the Rural Energy Board DLR 4.4: Preparation DLR 4.4: (i) Draft DLR 4.4: No change Rural Electrification ongoing. REMP expected to be Master Plan is completed by submitted to the September 2022. Ministry of Energy; and (ii) Draft Rural Electrification Master Plan is approved by the Ministry of Energy DLR 4.5: No change DLR 4.5: Targeted DLR 4.5: Achieved Communities Program approved by the Rural Energy Board DLR 4.6: Annual DLR 4.6: No change DLR 4.6: Achieved. Capacity Building Plan for FY 2018/19 approved and submitted by REA to the Association DLR 4.7: Feasibility DLR 4.7: No change DLR 4.7: Achieved. studies for grid connections for all twenty-four (24) Results Area DLIs Current Results Current DLR/Targets Revised DLR/Target regions in the Recipient’s territory completed DLR 4.8: No change DLR 4.8: Annual Capacity Building DLR 4.8: Achieved. Plan for FY 2019/20 approved and submitted by REA to the Association DLR 4.9: Four (4) DLR 4.9: No change DLR 4.9: consulting services, Finalization of the under terms of reports are reference acceptable ongoing. to the Association, completed to support TANESCO's new power DLR 4.10: No change DLR 4.10: Annual DLR 4.10: Capacity Building Achieved. Plan for FY 2020/21 approved and submitted by REA to the Association DLR 4.11: Annual DLR 4.11: No change Capacity Building DLR 4.11: Plan for FY 2021/22 Achieved. approved and submitted by July 31, 2021 by REA to the Association DLR 4.12: Capacity DLR 4.12 (scale up) : development Annual capacity DLR 4.12: Under program for development implementation, renewable energy program for expected to be submitted by REA to renewable energy achieved in FY23. the Association submitted by REA to the Association DLR 4.13: DLR 4.13 (scale up): Preparatory studies Preparatory studies DLR 4.13: Under for at least eight (8) for at least sixteen implementation, renewable energy (16) renewable expected to be projects completed energy projects achieved in FY23. by REA completed by REA Results Area DLIs Current Results Current DLR/Targets Revised DLR/Target Strengthening DLI 5: Implementation DLR 5.1: Achieved. DLR 5.1: Study under DLR 5.1: No change Capacity of of the National Energy NEP for unlocking the Sector to Policy of 2015 electricity connection Deliver the completed challenges in rural NREP areas completed DLR 5.2: DLR 5.2: Strategy DLR 5.2: No change Procurement under NEP for ongoing, expected enhancing access to to be achieved by modern energy June 2023 services approved by the Minister of Energy DLR 5.3: DLR 5.3: Renewable DLR 5.3: No change Procurement energy strategy and ongoing, expected implementation plan to be achieved by approved by the DLR 5.4 (new): June 2023 Minister of Energy Energy Sector Monitoring and Evaluation Framework (i) designed and (ii) implemented. Increasing DLI 6. Cumulative value DLR 6: 400,000 DLR 6: 16,500,000 DLR 6: No change Supply of of eligible SPP Loan for Renewable Small Power Projects Electricity in and Renewable Energy Rural Areas Sub-loans reaching Financial Close Table 2.3. Updated Allocation per DLI Results Area DLIs Revised DLR/Target TREEP TREEP AF Total Funding Funding Allocation1 Allocation Expanding DLI 1 (scale up): DLR 1: 1,585,000 IDA: IDA: US$320 IDA: US$495 Rural Access Cumulative number of connections2 US$175 million million to Electricity grid electricity million connections made under the Program Increasing DLI 2 (new): Cumulative DLR 2: 250,000 — IDA: US$4 IDA: US$4 Supply of number of quality- million million Renewable verified off-grid ESMAP/CCF: ESMAP/CCF: Electricity in electricity systems US$6 million US$6 million Rural Areas and/or efficient 1 After restructuring. 2 Target is increased from 585,000 to 1,585,000. Results Area DLIs Revised DLR/Target TREEP TREEP AF Total Funding Funding Allocation1 Allocation cookstoves made under the RBF Program DLI 3 (new): — — IDA: US$6 IDA: US$6 Implementation of the million million Renewable Energy Strategy completed DLI 4: Annual capacity DLR 4.12 (scale up): IDA: US$15 IDA: US$2 IDA: US$17 building and project Annual capacity million million million preparation activities development program SREP: SREP: completed for renewable energy US$2.5 US$2.5 submitted by REA to million million the Association DLR 4.13 (scale up): Preparatory studies for at least sixteen (16) renewable energy projects completed by REA Strengthening DLI 5: Implementation DLR 5.4 (new): Energy IDA: US$1 IDA: US$1 IDA: US$2 Capacity of of the National Energy Sector Monitoring and million million million the Sector to Policy of 2015 Evaluation Framework SREP: SREP: Deliver the completed (i) designed and (ii) US$0.5 US$0.5 NREP implemented. million million Increasing DLI 6. Cumulative value DLR 6: 16,500,000 IDA: US$9 IDA: US$9 Supply of of eligible SPP Loan for million million Renewable Small Power Projects SREP: US$6 SREP: US$6 Electricity in and Renewable Energy million million Rural Areas Sub-loans reaching Financial Close Total funding IDA: IDA: US$335 IDA: US$535 US$200 million; million; million; ESMAP/CCF: SREP: US$9 SREP: US$9 US$6 million; million million ESMAP/CCF: US$6 million D. Capacity Assessment 7. Although the REA has extensive experience in implementing rural electrification projects, a variety of capacity challenges facing the REA were identified during preparation of the Parent Program. This included the REA’s limited capacity to plan and prepare rural electrification projects including to prepare feasibility studies, handle procurement, and manage project contractors. To strengthen the REA’s organizational structure and improve its project planning and implementation capacity, the Parent Program supported annual capacity-building plans for REA from FY16 to FY22, including targeted training activities and key technical and managerial recruitments during this period. Moreover, the plan to strengthen the capacity of the department for planning was developed and was approved by the REA Board in 2019. The Parent Program also supported procurement of the PMC to support the design, procurement process, supervision, verification, and reporting on contract works. The PMC has assisted the REA in preparing bidding documents and a supervision and reporting framework for REA3-R2. 8. According to most recent Tanzania Joint Energy Sector Review 2019, the REA and MoE still lack qualified personnel to follow up and supervise quality performance of rolling out the ambitious rural electrification program. Both agencies require additional technical experts, program managers, and necessary software applications to manage the increased workload. To be more specific, the REA needs (a) additional zonal coordinators to follow up and supervise projects in the field and (b) systems to identify training needs that are clearly linked to organizational priorities and its strategic plan. Meanwhile, the MoE needs to strengthen its planning capacity. 9. As set out in the Program Paper, TA support under the AF will be extended to cover activities related to renewable energy generation. The REA has conducted a capacity needs assessment and highlighted various areas where capacity-building support will be key to implement the AF as it relates to renewable energy. In particular, REA has identified (a) design, development, and management of renewable energy technologies; (b) risk management and risk sharing arrangements in renewable energy technologies; (c) financing mechanisms in renewable energy technologies; and (d) appraising of renewable energy projects. Moreover, the REA will also be responsible for managing and supervising implementation of the Clean CEAP set out under the new REMP (2022–2030). The REA will therefore be engaged in managing and supervising the development of clean cooking activities in rural areas and has highlighted a capacity gap in staff skills and experience in this area. In addition, it will be important to increasing institutional capacity in the energy sector to manage climate-related risks throughout the design and emergency response. 10. To address the abovementioned capacity needs, the proposed AF will continue to support annual capacity-building plans to build capacity within the REA, with a focus on enhancing technical and managerial expertise and skills to plan and deliver rural electrification programs and scale up renewable energy power generation. The annual capacity-building plans will cover the REA and other key actors in the sector, including the MoE, MoFP, TANESCO, renewable energy project developers, and partner financial institution. The activities in the annual capacity-building plan will be aligned with the efforts of other DPs, according to the recent agreement on joint coordinated TA support for sector capacity building between the GoT and DPs. In particular, the EU, AfDB, Global Affairs Canada, Norwegian Embassy, Swedish International Development Cooperation Agency (SIDA), United States Agency for International Development, and United Nations Development Programme are providing TA to Tanzania to support energy efficiency initiatives; energy sector reforms; improvements in the enabling environment for renewable energy investments; public-private partnerships for the power sector; integrated resource and resilience planning, including power system planning; preparation of a hydrological database; low-cost connection assessment; feasibility studies; and capacity strengthening in the renewable energy and gas sector in post-secondary education and vocational training, among other initiatives. Moreover, the PMC will continue to provide supervision services during the implementation phase of the REA3-R2 contracts, including safeguards monitoring and reporting under the AF. E. Assessment of Program Expenditure Framework 11. Program Expenditure Framework. Energy is considered a Government priority sector, consisting of approximately 6.2 percent of the GoT’s budget in the 2021/22 financial year with a high share spent on power infrastructure investment, including for generation and transmission. According to arrangements under the Parent Program, the GoT has been the primary financing source for the NREP. Sources of funds for the NREP flow through the Rural Energy Fund (REF), which is supported by (a) the GoT in annual budgetary allocations; (b) DP funds; (c) petroleum levies; (d) an electricity levy charged on (i) the commercial generation of electricity to the national grid and (ii) electricity generation in specified isolated systems, including for private consumption; and (e) fees charged by the REA for programs, publications, seminars, and consultancy services provided. The REF is funded primarily through subsidies and grants accruing from petroleum and electricity levies, which constituted approximately 62.93 percent of the REF revenues in the 2021/22 financial year, while DP funding accounts for approximately 37.1 percent. The REF provides capital subsidies to modern rural energy projects and is intended to draw down the capital costs of rural energy investments to attract private sector investment and ultimately deliver reliable and affordable modern energy services. A depiction of the REF flow of funds is set out in figure 2.1, including delineation of special purpose/dedicated accounts where DPs’ funding is administered for a particular purpose or project and cannot flow into the REF. The demand for financial support to rural energy projects is increasing and currently surpasses resources available in the REF. The REA is therefore working to diversify sources of funds and operationalize new sources of funds for the REF, including strengthening revenue collection procedures and raising additional funding from DPs. Figure 2.1. REF Flow of Funds and Special Purpose Flow of Funds 12. The Prospectus currently represents the GoT’s main guiding framework for electrification efforts and lays out a guiding strategy for investments for the NREP for 2013–2022. The Prospectus forecasted total investment costs for rural electrification in 2013–2022 to be US$2.1 billion (TZS 4.9 trillion). As the investment programs under the Prospectus are coming to an end this year, future investments will be guided by the REMP (2022–2030), which is currently being developed under the TREEP Parent Program. The draft REMP is forecasting that total investment costs for rural electrification in 2022–2030 to be US$1.9 billion (TZS 4.4 trillion). The proposed investments under the Prospectus that did not materialize due to funded gap are being rolled over to the REMP. The financing sources of the NREP guided by the Prospectus and REMP are set out in table 2.4. Table 2.4. PforR Financing Sources (US$, millions) Financing Source NREP NREP AF Program Prospectus/TREEP Prospectus/TREEP Partial REMP - (2016–2022) (2016–2022) TREEP AF Estimated Actual Received (2022–2026) Estimated Borrower/recipient 900 812 6003 IBRD/IDA 200 189 335 SREP 9 2.5 — ESMAP — — 6 Gap — — — Total 1,109 1,003.5 941 13. As estimated, the largest share of funding has been committed for densification (14 percent) and especially grid extension (84 percent), necessary for reaching a rapid scale of grid expansion and the access agenda aimed by the Government. Less than 2 percent of committed funds will support off-grid electrification and less than 3 percent will support operating costs, which is considerably less than estimated. The main reason for the low commitment for off-grid electrification and distributed generation is the delay in development of new SPP projects. The estimated and actual expenses under the Prospectus (2016–2022) across the different areas of the NREP (that is, (a) electrification by grid extension, (b) electrification by densification, (c) electrification through off-grid investments, and (d) capacity building and operational costs) and the estimated allocation under the REMP (2022–2030) are detailed in table 2.5. Table 2.5. Government Program Expenditures (US$, millions) Results Areas Expenditure categories NREP Prospectus NREP NREP REMP (2022– (2016–2022) Prospectus Prospectus 2030) Estimated Expenditure Expenditure Estimation of 2016–2022 2016–June 2022 Investment Committed4 - Actual Needs Capital Expenditure (CAPEX) RA # 1: Cost of grid 492 1539 964 — Expanding extension/connecting the Rural Access to settlements to the MV Electricity backbone grid (including connection costs) Grid rehabilitation costs — — — 800 Cost of distribution 492 254 67 555 network (including connection costs) RA #2: Off-grid and cost of 246 36 32 235 Increasing network extension to Supply of connect SPPs Renewable Clean cooking — — — 516 Electricity in Rural Areas 3 Estimated proportional Borrower contribution over 2022-2026 TREEP AF/REMP Phase 1 4 Signed contracts. Results Areas Expenditure categories NREP Prospectus NREP NREP REMP (2022– (2016–2022) Prospectus Prospectus 2030) Estimated Expenditure Expenditure Estimation of 2016–2022 2016–June 2022 Investment Committed4 - Actual Needs Total CAPEX 1,230 1,829 1,063 2,106 Operating Expenditure (OPEX) RA #3: Operational and 68 21 17 — Strengthening consultancy costs Capacity of the Staff costs and capacity 41 16 14 — Sector to building Deliver the Administrative cost and 14 4 4 — NREP REA Board associated costs Other miscellaneous cost 14 5 2 — Total OPEX 137 47 37 — Total* 1,367 1,875 1,100 2,106 *The total expenditure figures are derived from adding the total capital expenditure to the total operating expenditure. The Committed Expenditure is US$1,875 which reflects the budgeted expenditure as per annual budgets. 14. Financial sustainability. The technical assessment also analyzed fiscal considerations of the Program, including the Government’s overall medium-term budget trajectory and its implication for the financial sustainability of the PforR and vice versa. Tanzania’s macroeconomic performance has been strong for the last decade. However, economic growth has slowed significantly during 2019/20. The real GDP growth rate fell from 5.8 percent in 2019 to an estimated 2.0 percent in 2020, the per capita growth turned negative for the first time in more than 25 years, and the fiscal deficit and current account deficit widened. The fiscal deficit expanded to 4.2 percent of GDP in 2020/21, more than double the 1.4 percent observed in 2019/20 and significantly above the 2.7 percent target for 2020/21. Total domestic revenue amounted to 14.4 percent of GDP, while public spending totaled 18.6 percent. Recurrent and development expenditures increased as the authorities accelerated arrears clearance, expanded public service delivery, and ramped up the implementation of capital projects. The widening fiscal deficit was largely funded by increased domestic borrowing. The cost of debt service has increased significantly and now consumes nearly 40 percent of the domestic revenue. The latest joint International Monetary Fund- World Bank DSA, conducted in September 2021, concluded that Tanzania’s risk of external debt distress had increased from low to moderate. The downgrade primarily reflected the collapse of tourism exports during the COVID-19 pandemic in a context of increased non-concessional borrowing and rising debt service. The results of the analysis underscore the importance of boosting revenue mobilization and maximizing concessional borrowing. Given the large fiscal demands of the pandemic response, to preserve debt sustainability the Government will need to carefully balance emergency spending with the country’s broader development agenda. The PforR focus areas are critical for the country’s medium- and long-term development agenda and will thus be of fiscal priority. F. Updated Economic Analysis/Economic Justification of the Program 15. The economic analysis for the AF is based on a standard cost-benefit analysis (CBA) framework.5 The quantitative analysis was pursued in Results Area 1: ‘Expanding Rural Access to Electricity’, through 5The CBA methodology is based on the following publication: Jenkins, G.P., C-Y. Kuo, and A. Harberger. 2011. “Cost-Benefit Analysis for Investment Decisions.� Development Discussion Paper. https://ideas.repec.org/s/qed/dpaper.html. the assessment of economic benefits that will accrue to envisioned direct beneficiaries. These beneficiaries are Tanzanian households that will obtain an electricity grid connection. The analysis was pursued through the evaluation of net economic benefits to these beneficiary households once they receive a grid connection. The estimated benefits expected to accrue to beneficiaries include cost savings (due to the switch in the energy generation process) and time savings associated with obtaining a connection to the grid versus the time necessary to make the alternative energy source function as expected. The analysis was pursued in individual terms (per individual Tanzanian household) and aggregate terms (assuming a total of 1 million potential households to be connected to the grid). Furthermore, the valuation of carbon co-benefits was also included in the economic resource flows. On the expected benefits side, the non-monetary (intangible) benefits were valued and included in the economic resource flows. 16. The standard measures of the project’s economic viability and sustainability were estimated: economic net present value (ENPV), economic internal rate of return (EIRR), and economic modified internal rate of return (EMIRR). The analysis is based on the following general assumptions: (a) the analysis was pursued over 20 years (2022–2042) using an economic discount rate of 10 percent; (b) the exchange rate used in the analysis was US$1 = TZS 2,250; (c) VAT was assumed at 18 percent; and (d) foreign exchange premium was assumed at 3.94 percent.6 The results of the analysis are presented in table 2.6. The results show positive and higher ENPV, EIRR, and EMIRR than in the case of the ‘without project’ scenario, justifying the rationale for AF for the project. The obtained results include the valuation of carbon co-benefits7 using lower and upper bound shadow prices of carbon, respectively (according to the World Bank Guidance Note on Shadow Price of Carbon in Economic Analysis from November 12, 2017). Table 2.6. Economic Analysis Results INDIVIDUAL RESULTS INDIVIDUAL RESULTS (assumed lower bound of (assumed upper bound of WOP Scenario Carbon prices) Carbon prices) MODEL 1 and 2 "WOP" MODEL 1 “WP" MODEL 2 “WP" Values in TZS ENPV(TZS) 141,095 2,253,915 2,376,432 Values in USD ENPV(USD) 63 1,002 1,056 Values in % ERR (%) 12% 57% 60% EMIRR (%) 11% 18% 19% AGGREGATE RESULTS AGGREGATE RESULTS (assumed lower bound of (assumed upper bound of Carbon prices) and 1 mln Carbon prices) and 1 mln WOP of direct beneficiaries of direct beneficiaries MODEL 1 and 2 "WOP" MODEL 1 “WP" MODEL 2 “WP" Values in 000 TZS ENPV(TZS) 141,095,198 2,253,915,152 2,376,431,758 Values in 000 USD ENPV(USD) 62,709 1,001,740 1,056,192 Values in % 6Source: https://ideas.repec.org/p/qed/dpaper/229.html. 7Carbon co-benefits are defined as the difference between the volume of carbon emissions in the ‘without project’ and ‘with project’ scenarios. These volumes are then multiplied by carbon shadow prices (according to the World Bank note from 2017) and included as entries in the economic resource flow. ERR (%) 12% 57% 60% EMIRR (%) 11% 18% 19% G. Clean Cooking Fund and Description of Clean Cooking Intervention 17. The CCF will co-finance clean cooking initiatives under the TREEP AF to address the country’s high dependence on biomass for cooking, which has a direct impact on health, particularly for women and children, and contributes to a wide range of negative environmental and climate change effects. In Tanzania, the main source of energy for cooking is firewood (60.9 percent), followed by charcoal (28.8 percent). The country’s dependence on charcoal and wood for cooking, combined with inefficient cooking methods such as three-stone fires and traditional stoves, are costing the country US$39 billion per year, stemming from the negative externalities for health, gender, and climate.8 The GoT, through the SEforALL Action Plan, has set the target of achieving access to modern cooking solutions for 75 percent of the population by 2030, from the baseline value of 11 percent in 2012.9 The CEAP is currently under development to guide the efforts specifically related to access to clean cooking options in rural Tanzania. The TREEP AF proposes allocating US$4 million in IDA funding, matched by US$6 million in CCF grant funding, to co-finance its clean cooking operation. This will also include tapping into the CCF’s expertise and networks comprising a wide range of DPs to contribute to both Tanzania’s and the global clean cooking agenda. It is expected to leverage up to US$3.25 million of private capital providing clean cooking solutions for 200,000 households. 18. Increasing access to clean cooking solutions (US$2 million IDA Credit and US$4.5 million CCF grant). The project will set up an RBF window to provide incentives at the output and outcome levels and could expand to the impact level for deployment of efficient clean cooking solutions. The key features of the clean cooking RBF window are the following: • Eligibility criteria for cooking technologies. The clean cooking RBF window is technology and fuel agnostic and supports continued technological innovations. The eligibility for participating in the RBF will be based on the performance criteria such as efficiency, safety, emissions, and durability of the devices. • RBF incentives and payment triggers. The total amount of eligible RBF incentives will be linked to the cooking technology performance levels. The RBF incentive levels and triggers will be reviewed periodically and adapted to the market conditions. • Focus on affordable and sustainable adoption. The clean cooking RBF is designed to incentivize the private sector to deliver affordable and sustainable improved and modern cooking solutions. Companies will be required to specify their product and marketing strategies in the application and the impact of the RBF incentives on product offerings and pricing. These strategies will be monitored through the Program implementation. If a company is found to deviate from the specified pricing and product offerings, the company could be removed from the Program. TA and training will be provided to local producers to improve the local product design and quality production. Innovation grants will be available (through a competitive process) to encourage innovative technological, business, and 8World Bank. 2020. ESMAP State of Access to Modern Energy Cooking Services Database. Washington, DC: World Bank. 9 Note: Baseline is 2012, based on the estimated number of clean cookstoves presented in the market assessment of the cookstoves in Tanzania (Global Village Energy Partnership 2012). financing approaches with a focus on meeting poor households’ cooking needs and encouraging female entrepreneurs in the cooking sector. • Adopting an adaptive and collaborative approach. The ongoing COVID-19 pandemic presents many uncertainties that affect all aspects of the cooking sector, ranging from individual cooking behavior to the global supply chain for stoves, components, and fuels. Therefore, the project will take an adaptive and flexible approach to periodically review market conditions, actively seek feedback from key stakeholders, and adjust accordingly. The project will continue to coordinate and collaborate with key stakeholders (for example, GIZ10/Energizing Development (EnDev), SNV, Clean Cooking Alliance, Modern Energy Cooking Services Program/Loughborough University, Access to Energy Institute, Global LPG Partnership, SIDA, and the EU), as well as relevant Global Practices of the World Bank to align efforts in ongoing and potential projects in the cooking sector. • Achieving gender co-benefits in the clean cooking value chain and women’s entrepreneurship. The project plans to leverage the RBF financing mechanism to incentivize the private sector to reach women customers and prioritize inclusivity for women’s employment in the clean cooking value chain and leadership. The project would set preconditions and targets and link the disbursements of the RBF with milestones such as lending to more women-owned or women-led businesses and lending to men-owned businesses, with an equal pay for equal job policy and that mandates nondiscrimination based on gender in hiring. This is part of the gender interventions and will be monitored as part of the Results Framework and will be reported in the progress reports. 19. Enabling environment for the clean cooking sector development (US$500,000 CCF Grant). An enabling environment can help ensure progress toward clean cooking access. The 2020 Regulatory Indicators for Sustainable Energy (RISE)11 on clean cooking indicates the need for advance in setting and using standards and labeling, planning scale-up, and targeting beneficiaries. The main areas of support are the following: • Policy development, improvement, and coordination. The project will support the development and operationalization of the CEAP, an integral part of the REMP. The project will also support implementation of the national quality and performance standards for cooking technology along with a labeling scheme. The project can also provide TA to review the fiscal policies and regulations and their impacts on the clean cooking market development. It will coordinate across sectors such as health, environment, and forestry to ensure a cohesive and comprehensive approach, leveraging ongoing initiatives and programs. • Consumer awareness campaigns. The project will work with different stakeholders, community leaders, health practitioners, women’s groups, and educators on the issue of household air pollution and clean cooking options. • TA to market players. The project will support market intelligence studies, entrepreneurship technical support, capacity building on stove testing, and product development. The project will hire a market facilitator to reach out to promising and interested cooking companies on 10GIZ = German Agency for International Cooperation. 11ESMAP. 2020. Regulatory Indicators for Sustainable Energy (RISE) Sustaining the Momentum . Washington, DC: World Bank. https://rise.esmap.org/country/tanzania. opportunities and provide targeted business development training for cooking companies participating in the RBF operation. • Monitoring and verification for the RBF operation. This subcomponent will cover the costs related to monitoring and verification of results at the output, outcome, and impact levels. CL support to clean cooking companies (US$3 million [IDA Credit - Parent Program]). Under Results Area 2 (Increasing Supply of Renewable Energy in Rural Areas), the CL currently assists both SPPs and RECs selling quality-verified renewable energy products to obtain credit through two financing windows through the Fund Administrator, which serves the role of a financial intermediary. To stimulate the development and growth of the clean cooking market, the project will support a new, third window of the CL—the clean cooking window. Under this window, the World Bank will provide US$3 million through the REA for the clean cooking loan window to enable either the Fund Administrator or PFIs operating through the Fund Administrator, to extend working capital to eligible companies offering efficient cookstoves and clean fuel technologies, which are seeking to expand their operations in Tanzania.