The Algerian government recently announced the launch of a tender to build 4 GW of PV plants. The announcement has raised hopes that the country can finally start exploiting its huge solar potential. Mixed reactions, however, are surrounding the government’s plan.
In a statement sent to pv magazine, Adel Baba-Aissa, director of UK company Renewable Energy Partner, which has been active in the country since 2013, expressed a positive opinion on the tender.
Baba-Aissa said that the FIT program issued by the Algerian government in 2013 has not led to the boom in projects that the local renewable energy industry was hoping for. At the time, Baba-Aissa added, lack of access to land and grid, as well as PPAs and financing terms were not adequate to make projects bankable.
According to Baba-Aissa, the new auction scheme is now fixing most of the issues raised by the FIT scheme and, at the same time, is not a total repeal of the regime. “The developer market”, Baba-Aissa stated, “hasn’t been overhauled completely. We are hopeful that it will remain in some shape or form, and that existing projects under development will be grandfathered. This segment of the market is crucial to encourage local private sector initiatives in renewables and will foster job and wealth creation, build local capacity and help the government to meet its targets.”
Baba-Aissa said that, in order to express a final judgement, it will be necessary to read the official tender documents, which are expected to be published this or next week. Baba-Aissa went on to say that the help of international development institutions is necessary and that these could play an important role by providing not only capital but technical assistance as well.
“As far I understand”, added Baba-Aissa, “the concerns expressed have been mainly local. The tender seems to have pre-selected some of the special purpose vehicle partners on the local side. They consist of the national oil and gas company Sonatrach and the public utility Sonelgaz which will make up the bulk of the 51%. It does seem that the private sector has been marginalized, which is counter-productive when it comes to cultivating efficient private sector investment in renewables. I think the investment framework can be improved to make it more sustainable and competitive, in order to increase local content and stimulate a burgeoning industry.”
Meanwhile, another voice has criticized the plan, that of Chems Eddine Chitour, the former director of the Ecole polytechnique d’Alger. In an interview with local radio station Radio M, Chitour has expressed almost the same criticisms raised at the beginning of this week by Mourad Louadah, an Algerian entrepreneur who is also president of the renewable energy division of trade & industry association Forum des Chefs d’Entreprise (CFE). Louadah claimed that the domestic content requirement embedded in the tender will make it impossible for project developers to offer low bids and, at the same time, make the investment to set up solar module manufacturing facilities across the country.
On his part, Chitour believes that the tender, as it is drawn up, will not enable the country’s energy transition. The auction, Chitour stressed, will not allow the creation of a strong domestic solar industry, and will make only giant projects using Chinese solar panels bankable. He says that the country’s oil and gas lobbies led respectively by Sonatrach and Sonelgaz, which will also be the entities managing the country’s solar plan, are intentionally preventing the growth of the national PV component industry.
Chitour, however, said he sees the involvement of Sonatrach and Sonelgaz in the renewable energy sector as positive. He cited the example of French oil company Total, which started to invest heavily in solar energy in recent years. The professor stressed that Algerian private companies will only gain a maximum 6% share in the special purpose vehicles owning the projects selected in the tender. “This will be only around 100 MW of the tendered 4 GW”, Chitour said. These vehicles, in fact, will be owned 51% by a domestic investor and 49% by an international partner. Algerian government-owned oil company Sonatrach will hold a 40% stake in all of these companies, while Sonelgaz and other public or private Algerian companies will hold the remaining 11%.
Chitour also criticized the big size of the three 1.35 GW phases of the tender. Their size, the professor claimed, could lead to having a single winner with a project covering all the allocated capacity in each phase, thus eliminating every chance of diversifying the market.
It is not to excluded, however, that the Algerian government could introduce a specific mechanism for PV projects developed by domestic private companies, according to information provided to pv magazine by local renewable energy entrepreneur Malek Drif. This specific mechanism for local developers was mentioned in a decree issued by the government in November 2016, which implemented the FIT regulation introduced in early 2014.
Drif also explained that in a recent meeting the local trade industry association Forum des Chefs d’Entreprise (FCE) has asked an annual allocation of 100 MW for PV projects exceeding 5 MW and a fixed tariff for projects ranging in size from 500 kW to 5 MW for these specific auctions.
The 4 GW tender is expected to enable the construction of several large-scale PV plants in the region of Hautes Plaines (High Plains), which is located in the northern part of the country, and also in southern Algeria.