The fiscal dependence of Algeria from the export of its massive oil and gas reserves, combined with the fact that over 90% of the country’s electricity generation is based on this resources, poses serious problems in facing the growing residential electricity demand. Moreover the slump in prices of oil since the third quarter of 2014 has nearly halved Algeria’s foreign currency reserves.
In 2016, in order to avoid other risks derived from fossil fuels price fluctuation, the Prime Minister launched an ambitious set of reforms aimed at diversifying away from oil and boosting sectors in Algeria such as manufacturing, agriculture, renewable energy, information and communications technology (ICT) and tourism.
The Renewable Energy and Energy Efficiency Development Plan, launched with its first version in 2011 and updated in 2015, has put greater focus on deployment of large-scale solar photovoltaic installations and onshore wind in Algeria due to large technology costs decrease as well as introduction of biomass, cogeneration and geothermal technologies into the mix until 2020.
The updated version of the Program aims to install 4,500 MW of new projects until 2020 and overall of 22,000 MW until 2030 Algerian capacity, splitted as follow:
The implementation of this solar program has recently been clarified through Executive Decree No. 17-98 of 26 February 2017, which provides the legal basis for tendering of renewables and cogeneration energies, as well as its integration into the national electricity supply system. Selected renewable energy projects had to be owned and developed by special purpose companies, which were also responsible for financing, EPC works, grid-connection and the sale of power. These vehicles had to be owned 51% by a domestic investor and 49% by an international partner. The government indicated CREG as responsible for the tendering process rather than the new born Ministry of Renewable Energy which will manage small plants and rooftop plants.
The electricity generated by the renewable energy plants will be sold through Power Purchase Agreements (PPA) to the state-owned utility Sonelgaz, which is the sole responsible for the commercialisation of electricity in Algeria.
The renewable source with the largest potential in Algeria is solar PV. The solar potential accounts for 3,000 hours of insolation per year and covers a surface area of 2,381,745 km2. This potential is mostly located in the southern part of the country, with an insolation ranging from 1,800 to 2,400 kWh/m2 (GHI – Global Horizontal Irradiance). Since 2015, about twenty solar photovoltaic facilities, with a total capacity of 343MW, have been in operation in the regions of the Hauts-Plateaux and the south of the country.
The Algerian government issued the first solar tender in November 2018. Through the tender, the Algerian Government will select IPP solar projects with a capacity range of 10-50 MW, for a total capacity of 150 MW. The solar PV plants will be located in the centre and northern part of Algeria, in the regions of Ghardaïa, Biskra, Ouargla, El Oued, Tendala and Nakhla.
All the projects will be developed on a build-own-operate basis (BOO) and will be awarded 20-year power purchase agreements (PPAs). Domestic content rules require the use of solar modules assembled in Algeria, as well as locally manufactured mounting structures and cables.
The Algerian Minister of Energy said that the reference price for this first round of the upcoming auction is not expected to surpass 4 DZD/kWh (approximately $0.04/kWh).
A second 50 MW tender, which will be held by Algerian state-owned power and gas provider, Sonelgaz through its unit SKTM, is in program for the development of off-grid hybrid gas/diesel and solar projects in early June 2019. This project will drastically lower the cost of existing power generation stations in the south of Algeria, which are mostly based on fossil fuels.