MENA Energized: Regional Challenges to "Green the Power" Sector July 28, 2009

1. MENA Energized: Regional Challenges to Green
the Power Sector
Session 1: the emergence of a regulatory framework
in the MENA Region
Perspective from the Maghreb Countries
28th June 09
Rafik MISSAOUI,
Energy & Enivrement expert

2. Content
Energy context and RE status in North Africa
region
Institutional and regulatory framework for
Renewable Energy
RE countries policy and their objectives
Strengths of the RE policies in the region
Success stories

3. Energy context and RE status in the region
Varied energy contexts
Algeria
Gas and petroleum net exporter
Primary energy consumption : 35 Mtoe
Libya
Gas and petroleum net exporter
Primary energy consumption : 11 Mtoe
Morocco
Importation for more than 96% of its energy needs
Primary energy consumption : 15 Mtoe
Tunisia
Net importer since 2000
Primary energy consumption : 8 Mtoe

4. Energy context and RE status in the region
RE contribution
6%
Share of RE in primary energy consumption
in North Africa Countries - 2008
5%
4,4%
4%
3%
RE contribution in the region is
still very low: around 1.6% of 2%
1,6%
the primary energy consumption 1%
1,2%
(including Hydro) 0,3%
0,1%
0%
Less than 2.1% of total Algeria Libya Morocco Tunisia All the region
electricity generation (including 12%
Share of RE in electricity generation
Hydro and excluding traditional
in North Africa Countries - 2008
10%
biomass) Hydroelectricity
Excluding hydro
8%
Morocco and Tunisia show the 6,0%
highest rates
6%
4%
2% 4,0%
1,6%
1,1%
0,9%
0,3% 0,4% 0,5% 0,5%
0%
Algeria Libya Morocco Tunisia All the region

5. Energy context and RE status in the region
Installed capacities
Installated capacities
Biomass (%
Primary energy Solar PV Solar thermal (1000
Countries consumption) Wind (MW) (MWp) x m² collectors)
Algeria 0,6 6
Libya 0,5 6
Morocco 16% 124 10 240
Tunisia 11% 54 1,3 320
35
Penetration rate of Solar Water Heater 31
30 in North Africa Region - 2008
Collectors m² / 1000 hab.
25
Turkey 132
20
Cyprus 788
Greece 334
15
10
7
5
1
0,2
-
Algeria Libya Morocco Tunisia

6. RE institutional and regulatory frameworks
General overview
Centre for the Development of RE
Algeria Agency for the Promotion of the Rational Use of Energy
Centre of Research and Studies on Solar Energy
Libya Renewable Energy Authority of Libya
Morocco Centre of Renewable Energy
Tunisia National Agency for Energy Conservation
Public
incentives & Specific Feed in
Countries Specific regulation for RE subsidies fund Tariffs
Elec. & Gas Law 02-01
Algeria Law on RE 04-09 Yes Yes Yes
Libya No No No No
Morocco On going Yes On going On going
Law n°2009-7
Tunisia Decree n°2009-362 Yes Yes On going

7. RE institutional and regulatory frameworks
Algeria
Regulation framework
Private bodies can install and operate RE power plants, but under
concession regime.
Transmission system operator or the holders of the distribution
concessions must purchase RE-based power generation.
Annual quotas for power generation from RE can be set by Regulatory
Commission who ensure compliance to such obligations.
A premium of 100% to 300% over the electricity price as established
by the market operator is given to every kWh from RE supplied to the
network. The premium depends on the RE sources (ex: PV and wind
300%, CSP maximum 200%, waste 200%, etc.).
The excess costs associated to these measures can be financed by the
State or can be imputed on tariffs.
Incentives
Investment subsides provided by the national energy conservation fund
which can go until 50%, depending on the RE technology.

8. Institutional and regulatory framework for RE
Conception du mécanisme PROMO-ISOL
Morocco du mécanismes
Objectifs
Regulation framework
Private operators can produce electricity from RE for its own
consumption for less than 50 MW
Private operators can produce electricity from RE for the national
network
The operators needs simple declaration for small capacities (less
than 2 MW) and authorization for upper capacities.
The purchase tariff is defined by a Power Purchase Agreement to
be signed between the operators and the national utility.
Incentives
Customs duties : 2,5% for all RE
Other subsidies in the framework of the foreseen energy
conservation fund

9. Institutional and regulatory framework for RE
Tunisia
Regulation framework
A company (or a group of companies) is allowed to produce electricity
from RE for its own consumption, with no capacity limitation.
The company is allowed to use the transmission network for electricity
transportation to other consumption facilities belonging to the same
company or group.
The national utility has the obligation to buy electricity in a proportion
below 30% of the generated RE electricity by the company, with a price
defined by decree.
Incentives
Investment subsides provided by the national energy conservation fund
with a level that depends on the RE technology:
70% of cost for immaterial investment (feasibility study, etc.)
70 $/m² for the SWH, 30% for PV systems connected to the
network, 40% for solar and wind water pumping and small biogas
systems, etc.
VAT and Customs duties exemption for all RE and EE equipments

10. RE country policies and their objectives
Strategic goals
Reduce the weight of the energy expenses in the
economy (in 2007 the share of energy expenses in
the GDP was around 12% in Tunisia and 20% in
Morocco)
Reduce the amount of public subsidies to
conventional energy by displacing energy fossil
consumption
Reduce the energy dependence of the country by
diversify the energy mix in the mid and long term

11. RE country policies and their objectives
Quantitative objectives
% RE in % RE in primary
Target
Countries electricity energy Additional forecasted capacities
horizon
generation (1) consumption (1)
Algeria 2010 5% 400 MW solar PV and CSP
* Wind: 1000 MW
* PV: 16 MW
Libya 2020 10% * CSP: 100 MW
* SWH: 10.000 m²
* Wind: 1420 MW
* PV: 20 MW
Morocco 2012 20% 10% * CSP: 20 MW
* SWH: 200.000 m²
* Wind: 190MW
* Biogas: 10 MW
Tunisia 2011 8% 4% * Pomace olive valorisation: 40 MW
* PV: 4 MW
* SWH: 480.000 m²
(1) Including hydro

12. Strengths of the RE policies in the region
Raised awareness of policy makers in the region for energy
efficiency and RE
Existence of RE official policies development in the countries
Reinforcement of energy efficiency and RE policies since the last
oil international price increase, particularly in energy importer
countries (Tunisia and Morocco)
Establishment of new regulatory frameworks more open to
private-public partnership
Increase of financial support from the international donors to RE
in the region, mainly for Tunisia and Morocco
More and more mobilization of CDM to support RE projects in the
region (Tunisia and Morocco).

13. Main weaknesses of the RE policies in the region
Legal frameworks still not enough attractive for private
investment
Subsidies to conventional energy tariffs make RE not
profitable for the end user and not attractive for private
investors
Strategy targets are based some time on political issues and not
taking in account the real bottlenecks that will make them not
feasible
Development approach focusing on demand stimulation only:
But, market transformation needs to work also on the
development of local industries and suppliers of RE energy
technologies
Countries don’t focus enough on financing mechanisms to
mobilize required resources.
Lack/absence of concrete integrated mechanisms to
operationalize the adopted strategies
Capacities building

14. Main weaknesses of the RE policies in the region
Impact of the subsidies to conventional energy tariffs
0,250
Energy tariffs
Electricity tariffs for residential use in MEDA Country
November 2008 - all taxes included
$/kWh
in MENA countries 0,200
Min 0,162
Max 0,154
0,150 0,142
0,125
0,100 0,087 0,087
0,067
0,050
-
Algeria Egypt Jordan Lebanon Morocco Syria Tunisia Turkey
0,300
LPG and natural gas tariffs for residential use in MEDA Country
November 2008 - all taxes included
0,250
€/kWh
0,207
0,200
LPG Price (USD)
NG Price (USD)
0,150
0,100
0,067
0,056
0,050 0,031
0,029
0,018
0,003 0,007 0,002
-
Algeria Egypt Jordan Lebanon Morocco Syria Tunisia Turkey

15. Main weaknesses mécanisme PROMO-ISOL
Conception du of the RE policies in the region
Impact of the subsidies to conventional energy tariffs
Mécanisme financier
Example of the wind projects
50%
Profitability of self production wind projects
45% according to the site quality in NA countries
Equity IRR
40%
35%
Tunisia
35% 32%
Morocco 30%
30% Algéria 27%
24% 30%
25% 22% 28%
19% 25%
20% 23%
16%
20%
15% 18%
15%
10% 13%
5% 3%
1%
0%
2600 2800 3000 3200 3400 3600 3800 4000 4200
Source: Author estimation Site quality: Number of hours of full generation per year

16. Main weaknesses mécanisme PROMO-ISOL
Conception du of the RE policies in the region
Impact of the subsidies to conventional energy tariffs
Mécanisme financier
Example of the SWH market
1 000
Pay back
Period
(years) LPG Tariff and SWH
Egypt profitability for the end users
100
Algeria
Syria
Jordan Moroc
Tunisia
10
Lebanon
Palestine
Turkey
1
0 200 400 600 800 1000 1200 1400 1600 1800 2000
LPG Tariff in €/T

17. Main weaknesses of the RE policies in the region
Impact of the subsidies to conventional energy tariffs
Example of the SWH market
1 000 0,3
m² of collectors / SWH penetration market rate versus
900 1000 inh. LPG tarifs in MEDA region
0,25
LPG price €/kWh
800
700
0,2
600
500 0,15
m²/1000 inh
400 LPG kWh price
0,1
300
200
0,05
0,025 0,023
100 0,014
- 0
Cyprus Greece Turkey Jordan Tunisia Morocco Algeria

18. Success stories of integrated RE approaches
Solar water heater program in Tunisia: PROSOL
Principles
Integrated approach including technical, financial and
organizational issues
Win-Win negotiated multi-stakeholders approach,
Pubic-private partnership approach,
Strong involvement of stakeholders: suppliers, bank sector,
Utility
Mechanism description
NECF subsidies the SWH cost (around 20%) to improve the pay
back period for the end-user
5 years loan reimbursable through the electricity bill to face the
constraints of limited household capacity of investment
Public quality control mechanism by NAEC (suppliers and models
accreditation)
Monitoring and information management system

19. Success stories of integrated RE approaches
Solar water heater program in Tunisia: PROSOL
4 000
Evolution of installed thermal solar collectors index
Index (%) Base 1985 85000 m²
3 500 No clear
policy
PROSOL
3 000
GEF project
No specifique credit system
2 500
No quality control system
No investment subsidies
Fiscal incentives (VAT =0 and CD = 63000 m²
10%) Fiscal incentives
2 000 No specific credit system
Private suppliers
Fiscal incentives
Specific credit system (via STEG)
Investment subsidies
No investment subsidies (35%)
1 500 One public supplier and no private Private suppliers 35000 m²
Quality control system
Quality control system
Specific credit system
Investment subsidies
5
Private suppliers
1 000
Fiscal incentives
17000 m²
4
500 2350 5494 3
1 2
328 m² 7500 m²
-
85
86
87
88
89
90
91
92
93
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95
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97
98
99
00
01
02
03
04
05
06
07
08
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20

20. Success stories of integrated RE approaches
PV rural electrification program in Morocco
Strong Public-private partnership : concession approach
Cost sharing between Utility, local collectivities and customers

21. Success stories of integrated RE approaches
CSP project in Algeria: Hassi Rmel project
Project description
Project developer: New Energy Algeria (NEAL)
Project under implementation
Installed capacity 150 MW
Energy mix : solar and natural gas
Developing approach
Project finance implying private sector
66% Spanish private developer and 33% public and private
Algerian investors
BOT approach

22. Conclusion
The region knows recent dynamism for RE development through:
Regulatory frameworks reform
RE development strategies setting up
There is a need to operationalize these strategies through
innovative mechanisms
Need for win-win financial mechanism that conjugate
Public investment subsidies to overcome the constraint of low
energy conventional tariffs
Appropriate financial facilities (credit, guarantee, etc.)
Downstream financial resources mobilization mechanisms
(dedicated credit lines, investment funds, etc.)
CDM mobilization as a financial supporting mechanism

23. Conclusion
Technology transfer and local industry support in order to
maximize indirect benefits of RE programs
Capacity building
Monitoring system for strategies and programs
Enhancement of regional cooperation