Algeria jumpstarts renewables programme

8 July 2024

 

Generating renewable energy from wind and solar has remained a sideshow for Opec members Algeria and Libya, where renewable energy accounted for about 3% and 0.1% of overall electricity generation capacities, respectively, as of 2023.

This may be set to change, however, particularly for Algeria. Sonelgaz Energie Renouvelables, a subsidiary of Algeria’s state-owned utility, awarded 14 of the 15 solar photovoltaic (PV) packages it tendered last year.

The 15 packages have a total combined capacity of 2,000MW, requiring at least AD172bn ($1.2bn) of investment.

The Algerian Renewable Energies Company (Shaems) also awarded contracts to develop five solar PV projects with a combined total capacity of 1,000MW.

These developments stand in stark contrast to the bleak years of 2018-22, when virtually no new solar or wind farm contracts were awarded in Algeria, based on available data from regional projects tracker MEED Projects.

The recent contract awards improve the prospects for investors and contractors, especially in light of Algeria’s overall renewable energy pipeline of at least 12,000MW. This is the second-largest pipeline in the Middle East and North Africa (Mena) region after that of Saudi Arabia – exclusive of renewable energy capacity powering the planned green hydrogen and ammonia facilities, which makes Morocco the largest.

In terms of conventional power, data from MEED Projects indicates that oil- or gas-powered plants with a total combined capacity of more than 5,000MW are under construction in Algeria.

Libyan route

Meanwhile, Libya’s government has so far been more focused on augmenting its electricity generation capacity via the conventional route.

An estimated 5,000MW of oil- or gas-fired capacity, both from greenfield and retrofit projects, is understood to be under construction in Libya. The statuses of two solar PV contracts awarded by the state-owned General Electricity Company of Libya (Gecol) in 2022, with a combined capacity of 700MW, remain unclear.

Libya’s planned and unawarded oil- or gas-fired generation capacity sits at over 3,000MW, compared to only 500MW of renewable energy.

It comes as no surprise that in December 2023, the Tripoli-based Libyan Prime Minister Abdul Hamid Dbeibeh launched the country’s National Strategy for Renewable Energies & Energy Efficiency covering 2023-35.

Prepared by the Planning Ministry and the US Agency for International Development, the strategy outlines energy diversification objectives including increasing the contribution of renewable energy technologies such as solar and wind by as much as 4,000MW.

This is a lofty goal considering that no more than 10MW of solar PV schemes are officially registered in the country.

The strategy also aims to tap public-private partnerships to implement the first objective, and to adopt energy-efficiency measures including the restructuring of electricity pricing.

Managing risks

Some international utility developers and consultancy companies – particularly those headquartered in Japan and Europe – have spoken of their reticence about participating in tenders in either Algeria or Libya.

In addition to geopolitical considerations, they cite long or complicated procurement processes, the uncertainty of securing long-term project finance and the generally weak investment framework to support this type of project.

This helps to explain the dominance of their less risk-averse Chinese counterparts in the 14 contracts that Sonelgaz awarded in December.

A team comprising China International Water & Electric, China Nuclear Industry Huaxing Construction and Yellow River Engineering Consulting Company won five packages, which have a total capacity of 780MW. The five projects in Abadia, Batmet, Gueltet Sidi Saad, Douar El-Maa and Ouled Djellal will require a total investment of about AD65.1bn.

Other Chinese-led companies were selected for four other schemes: Shanxi Installation Group won the contract to develop the 80MW Ouled Fadel scheme; China State Construction Engineering Group won the 200MW Tendla solar project; a team of Power China International and Sinohydro will implement the 200MW Laghrous solar project; and Power China Zhongnan Engineering Corporation has been selected to develop the 150MW solar scheme in Khenguet Sidi Sadji.

A group comprising the local Cosider Canalisation and Italy’s Fimer, and the local company Hamdi, each won more than one contract, while a Turkish/local team comprising Ozgun and Zergoun won just one.

The tariffs proposed for these eight packages averaged AD7.382 a kilowatt-hour (kWh), or about $cents 5.4/kWh. This is approximately three times the average tariff seen in some GCC states and almost 20% higher than the global average.

While the past few months have provided some encouraging signals compared to previous years, if Algeria and Libya are to meet their energy diversification targets, the two countries will need to urgently improve their overall investment environment, procurement processes and projects pipeline to attract more developers to participate in their future independent power producer projects.

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Jennifer Aguinaldo
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