Where is the photovoltaic market in Tunisia at?
Although Tunisia has all the ingredients to be a solar energy producer/consumer, the photovoltaic market has not yet taken off. It has the opportunity to take full advantage of its sunshine potential (around 3,000 hours/year), proximity to Europe, Africa and parts of the UAE, and skilled human resources in the field.
However, while the Tunisian government has already envisaged setting up 40 projects between 2010 and 2016, the measures and incentives taken to promote photovoltaics are still limited. Furthermore, the government envisages that large amounts of the produced solar energy will be exported to Europe, instead of being considered for local consumption. In fact, at Aurasol we are assisting many projects concerning, basically, the installation of a variety of central parks that aim at providing the European continent with energy via the interconnection cable between Tunisia and Italy.
In the meantime, we are registering a yield from the Tunisian electricity provider (STEG) about many incentives to develop the photovoltaic sector locally. This retreat is explained by the change that was made on June 25, 2012, and that has affected the credit interest rate, the repayment terms and as well as the cancelation of the credit types 3,4 and 5. In fact, a Tunisian household used to benefit from a credit payable over a period of 5 years and without any interest rate of 3000dt (1,500) for 1 and 2 KW installations and 6000dt for 3, 4 and 5 KW installations. The new measures have concealed the credits for the installation going from 3 to 5 KW and added a certain interest rate for the credits related to 1 and 2 KW.
It should be also noted that, until now, there is no enactment of law regarding this new decision, but it has already stirred up disappointment and anger inside the PV business in Tunisia. Thus, we can understand that the Tunisian government is more concerned about producing and selling the electricity overseas than developing it for local consumption. In other words, Tunisia wants to be a photovoltaic producer, rather than a consumer. This is due to the still lower costs of other energy sources.
Why did you set up a production line in Tunisia, despite the low market volume and highly competitive world market?
The idea of setting up a production line in Tunisia was based upon a deep environmental analysis during which we focused on the photovoltaic perspectives advanced by many official reports, such as those from the European Photovoltaic Industry Association (EPIA), and Xerfi. A current overview of the world photovoltaic market reveals overcapacity. However, I think that the future of the industry will be in Africa, and specifically North Africa. In light of this, we have already signed a contract with a Libyan government institution to put in place a photovoltaic solution for its site.
The contract contains two main scoops: (i) setting up between 850 KWp and 950 KWp for the site as a combination between roof and ground installations; and (ii) putting in place show cases for standalone systems such as public lighting, pumping water and parking lots.
In terms of the European market, I think the main reason behind the bankruptcy of some of the leaders of the photovoltaic production companies is partly due to the dramatic collapsing of cell and module prices that took place over a very short time period. Companies have found themselves in the situation where the supply level is higher than the demand, which has driven a decrease in market prices.
In light of these revealed facts, we have decided to focus on a niche market in which we are focusing on customers customized projects. This automatically relies instead on the "make-to-order" option, in terms of production.
It should be noted that we have signed for 2013 two contracts with two European companies operating in the BENELUX region. The first contract is for a capacity of 10 MW bearing on delivering customized modules for BIPV applications going from 80 Wp to 250 Wp efficiencies. As for the second contract, it concerns the production of 1 MW glass-glass modules and Megaslate roofing system, which is a 160 Wp BIPV exclusively produced under Meyer Burger license in North Africa. All the deliveries are monthly based.
In Tunisia, the government subsidizes new investments in renewable energy production facilities by up to 40%. Do you think this is an incentive for other companies to produce in Tunisia?
If we refer to the decree number 362-2009 from February 9, 2009, we may notice that this subsidy of 40% contains a cap of 20.000dt, which is, in our opinion a timid incentive of a country that would like to promote renewable energy. I think that without a feed-in tariff policy mechanism, the photovoltaic market will remain in its embryonic stage.
What are the particular challenges in Tunisia for you as a manufacturer?
The major challenge facing us as a Tunisian manufacturer is our ability to compete with European companies on a price-quality ratio, innovation and branding. Regarding quality, we focus on Total Quality Management, which is an integrated management philosophy whereby we continuously improve the quality of our products and processes. This philosophy should meet with an innovation through research and product development to develop photovoltaic solutions that are able to meet market needs. This innovation should further be aligned with a competitive price compared to European companies. The third challenge is to build up our company brand, so that it conveys trust to both upstream and downstream players. These challenges are of central importance not only to Aurasol, but for every Tunisian manufacturer, which is looking to establish itself in both Tunisia and globally.
What is your competitive advantage against foreign companies?
Our competitive advantage depends on the market in which we are operating. For example, in the local and North African markets, our competitive advantage is reflected by our ability to source clients, our after-sales service, and our price competitiveness. It should be mentioned that in this market, we are mainly stepping in as the last supplier within the distribution channel. As for the European market, we are mainly focused on quality, and maintaining an acceptable price range compared to our European competitors.
Who are your target customers?
Our target markets currently comprise: Europe (big installers, wholesalers); and North Africa (governments).
Which markets do you want to deliver your products to in the future?
In the long-run, we will put greater emphasis on accessing sub-Saharan Africa (SSA) by targeting the governmental institutions. As it is known, the solar potential is extremely substantial in these regions, and the electricity coverage rate is very low. According to the International Monetary Fund, the electricity consumption in SSA, excluding South Africa, is about 124 kwh a year, which is less than one-tenth of Chinas, for example. Furthermore, the cross-country average tariff is rather high at US$0.13 per kwh about double those in other parts of the developing world and almost as high as in OECD countries. As such, I believe PV is a great solution to provide electricity in the SSA regions.
What are the biggest challenges for market development in Tunisia?
The biggest challenges are: a decrease in the cost of photovoltaic technology, and the development of a technology, which is attuned to the local climatic conditions. In fact, despite the limited political measures taken to promote photovoltaics through a few subsidiaries, I think that without the adoption of a proper feed-in tariff policy mechanism, the photovoltaic market will not have a chance to grow properly. This decision hangs on many factors, and particularly on the high technology costs, which are still very high for households, the government, the electricity supply company and financial institutions (banks, insurance, etc.).
From the technical side, photovoltaic modules behave differently in Tunisia, compared to Europe, due to the different climatic conditions (sand, high temperature, humidity, etc.). Therefore, pilot projects testing different technologies are mandatory, in order to effectively gauge real photovoltaic behavior. Once data is available and quality is proven, then investments will follow.
How competitive are photovoltaic power plants compared to oil-and gas-fired power plants, in terms of current electricity generation costs in the region?
For the Tunisian government, photovoltaics seems to be the last among the renewable energy alternatives, because it is the most expensive compared to others. With the national monopoly of the power supplier in Tunisia (STEG), the main energy sources are fossil fuels. The grid sale price adds up to 0.06/KWh. Based on this price and according to our simulation, a photovoltaic installation will depreciate over a period of 12 years, which is disheartening for investors, businesses and households. However, STEG is struggling, since the costs of gas and oil are increasing and I believe that photovoltaics will sooner or later be a must, not only to avoid the instability of the oil-and-gas costs, but also to be able to cover the peak power demands.
Despite this, I think the largest part of the intended photovoltaic production is expected to be exported to Europe. Within this framework, Tunisia has recently signed many agreements with European companies, such as the 2,000 MW central park contract, which is destined to be exported to Europe. This mega-project is a joint-venture between NurEnergie, a solar power plant developer based in England and Tunisian investors and aims powering 700,000 European households by 2016.
How much interest is there from international investors in projects in Tunisia? And what does the country do to attract them?
The international investors, especially from Europe have always been interested in investing in Tunisia and this interest is mainly due to the geographic and cultural proximity, the good quality of living especially along the coastal regions, and the availability of skilled human resources. According to the Foreign Investment Promotion Agency (FIPA), foreign direct investment (excluding portfolio investments) increased from TND402.9 million (200.84) in 1997 to TND2,165 million (1,079 million) in 2010. From 2011, this increasing trend has slowed, due to the political instability in the country. I strongly believe this situation is no more than a run up for a better business environment with more freedom and transparency. In this way, and according to the FIPA, growth of 44% was seen in the first quarter of 2012 compared to the same period in 2011 in terms of foreign investment in the country. The same source has stated that 71 companies are currently preparing to be set up in Tunisia.
??As for the efforts deployed by the Tunisian government to boost foreign investment, many incentives have been put in place, including tax/VAT exemptions that can last for up to 10 years, investment bonuses up to 1.000.000 DT (500.000 ), no-cost infrastructure, assumption of employers share of social costs, and exemption of customs duties exemption for imported goods. In addition, Tunisia has partnered with many international organizations, including agreements with the Multilateral Investment Guarantee Agency (MIGA), investment protection and double taxation relief agreements with most OECD countries, convention concerning the creation of an Arab organization to guarantee investments, Inter-Arab Convention, Inter-Islamic Convention and Inter-Maghreb Convention
Tunisia’s solar industry is still in its infancy. How did the construction of a production line, including the search for qualified employees, high quality components turn out?
Certainly, we had some problems with assembling the puzzle the right way. For the executive or qualified employees, for example, we did not find big problems insofar as the Tunisian universities provide high skilled engineers. However, issues arose regarding unqualified employees, since our factory is set up within an agricultural region where people are not familiar with the industrial practices. For the high quality components, 90% of our raw materials are exported from well-known European companies. This decision was taken to avoid any risk related to certification issues, but sooner or later our products will be enhanced by local components that are quality proven. I have also to mention that we are tightly working with a German photovoltaic company that is supporting us on quality issues and know-how transfer.
According to the Tunisian solar plan, installed solar capacity will reach 1 GW by 2014. What must be done politically and socially to achieve this goal?
Despite the wide interest that seems to be oriented towards photovoltaics in Tunisia, it has recently stirred up a controversy from many observers. This fact is mainly explained by the divergence between the official measures taken by government and the real experienced practices. I think one of the biggest obstacles facing the 1 GW accomplishment is the political instability in the country. Against this background, the new elected government has to demonstrate a real will to change behavioral and investment patterns, not only for promoting renewable energy, but also energy efficiency and saving technologies. This commitment should be boosted by a concrete policy framework and backed up by further proposals, such as the EU decision for binding CO2 emission limits. Tunisia should also be involved in more international energy cooperation initiatives, such as the Africa-EU Energy Partnership, and the ACPEU.
Can you provide some more background on Aurasol?
Aurasol is a Tunisian company specialized in conceiving and producing customized photovoltaic solutions for the African and European markets. It was created in April 2010, after 4 years of continuous work, by the 2 brothers, Slim and Khaled Nasraoui. After the Tunisian Revolution, we decided to create our company in a disadvantaged region as an attempt to improve its life quality by granting its residents the dignity of work and a decent standard of living.
From a business perspective, Aurasols goals are: (i) The production of first class, competitively-priced modules; (ii) Customized solutions tailored to the customers needs; and (iii) Geographic and cultural proximity to serve the European, African and Arabic markets.
Our product range contains the products: Megaslate, Auraminate and Aura++. We are currently working on new product developments: (i) a 2mm Glass-Glass module that combines the advantages of quality, greater mechanical stability and cost effectiveness; and (ii) using bifacial cells instead of the crystalline cells. A first prototype is planned in February 2013. This product range is associated with an attractive price that might reach 0.10 Euro/Wp less than our European competitors.
Khaled Nasraoui is speaking at the PV Technology Conference – North Africa 2012. The event is scheduled to take place on September 10, 2012 in Casablanca, Morocco. It will provide substantial know-how about market potential, relevant persons to contact, economic aspects, infrastructure and technology in North Africa. At the event regional and international project developers, suppliers and manufacturers have the opportunity to meet governmental decision makers, and potential investors who want to enter the market and invest in solar industry.
Edited by Jonathan Gifford.