Solar projects expand in Algeria's energy sector

In 2011 the government launched the National Development Plan for Renewable Energies (Plan National de Développement des Energies Renouvelables, PNDER), a massive programme to develop renewable energies. The initiative entails plans for the addition of 22 GW to the national grid by 2030, entirely generated through renewable energies. “This target will represent around 35% of the installed capacity of the time, taking into account ongoing conventional generation projects that will come on-line in 2019,” Hamid Bennour, portfolio consulting manager at Siemens, told OBG.

Solar Slice

Out of the 22 GW the PNDER expects to bring on-line, 12 GW are expected to be reserved for the local market’s needs, while 10 GW will be exported, with roughly 13.5 GW coming from solar production. According to Algeria’s Centre for Renewable Energies Development (Centre pour le Développement des Energies Renouvellables, CDER), 3000 MW of solar power should be completed in the PNDER’s first phase, which aims to bring 4525 MW on-line between 2015 and 2020 thanks to a blend of renewable sources. During the second phase — 2021 to 2030 — the PNDER aims to bring 10,575 MW of solar power to the grid, out of an expected total of 17,475 MW. Thus, solar power represents by far the largest contributor to the PNDER’s success.

While the government is planning on expanding its own facilities, it is also looking to the private sector to fill the gap, providing incentives to attract new investment. “The state will give them land, benefits under the recent law on renewables and well-defined specifications,” Bennour told OBG. “Based on current conditions and regulations, the investors would recoup their investment after 20 years, which is relatively fast in the energy generation field.”

Regulations

Algeria’s renewable energy sector is regulated by the Regulatory Commission for Electricity and Gas (Commission de Régulation de l’Electricité et du Gaz, CREG). Solar plants fall under a 20-year power-purchase agreement (PPA) between the power producer and the government, with base tariffs ranging from AD12.75 (€0.11) per KWh for outputs over 5 MW and AD15.94 (€0.13) per KWh for those between 1 and 5 MW. The tariffs are revised after an initial five-year period based on a plant’s effective output, where it can be either increased or reduced by 15% according to the output size.

The PPA can only be signed after a lengthy accreditation process by the CREG. Power producers must first obtain a certificate of origin proving the power is generated locally, then make a formal tariff request. The plant must then be hooked on to the national grid and the producer needs to obtain an authorisation to produce. Once all these conditions are met, the PPA can be signed.

Projects

In the private sector, local firm Condor Electronics Algeria began developing a 2-MW solar project with UK solar firm Renewable Energy Partner in October 2015. The project is notable for being the first private solar independent power producer project in Algeria. Additionally, PowerChina brought a 233-MW solar power plant on-line in the wilaya (province) of Adrar in January 2016. The project will be made up of 16 separate solar installations, some of which are already operating. It is the first utility-scale photovoltaic project connected to the grid, and is also PowerChina’s largest overseas solar engineering, procurement and construction deal.

Development of solar power has the potential to benefit the entire economy, whether it is by producing and exporting a renewable energy, or by creating local jobs in the manufacture of solar panels and the installation and maintenance of the plants. That said, simplifying the bureaucracy of the PPA process and opening the market to foreign investors will be key to attracting investors who may be reluctant to take on high early-stage development risks in the sector.

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The Report: Algeria 2016

Energy chapter from The Report: Algeria 2016