Jordan’s solar PV spring

Jordan’s photovoltaics sector has been making headlines in the recent months announcing a series of impressive projects that are bringing the Middle Eastern country to the forefront of the region’s solar development (see Table p. 28).

On top of this most recent activity, there is a range of previous projects that are the result of the first round of renewable energy auctions held by the Jordanian Ministry of Energy and Mineral Resources, which in total has approved 12 PV projects of various sizes and of 200 MW cumulative installed capacity (the so-called round one or stage one auction has also approved two wind projects). All 12 photovoltaic projects will sign a 20 year power purchase agreement (PPA) with the National Electric Power Company (NEPCO), Jordan’s publicly owned power transmission company, at a price negotiated for each project separately. The ministry though has set a ceiling for the tariff attributed to each renewable energy technology. In 2012, the ceiling tariff for the sale of electricity from solar PV and wind plants was $0.169 and $0.12 per kWh respectively. All round one PV plants have received the $0.169 per kWh tariff, apart from the 52.5 MW project that received $0.148 per kWh.

PV tender round two

In 2013 and while the first tender (round one) was still under way, the ministry of energy launched a second tender for the submission of expressions of interest under the direct proposal submission process (round two). The deadline for thesecond tender has since been postponed several times, with the latest deadline being set on December 31, 2014.

Both round one, which kicked off in 2011, and round two initiated in 2013 have not been concluded on time and have repeatedly extended deadlines. A reason for this is the great bulk of information requested to be submitted by the bidders. Specifically, proposals need first to clarify the bidder (single company, consortium or joint venture) and the project (including capacity, location with map coordinates and contact with the relevant transmission or distribution grid company that confirms the suitability of the grid to connect the project). And second, a successful application needs to demonstrate the bidder’s technical capability and experience to design and build the project (especially related to past experience) and its ability to raise debt and equity (the bidder must have previously raised funds larger than $10 million).

Karim Asali, former Dii GmbH project developer, who also comes from Jordan and often advises Jordanian banks and investors on the PV business, told pv magazine renewable energy policy making in Jordan was something totally new and the government needed to undertake a number of new tasks such as streamlining the planning process, verifying the laws, and coordinating the various institutions involved (e.g. the regulatory body and the energy ministry), and that required a great deal of time. There is no doubt though, Asali added, that the government has now acquired significant knowledge and experience and future tenders are expected to run more smoothly.

Nevertheless, Jordan’s energy ministry has published a preliminary list of qualified expressions of interest for PV projects and a list of conditionally qualified bids for PV projects under round two. Both lists impress with the wide geographical scope of the bidders. The qualified bids for instance include Hanergy, Canadian Solar, Scatec Solar, Hareon Swiss, and Activ Solar, while the conditionally qualified bidders include SunEdison, Elecnor, Deutsche Eco International, and Abengoa Solar.

Tender round three cancelled

While round two was still under way, in 2014 the Jordanian energy ministry launched a third round for renewable energy bids asking bidders to submit their proposals by April 10, 2014. The deadline was later extended to August 2014, but eventually the ministry cancelled the tender altogether.

Jordanian solar insiders understand the reason why the country cancelled the third round lies with the Abu Dhabi company Masdar, Asali told pv magazine. Representatives of Masdar visited Jordan and promised its government they will help it build a pipeline of new renewable energy projects totaling 1 GW, plus the so-called green corridor, which is the high voltage line. Moreover, Asali pointed out, the third round was always subject to the high voltage grid being upgraded and able to absorb the new capacity, therefore Masdar’s proposal made sense because they offered to solve the grid issue too.

“Whether this huge pipeline of new power projects supported by Masdar will materialize, I am not sure,” commented Asali. Since the cancellation of the third round, neither Jordan’s government nor Masdar have released any information regarding new power projects in Jordan.

Despite the third tender being cancelled, a clear trend regarding the PV sector has emerged: each round has announced bigger but fewer projects, thus attracting large international investors but also presenting fewer market opportunities. Round one consisted of twelve projects of various sizes totalling 200 MW. Round two, said Jordan’s Minister of Energy and Mineral Resources Mohammad Hamed, will consist of four 50 MW PV plants, while the cancelled round three had asked for proposals to build photovoltaic plants of 100 MW capacity, aiming eventually to approve just two, totalling 200 MW.

Funding abundance

Some of the round one confirmed projects, the government said, have been funded by grants from the Gulf Cooperation Council (GCC), a regional intergovernmental body consisting of all Arab states of the Persian Gulf, except for Iraq. Asali confirmed this, adding that the GCC funds are meager compared to the several hundreds of millions dollars loaned by international organizations such as the World Bank’s International Finance Corporation (IFC), which is the key financier for solar PV projects in Jordan. In addition, Asali noted, local banks have also started getting involved in funding photovoltaic projects but mainly to a lesser extent and only when an international institution is involved. The reason for this, Asali explained, is that international institutions have expertise (e.g. accounting, managerial or even engineering skills) that local banks lack. Therefore, local banks feel more confident investing in projects that have been primarily designed by international players and tend to step in by complementing a project’s budget. Jordanian banks involved in financing photovoltaic projects are the Arab Bank, the Capital Bank and the Jordan Kuwait Bank.

Competition among power sectors

According to the European Bank for Reconstruction and Development (EBRD), Jordan imports more than 97% of the energy it consumes, mainly via natural gas from Egypt and oil from Saudi Arabia. Formerly, Jordan had relied heavily on oil imported from Saddam Hussein’s Iraq. However, recent political and military unrest in the neighboring countries (during the Arab Spring in 2011, for instance, gas pipelines in Egypt were repeatedly attacked) and global competition for the remaining fossil fuels have triggered the country to find alternative sources of power.

Such is Jordan’s dire need to cut its current reliance on vulnerable power supplies that in September a historic letter of intent to import $15 billion worth of natural gas from Israel over a 15 yearperiod was signed. A few more approvals from both countries are needed for the deal to be definitely and irreversibly sealed, but if it goes ahead it would in effect supply all of Jordan’s energy needs for the next 15 years from the Leviathan gas reservoir west of Haifa, Israel.

Furthermore, in September 2014, Russia’s Rosatom State Atomic Energy Corporation and the Jordanian government signed a project development agreement on the construction of a nuclear power plant near Zarqa in northeast Jordan. Atomstroyexport said Jordan’s energy ministry, will supply the nuclear technology and Rosatom will operate the one gigawatt plant, which aims to deliver 12% of Jordan’s energy needs by 2020. “The project phase that has now started will result in a contract for nuclear power plant construction that is planned to be signed in one and a half to two years,” said Rosatom.

Among plans for other forms of power production, Jordan has set a target of generating 7% of its energy from renewable sources by 2015 and 10% by 2020. Of

the 2020 target, 600 MW of power will come from solar PV and 1,200 MW from wind, Jordan’s government says. Given that the country’s annual daily average solar irradiance on a horizontal surface ranges between 5 and 7 kWh/m² , which is one of the highest figures in the world, power from solar PV is an obvious choice.

PV challenges and opportunities

One major challenge in Jordan is finding land for projects. “Once land owners know their land is sought for developing PV, they ask for very high prices,” Asali points out. Investors also struggle to find land that can connect to the electricity grid. “Transmission and distribution companies have limited availability for connecting new capacity to their grids and only for certain locations. So, it is complex to find a good match between available land, the right size of it and availability to connect it to the grid,” Asali says.

An additional issue is that Jordan’s three medium voltage distribution networks in the north (IDECO), middle (JEPCO) and south (EDCO) of the country respectively require photovoltaic investors to develop their projects where their power is going to be consumed. This requirement, which is compulsory under Jordanian law, further limits the expansion of renewable energy development in Jordan because most investors need to develop their projects in the middle zone, where the majority of the population lives. Projects in the IDECO and EDCO networks, where additional lands are available, often need to be abandoned because the generated power cannot be consumed within the networks’ geographic coverage. The plan for a high voltage electricity line connecting the north to the south by 2017 could solve the problem, but concrete details have not been announced yet.

Funding, red tape and the development of a local renewable energy services network on the contrary appear not to be a problem. Jordan is a stable, pro-Western Arab country, which the West is keen to support to develop its renewable energy sector and increase its energy independence. For this reason, Western funding towards Jordanian solar PV projects appears not to be threatened, Asali agrees. Red tape and local knowledge, he adds, also steadily improve. First, he points out, all related public institutions have now accumulated necessary knowledge and experience from the first round of tenders that will hopefully help them to be more efficient in future processes. Second, evidence from the ground confirms that a network of local consultancies have sprung up providing a range of services such as engineering, legal advice, accounting and others. In the past, Asali says, these services were mostly provided by foreign, mainly Dubai-based companies. “But I have seen how fast local teams learn and I believe in one to two years local consultants will be able to develop most of the needed work alone,” Asali notes.

Clearly, both Jordan’s immediate and long-term photovoltaic future appears exciting. In trying to address its energy gap, the country is presently undergoing a major energy system modernization, which touches various aspects (technical, regulatory, managerial and so on) and sectors of the system, including solar PV. Throughout this process, solar PV needs to make sure it remains firmly visible on the energy policy agenda and establishes itself as a secure answer to the country’s energy dilemmas.

Competition among different power sectors is escalating, with each sector attempting to gain an increasing chunk of the country’s future energy mix. Photovoltaic power needs to aim higher, targeting both the commercial and the residential sectors (Jordan also has a tariff for household PV, which has seen about 8 MW of panels installed in Jordanian households) and pushing for a decentralized system that provides energy services to cities and connected and remote villages.
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