A Sustainable Asset Valuation of the Kakono Hydropower Plant in Tanzania

The assessment finds that the Kakono Hydropower Plant (HPP) is the most sustainable and cost-effective energy option for northwestern Tanzania, demonstrating high climate resilience and the highest net societal benefits. Compared to a utility-scale diesel plant and a gas-solar PV portfolio, the HPP offers the lowest levelized cost of electricity (LCOE) and the most attractive net present value (NPV), particularly when environmental and social externalities are internalized. While the HPP causes some habitat loss and carbon emissions during construction and reservoir operation, these are offset by significant employment generation and the avoidance of high fossil fuel emissions. The report concludes that the HPP is a viable investment for multilateral banks like the African Development Bank, provided that mitigation strategies for GHG emissions and habitat loss are implemented.

• The Kakono Hydropower Plant (HPP) provides the highest net societal benefits among the assessed alternatives, with a SAVi net result of USD 124 million under the RCP 4.5 climate scenario, significantly outperforming the gas-solar PV portfolio (USD 63.5 million) and the diesel power plant (negative USD 1,265 million).
• The Kakono HPP is the most affordable energy solution for Tanzania, with a SAVi Levelized Cost of Electricity (LCOE) of 69.98 USD/MWh, which is lower than its conventional LCOE of 71.36 USD/MWh due to positive externalities from employment and discretionary spending.
• The Kakono HPP is considered climate-resilient, as its costs, revenues, and externalities show minimal variation across four different climate scenarios (RCP 2.6, 4.5, 6.0, and 8.5).
• In contrast to the HPP, the utility-scale diesel power plant is highly vulnerable to climate change; higher air temperatures decrease thermal efficiency, leading to increased fuel expenditures and higher carbon emissions, particularly in the RCP 8.5 scenario.
• Financial analysis indicates the Kakono HPP is a highly attractive investment with a Project NPV of USD 191.92 million (baseline) and a Project IRR of 8.93% under the RCP 4.5 scenario, results which improve slightly when externalities are internalized.
• The construction of the Kakono HPP is projected to reduce total carbon storage in the affected area by more than 4% (approximately 98,383 Mt) and decrease mean habitat quality by more than 8% (from 0.26 to 0.23).
• The gas-solar PV portfolio is a viable alternative but is less appealing from a societal perspective than the HPP, as its Project NPV decreases by approximately 40% when negative externalities from fossil fuel carbon emissions are internalized.
• The report recommends that the African Development Bank (AfDB) and other investors adopt sustainability-adjusted cost indicators and conduct ex-ante climate risk assessments to avoid creating stranded assets and to ensure the ecological integrity of upstream areas.

APA

Uzsoki, D. (2021). A Sustainable Asset Valuation of the Kakono Hydropower Plant in Tanzania. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-07/savi-kakono-hydropower-plant-tanzania.pdf

Chicago

Uzsoki, David. A Sustainable Asset Valuation of the Kakono Hydropower Plant in Tanzania. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-07/savi-kakono-hydropower-plant-tanzania.pdf.

Wikipedia

{{cite report |last1=Uzsoki |first1=David |title=A Sustainable Asset Valuation of the Kakono Hydropower Plant in Tanzania |publisher=International Institute for Sustainable Development |date=July 2021 |url=https://www.iisd.org/system/files/2021-07/savi-kakono-hydropower-plant-tanzania.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{uzsoki2021sustainable, author = {Uzsoki, David}, title = {{A Sustainable Asset Valuation of the Kakono Hydropower Plant in Tanzania}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = jul, url = {https://www.iisd.org/system/files/2021-07/savi-kakono-hydropower-plant-tanzania.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }