90% of the total energy used in Tanzania is produced from wood fuel and charcoal, 80% being consumed in rural areas. Unsustainable charcoal making contributes to deforestation and forest degradation, which furthermore reduces the capacity of forests to act as a carbon sink. Access to electricity in urban areas is 39% and in rural areas the level of access is only 2%. Despite having electricity, 79% of urban population still uses charcoal for cooking and heating because of the cost and unreliable supply of electricity. In Dar-es-Salaam less than 6% of the population, (estimated at 4 million) use electricity for cooking because of high cost and intermittent supply. There have been frequent power cuts due to power rationing over the past two years, due to capacity constraints of electricity production and distribution. Although these problems are mainly linked to the national grid, initiatives of establishing renewable energy sources will reduce the dependence on national grid. Commercial energy sources based on petroleum, hydropower and coal represent less than 10% of the total energy consumption.

Over 50% of the commercial electricity production is based on hydropower thus recent droughts have caused severe problems. Biomass, solar and wind energy are hardly exploited commercially. Strategies to diversify energy sources in electricity generation are being implemented which will include various renewable sources, coal and gas. The current Tanzanian energy policy was adopted in 2003. The main elements of the policy include: the development of least-cost options for domestic energy resources; promotion of economic energy pricing; improving energy reliability and security; enhancing energy efficiency; encouraging commercialization and private sector participation in the energy sector; reducing forest depletion and development of human resources. Rural energy and indigenous, renewable energy sources are highlighted in the policy. Efficient use of wood fuel and the provision of alterna tives for wood fuel are already promoted at some level in the country but further support is urgently needed. Furthermore, energy is not yet recognized in, or linked to, the other important policies of the country.

The Rural Energy Agency is currently cooperating with TANESCO Energy Utility Company to implement grid expansion programmes and piloting also off-grid projects with the support of the established Rural Energy Fund.

EEP Projects in Tanzania