Kenya Tanzania Power Trade to cut regional energy costs

A Milestone for East African Regional Power Integration

The interconnection between Kenya and Tanzania was celebrated by NEPAD in January 2025 as a major milestone under the Programme for Infrastructure Development in Africa (PIDA). The 400 kV line stretches approximately 507.5 km from Namanga in Kenya through Arusha to Singida in central Tanzania, linking Tanzania’s grid to Kenya, Uganda, Rwanda, and the DRC as part of the Eastern Africa Power Pool.

According to ESI-Africa, the energy wheeling test that routed Ethiopian power through Kenya to Tanzania marked a continental first—one country exporting power to another via a third-party transit grid. In June 2025, Kenya transmitted 50 MW from Ethiopia to Tanzania through the Suswa–Isinya line, increasing its grid flow from 225 MW to 262 MW (Kenyan Wall Street).

This event signals a bold leap toward an interconnected East African electricity market, where countries can trade surplus energy efficiently to stabilize supply and reduce costs.

Challenges Facing Tanzanian Manufacturers

Many Tanzanian manufacturers face two recurring pain points: high electricity tariffs—especially during peak hours—and inconsistent supply leading to expensive diesel backup. TANESCO’s reliance on thermal plants during shortfalls often drives up the effective cost of power.

For instance, a factory that pays between USD 0.12 and 0.18 per kWh during peak hours and must fall back on diesel generation at over USD 0.30 per kWh sees its profit margins eroded. By comparison, importing off-peak power from Kenya or Ethiopia at USD 0.08–0.10 per kWh could cut energy costs by 20–40%—a significant margin shift for industries like cement, steel, and textiles.

Even a modest improvement in uptime can compound earnings. If a Dar es Salaam plant currently operates 85% of the time but can lift that to 95% through backup imports, that’s an extra 120 production hours per month—translating to tens of thousands of dollars in additional output value.

Modeling a Dar es Salaam Factory’s Savings

Take a medium-sized industrial plant in Dar with a 2 MW load, operating at 70% utilization. That equals roughly 1,000 MWh of monthly energy use. At an average blended tariff of USD 0.13 per kWh, the plant spends about USD 130,000 monthly.

Now imagine importing off-peak power (10 pm to 5 am) at USD 0.08 per kWh—covering roughly 210 MWh per month. That substitution saves (0.13 – 0.08) × 210,000 kWh = USD 10,500 per month, or about USD 126,000 annually. Combine that with improved uptime adding USD 20,000 in extra monthly production, and the combined margin lift could exceed 20% for energy-intensive sectors.

Why Now: The Institutional and Timing Context

The Kenya Tanzania interconnector was energized in December 2024 and commissioned shortly after (Africa-Energy). With a transfer capacity of 1,600 MW, the link synchronizes both national grids for the first time, advancing the EAPP’s regional trading goals.

Meanwhile, Ethiopia’s power wheeling to Tanzania through Kenya demonstrates real throughput of 50 MW and a scalable model for future trade (Kenyan Wall Street, ESI-Africa). AfSEM, with support from NEPAD and the African Union, is standardizing regulations, tariffs, and market access to build a single continental electricity market.

This combination of physical infrastructure and policy harmonization is creating the right environment for cross-border industrial power procurement to become a reality.

Tariff Design and Market Mechanisms

For Tanzania to benefit fully, its tariff framework must accommodate cross-border imports. A factory’s landed cost would include the energy price, wheeling fees, transmission losses, and currency conversion charges. As long as the total remains below domestic peak tariffs, the business case is strong.

The interconnector covers about 507.5 km (94 km in Kenya and 413 km in Tanzania) per AfDB project data. Transmission losses are estimated at 3–5%. Factories importing at night or during low local generation could achieve 15% average cost reduction, provided scheduling and grid coordination remain stable.

However, factors like grid synchronization, frequency control, and regulatory compliance under EAPP and AfSEM remain essential for sustainable operation.

Risks and Constraints

• Currency and FX exposure: Cross-border energy trades may require USD settlements, exposing buyers to currency risk.
• Policy alignment: Disparities in tariffs, taxes, and regulatory approaches could delay large-scale adoption.
• Supply reliability: If export commitments are disrupted, factories may need dual supply systems, adding capital costs.
• Transmission congestion: The 400 kV corridor could face peak-hour bottlenecks during regional surges.

What Kenya Tanzania Power Success Could Look Like

If a Dar manufacturer combines local power with imported off-peak supply, it could reduce average energy cost from USD 0.13 to USD 0.11 per kWh—roughly a 15% savings. Boosted uptime could raise production output by up to 10%, creating a ripple effect across Tanzania’s industrial base.

Clusters of manufacturers in Dar, Arusha, and Mwanza adopting cross-border imports could reduce strain on local thermal plants and improve TANESCO’s dispatch flexibility. Utilities could monetize export surpluses, while industries gain from cheaper and greener energy.

Also Read:
Kenya’s Power Exports and Interconnector Ambitions |
East Africa Energy Market Integration and Grid Trade

Beyond Cost: Strategic Implications

The Kenya Tanzania Power Trade has broader economic implications. It reduces barriers for heavy industry expansion in Tanzania by stabilizing power access. Over time, regional energy arbitrage could curb local tariff inflation, encourage renewable imports from Ethiopia, and incentivize TANESCO to improve efficiency through competition.

It also deepens Tanzania’s integration into East African value chains, allowing manufacturers to hedge energy risks, diversify procurement, and compete regionally on price and reliability.

Final Word: Turning on the Switch for Tanzanian Industry

The Kenya Tanzania Power Trade—now enabled by the 400 kV interconnector and Ethiopia wheeling—marks a new phase of industrial competitiveness for Tanzania. With smart tariff design, bilateral agreements, and coordinated grid management, Dar es Salaam’s factories could save tens of thousands of dollars monthly while gaining consistent operational hours.

To capture this opportunity, regulators, utilities, and manufacturers must align policies, ensure transparency, and prioritize collaboration over bureaucracy. East Africa’s energy transition is being powered not just by renewables, but by connection, cooperation, and the will to keep the lights on across borders.