Feasibility Study of Low Carbon Energy Investments in Jordan. By Bashar Zagha

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Feasibility study of low carbon energy investments in Jordan
By : Bashar Zagha

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  • 1. Feasibility Study of Low-Carbon Energy Investments in Jordan Prepared by: Bashar Al-Zagha Supervised by: Prof. Andrew Tylecote The University of Sheffield Management School September, 2010
  • 2. Sheffield MBA AbstractThe aim of this research is to investigate the feasibility of low-carbon energy investmentsin Jordan. The research is divided in to two main sections: one examines the effectivenessof policies adapted by the Jordanian government to promote renewable energyinvestments, and the other inspects the challenges facing the nuclear program in Jordan.Together, these two factors will play a major role in determining the future of low-carbonenergy mix in Jordan.The literature review will shed light on issues attached to the current consumption ofprimary energy resources and how this could affect the future of the planet. In addition,the literature will compare and contrast the different insights concerning the advantagesand disadvantages of low-carbon energy resources and outline Jordan’s national energystrategy as well as the country’s political, financial and economic background.Since this is qualitative research, it was decided to gather primary data through conductingsemi-structured interviews with top personnel from private and public organizations. Thismethod will provide diverse perspectives regarding the research topic and will allow theresearcher to develop a holistic view of the situation and develop his own analysis.Based on the findings, Jordan has a desperate need to diversify its energy resources inorder to avert an energy crisis in the near future. However, there are still barriers andchallenges attached to low-carbon energy investment that still need to be addressed. Alongwith different strategies that the Jordanian government must consider in order to create aninvestment friendly atmosphere and achieve its national energy mix objectives. -1-
  • 3. Sheffield MBA AcknowledgementI owe my deepest gratitude to my supervisor Prof. Andrew Tylecote for his unlimitedsupport, encouragement and guidance. Prof. Andrew provided me with invaluable insightsand ideas that widened my knowledge in relation to the research topic, and it would havebeen next to impossible to write this thesis without his help and support.I would also like to show appreciation for the valuable time given by all the intervieweeswho took part in the research, and whose responses provided precious data that wereessential to the research.I am also deeply thankful to my family and my MBA class mates as they have been asource of support and inspiration. I also offer my regards and blessings to all those whosupported me in any respect during the completion of the project. -2-
  • 4. Sheffield MBATable of ContentsChapter 1 – Introduction ....................................................................................................... - 4 -Chapter 2- Literature Review ................................................................................................ - 7 - 2.1 Global Energy ........................................................................................................ - 7 - 2.2 Global Warming ..................................................................................................... - 8 - 2.3 Renewable Energy ................................................................................................. - 9 - 2.4 Solar Energy ......................................................................................................... - 11 - 2.5 Economic Efficiency ............................................................................................ - 13 - 2.6 Energy in Jordan .................................................................................................. - 14 - 2.7 Renewable Energy in Jordan................................................................................ - 15 - 2.8 Nuclear Energy .................................................................................................... - 16 - 2.9 Nuclear Energy in Jordan ..................................................................................... - 19 -Chapter 3- Research Methodology ..................................................................................... - 21 - 3.1 Research Method.................................................................................................. - 21 - 3.2 Data Collection..................................................................................................... - 22 - 3.3 Research Limitations and Boundaries.................................................................. - 24 -Chapter 4- Results ............................................................................................................... - 25 -Chapter 5- Discussion ......................................................................................................... - 32 -Chapter 6 –Conclusion and Recommendations .................................................................. - 36 -References ........................................................................................................................... - 40 -Appendix ............................................................................................................................. - 46 - -3-
  • 5. Sheffield MBA Chapter 1 – IntroductionEnergy is a fundamental element in our universe and has become an indispensable part ofour daily lives. Energy has empowered the progression of developed societies fromproviding the basic needs of heat and light to complex activities like transportation,communication and industrial processes.However, today’s energy sources are predominantly from fossil fuels, and with the currentgrowth of energy demand and the global economic expansion these unsustainableresources will become depleted in the near future. In addition, the ignition of non-renewable energy resources is responsible for the anthropogenic greenhouse effect whichis the main cause of global warming. Having foreknowledge of these consequences,countries and governments have identified that the key to solving the energy problem isthrough renewable energy investments, which has recently experienced a surge of interestdue to falling costs of installation and advances in technology (Development, 2000).Jordan, a Middle Eastern developing country with a population of six million, would be onthe brink of an energy crisis if it were to keep relying on its current energy generatingcapabilities and technology. Jordan is a net energy importer with very limited resources, asit is one of the few countries in the Middle East with no oil reserves. Currently thekingdom is importing about 96 per cent of its energy at a cost of 18 per cent of its growthdomestic product (EDAMA, 2009); consequently, this has imposed further pressure on theenergy sector, especially since the volatile rise of crude oil and gas prices and the financialcrisis that struck the world recently (Luck, New law streamlines renewable energyinvestment, 2010).According to NEPCO (2009), by the end of the year 2009 Jordan was generating about14.3 TWh of electricity, with a total generating capacity of 2749 MW, which is predictedto grow to 3600 MW of electricity by 2015, doubling by 2030 (Jordan – uranium hotspot,2010). Anxious not to fall into an energy deficit in the future, the Jordanian governmentformed an energy strategy in 2007 to avoid the crisis. The strategy highlights thesignificance of supplying 14 per cent of its energy from oil shale, 10 per cent fromrenewable energy resources and 6 per cent from nuclear energy by 2020. -4-
  • 6. Sheffield MBAEarly in 2010 the Jordanian government released a new law that aims to promote theinvestment in renewable energy projects in order to achieve the energy mix goals of thenational energy strategy. The new energy strategy requires that 7 per cent of the energymix should be derived from renewable resources by the year 2015 and 10 per cent by2020. This newly released law aims to accelerate the deployment of renewable energyinvestments by providing a wide range of benefits in terms of competitive bidding priority,long-term funds, connectivity costs, tax cuts and more (Luck, New law streamlinesrenewable energy investment, 2010).In addition, the year 2007 became a turning point for the future of energy in Jordan due tothe discovery of uranium deposits in the kingdom estimated at 65,000 tonnes, excludingan extra 45,000 tonnes from phosphate reserves, which collectively accounted for 2 percent of the global total uranium reserves (JAEC, 2010). Jordan’s higher committee fornuclear energy has developed a program that is intended to supply 30 per cent ofelectricity from nuclear power by 2030, as well as driving a desalination plant forsupplying water in a country which is characterised by a severe lack of water (IFandPNewsroom, 2010).Renewable energy and nuclear energy present wide scope for research; however, thisresearch will seek to provide answers to certain questions that may define the future forlow-carbon investments in the Hashemite Kingdom of Jordan. These questions are:Q1. How Jordan’s recently released renewable energy law might play a role inencouraging local/foreign investors to invest in renewable energy in the kingdom? o What are the benefits that the new renewable energy law will provide to investors in the renewable energy sector? o What are the limits and boundaries of the newly released law in terms of funding, incentives and subsidy levels, and how could it affect the deployment of renewable energy projects? o Would the government modify the renewable energy law if it were not able to meet its energy strategy objectives? -5-
  • 7. Sheffield MBAQ2. Will investing in renewable energy projects in Jordan yield good return oninvestment? o What are the risks that face renewable energy investments in the kingdom? o What is the potential of photovoltaic and wind energy in the kingdom as renewable energy sources? o What will be the cost of generating electricity from renewable energy projects, and who will bear the additional costs of the electricity generated from renewable resources?Q3. What are the challenges facing the deployment of a nuclear program in Jordan? o What are the costs and benefits of implementing a nuclear energy program in the kingdom? o What are the differences in generating energy from renewable sources or nuclear sources in terms of environmental aspects and economic efficiency? o How could the discovery of new uranium deposits and the launching of a civil nuclear program in Jordan affects the interest in renewable energy investment in the kingdom?A mind map was constructed to visualize and structure ideas related to the researchquestions that will assist the researcher in his interpretation and analysis (see AppendixA). -6-
  • 8. Sheffield MBA Chapter 2- Literature ReviewThis chapter will construct the corner stone of the research by presenting the literaturerelated to low-carbon energy investment. The chapter will start by stating some facts aboutthe global energy consumption rate, and how the increased consumption rate of fossil fuelsis raising concerns over environmental issues such as global warming. Then it will discusshow the world is moving towards renewable energy sources as an alternative to fossilfuels, whilst also presenting the different perspectives on implementing this technology.Following that, the chapter will define the current energy issues faced by the Kingdom ofJordan and how the government is adjusting its policies and strategies to supportrenewable energy investments.The chapter then concludes with discussion of global nuclear energy utilization as well asthe costs and benefits incurred in implementing this technology, along with Jordan’sambition to start its own nuclear program as a source of energy and how this could play apart in the future of energy mix in the kingdom.2.1 Global EnergyEnergy is the life blood of modern civilization; it amplifies the human capability to travel,work, communicate and undertake daily tasks in an effortless manner. Energy providesmankind with the necessary power to manufacture goods, generate electricity and providediverse energy services. However, the global demand for energy is growing day by dayand at a record pace, due to acceleration in population growth and industrialisation rates(Snead, 2008). According to Al-Qahtani (2007), “the global energy demand will grow byabout 50 per cent over the next 25 years”.Fossil fuels such as crude oil, coal and natural gas are considered to be the main sources ofenergy used today. However, as fossil fuels require millions of years to form, at thecurrent consumption rate, fossil fuels are being depleted at a faster rate than they are beingformed; that is why they are also known as non-renewable energy sources. -7-
  • 9. Sheffield MBAIn 2008, the world total energy consumption consisted of 78 per cent fossil fuels, 2.8 percent nuclear energy and the remainder came from renewable energy sources (see figure 1)(REN21, 2010). Hence, more than three quarters of the energy supplied to the world isbased on a finite source of energy that is estimated to last for only about 140 years at thecurrent consumption level (Al-Qahtani, 2007). Renewables 19.0% Nuclear 2.8% Fossil fuels 78% Figure 1 Global Energy Consumption, 2008 (REN21, 2010)In addition to the global hunger for energy and the anxiety over meeting future energydemands, the current exploitation of traditional energy resources has a negative impact onthe environment and the planet’s ecosystems. The burning of fossil fuels releases harmfulemissions and pollutants in to the atmosphere. Therefore, unless countries take drasticmeasures to diversify their reliance upon fossil fuels, humanity will have to expecteconomic and environmental tragedies in the near future (Kaltschmitt, Streicher, & Wiese,2007).2.2 Global WarmingGlobal warming involves a slow and steady rise in the temperature of the Earth and itsatmosphere, mainly as a result of incineration of fossil fuels and other associated human -8-
  • 10. Sheffield MBAactivities. Concern over this phenomenon has mounted recently due to its significant anddrastic economic, environmental and social impact (Climate change, 2009).The atmosphere surrounding the earth consists of a layer of gases that act as a protectiveshield, allowing sunlight to pass through while trapping heat. This natural phenomenon,which is essential in keeping the Earth’s surface warm, is known as the greenhouse effect(Quaschning, 2005).Over millions of years nature maintained a balance of greenhouse gas concentration in theatmosphere which consists mainly of water vapour (H2O), carbon dioxide (CO2), methane(CH4), nitrous oxide (N2O), halocarbons and ozone (O3). However, the concentration ofthese gases is increasing due to various human activities: mainly involving fossil fuelcombustion, which in turn is amplifying the greenhouse effect (The National Academies,2008).The additional greenhouse gases emitted to the atmosphere will alter the global climate bywarming it up rapidly. According to the European Commission (2009), this increase intemperature will lead to catastrophic consequences such as the meltdown of polar ice capsleading to a rise in global sea water levels, thus threatening the existence of coastal areasand islands. In addition, global warming can be linked directly or indirectly to extremeweather conditions around the world, including floods, heat waves, droughts and storms,therefore jeopardising food production and leading to water scarcity in different regionsaround the globe, resulting in famine and migration.If no significant actions are taken to reduce the anthropogenic greenhouse gas emission,the concentration of carbon dioxide in the atmosphere will double by the end of thiscentury, thus yielding a mean global temperature rise of more than 2 degrees Celsius(Sawin & Moomaw, 2009). Mankind needs to address the necessity of reducing thesegases emissions and start searching for alternatives to present energy sources.2.3 Renewable EnergyRenewable energy refers to “the energy derived from natural processes that do not involvethe consumption of exhaustible resources such as fossil fuels and uranium” (BP, 2010).Renewable energy has lately started to make a major contribution to global energy -9-
  • 11. Sheffield MBAsupplies; thus, by 2009, renewable energy accounted for 18 per cent of global powerproduction and 25 per cent of global power (electricity) capacity (REN21, 2010). Despitethe rapid growth of renewable energy, renewable energy sources such as wind andphotovoltaic energy still lag behind and supply only a small fraction of the energyconsumed globally, as they are constrained by high investment costs and intermittentsupply (see figure 2). Figure 2 Renewable Energy Shares in Global Energy Consumption, 2008 (REN21, 2010)In the last decade, governments have started to deploy different policies to promoterenewable energy investment, while establishing future renewable energy targets. By early2009, at least 64 countries had policies in place for promotion of renewable powergeneration, to address challenges posed to global communities of enhancing energysecurity and meeting future energy demands (REN21, 2010).Renewable energy can be divided into three main categories: solar energy, gravitationalenergy and geothermal energy. Depending on the technology employed, these sources canbe either used for heating purposes or electricity generation. The next section willintroduce environmental and economic data on renewable energy implementation,focusing mainly on solar energy and specifically on wind power and photovoltaictechnology. - 10 -
  • 12. Sheffield MBA2.4 Solar EnergySolar energy is considered to be the most significant source of renewable energy, since thesun provides the earth with unfathomable amounts of energy. According to Zweibel,Mason & Fthenakis (2007), “in one hour the earth receives more energy from the sun thanthe worlds population uses in a whole year”.The utilization of solar energy can be divided into two forms: direct and indirect. Directsolar energy is energy coming directly from solar radiation, whereas wind power, wavemovements and biomass are all forms of indirect solar energy. This research will shedlight only on two renewable technologies for utilizing solar energy: wind turbines andphotovoltaic cells.Wind PowerWind power is an indirect form of solar energy, created as a result of different pressureareas in the air due to different temperature levels on the earth’s surface (Quaschning,2005). Wind power is considered to be clean, reliable and, due to its lower capital costscompared to solar thermal and PV technologies, is the only power generating technologythat can deliver the needed CO2 cuts by the year 2020 (GWEC, 2010). By the end of2009, global wind turbines were generating 340 TWh of electricity annually, which isequivalent to 2 per cent of the global electricity consumption (World Wind EnergyAssociation, 2010).Wind power can play a part in the fight against global warming, enhancing energy securityand creating thousands of jobs. However, there are drawbacks in relying completely onthis form of energy. Wind power is characterised by intermittency, hence, wind turbineswill generate power only when the wind is blowing and the blades are spinning. Sincethere is no effective or economic mean for storing the excess energy produced from windpower yet, it would be impractical to depend totally on wind energy (Quaschning, 2005).From the environmental aspect, wind power is not as carbon free as it is claimed to be,since it relies entirely on fossil fuels for manufacture, assembly, transport and - 11 -
  • 13. Sheffield MBAmaintenance, along with the necessity of having a fossil fuel powered backup to balancethe fluctuations of wind power output (Lang, 2009). Nevertheless, wind energy isconsidered to have the shortest energy payback time, as only a few months are required topay back the energy needed for manufacture and installation (Milborrow, 1998).Photovoltaic PowerPhotovoltaic (PV) technology is used to generate electricity by converting solar radiationor sunlight into a direct current electricity using silicon solar cells. PV is considered tohave very high potential, as in theory it is assumed to have the capability to meet thedemands of the entire world (Quaschning, 2005).By 2009, the solar PV grid tied industry had grown by 53 per cent compared to the year2008, despite the financial crisis and lower oil prices (see figure 3). In addition, solar PVhad the fastest average growth compared to any other renewable technology over the lastfive years (REN21, 2010). Nevertheless, PV is considered to be an expensive method forelectricity production compared to other forms of conventional power plants; therefore,and in order to cut the high technology costs and make it a more competitive marketoption, governments started to introduce new incentive schemes and medium-termfinancial support to endorse PV investment and promote mass production (Luque &Hegedus, 2003). Figure 3 Solar PV, Existing World Capacity 1995-2009 (REN21, 2010)Energy generated by PV technology is also intermittent, since it only feeds electricity tothe grid as long as the sun is shining; as a result, the output efficiency of PV cells depends - 12 -
  • 14. Sheffield MBAsignificantly on factors like daylight hours, sun elevation, altitude and weather conditions(Aglietti, Redi, Tatnall, & Markvart, 2009) .Neither is PV as totally carbon free as it is purported to be. Even though PV powergeneration is free of greenhouse gas emissions, mining and refining semiconductors usedin PV cells as well as the manufacture and transportation of PV systems all depend onenergy obtained from fossil fuel sources (Luque & Hegedus, 2003). However, accordingto Black (2005) the energy payback for most PV systems is in the range of two to fouryears, which is relatively low in terms of a PV system’s life span that ranges between 20to 25 years.2.5 Economic EfficiencyInvestment in the renewable energy sector has become one of the top choices for energyinvestors and developers, driven by effective government policies, enhanced technologies,and growing concerns about global warming and exhaustion of fossil fuels. Accordingly,between the years 2004 and 2008, global renewable energy investment increased morethan fourfold, from 35 billion to 155 billion US dollars, reflecting the growing interest inthe renewable energy sector (Sawin & Moomaw, 2009).One of the major concerns when considering any form of investment is economicefficiency; the same applies for renewable energy investments. Economic calculationsneed to be made in order to identify the renewable energy source that can best provide thedesired energy at the lowest cost, thereby ensuring high economic return on the investment(Quaschning, 2005).When carrying out economic calculations on renewable energy, all expenses must becomputed; that includes costs of installation, operation, maintenance and disposal. Theseexpenses should then be divided by the total number of kilowatt-hours generated duringthe plant’s life span. The resulting figures will represent the cost for one unit of energy,which can be expressed in terms of $/KWh (Quaschning, 2005).Unlike conventional sources of energy, the costs of renewable energy investment are moreor less fixed: since the fuel sources for renewable energies such as wind and solar aretotally free, thus avoiding any uncertainties of fuel cost variation. Nevertheless, as - 13 -
  • 15. Sheffield MBArenewable energy projects extend over a long period of time, inflation must be included inthe equation (Quaschning, 2005).Like all other investors, renewable energy investors expect a return on their capital.However, renewable projects are usually characterised by demand for high rates of returnas a result of the high risks coupled with them. Renewable energy projects are consideredto be risky due to unpredictable changes hiding on the horizon: from policy changes tounforeseen technical issues and overestimation of the availability of renewable energyresources (Quaschning, 2005).2.6 Energy in JordanThe Hashemite Kingdom of Jordan is a small Arab country in the Middle East with fewnatural resources, except for phosphate and agricultural produce. The country’s economyand its 6.3 million inhabitants mainly depend on services, tourism and foreign aid (BBCNews, 2010). Although Jordan is surrounded by oil rich neighbours such as Saudi Arabiaand Iraq, it has no oil of its own; therefore, the lack of conventional fossil resourcescombined with the rapid economic growth experienced by the country has created a highlevel and costly dependency on imported energy (EDAMA, 2009).Jordan relies on external resources for almost 96 per cent of its energy supplies, derivingfrom fossil fuels, and these account for almost 21per cent of Jordan’s imports and 18 percent of its gross domestic product. Although Jordan’s contribution to global warming isbelow the world average, this almost exclusive dependence on fossil fuel sources meansthat its greenhouse gas emissions accounts for over 20 million tonnes of carbon dioxideper year (EDAMA, 2009).In addition to the above, Jordan is facing a very grave environmental challenge due toscarcity of water. On per capita basis, Jordan is considered to have the lowest level ofwater resources in the world, and this level is predicted to decline further, leading to anabsolute water shortage by the year 2025 (Royal Hashemite Court ).The dearth of energy resources combined with water poverty and the accelerating demandfor electricity has forced the Jordanian government to change its energy strategy mix, andit is currently planning to meet 29 per cent of its energy needs from natural gas, 14 per - 14 -
  • 16. Sheffield MBA cent from oil shale, 10 per cent from renewable energy sources and 6 per cent from nuclear energy by 2020 (see figure 4) (Ministry of Energy and Mineral Resources, 2007). Domestic: 4% Domestic: 25% Imported: 96% Imported: 75% Domestic: 39% Imported: 61%Figure 4 The Energy Mix in Jordan (2009-2020) (Sabra, 2010) 2.7 Renewable Energy in Jordan The Ministry of Energy and Mineral Resources (MEMR) has stated its objectives of diversifying its energy sources, reducing green house gases, encouraging renewable energy investments and complying with the kingdom’s national energy strategy for 7 per cent of its energy mix to come from renewable sources by 2015 and 10 per cent by 2020. To that end, it has recently endorsed a new stream of legislation under the name of “Renewable Energy & Energy Efficiency Law of 2010”. The new law aims to facilitate investment in the renewable energy sector by providing a variety of incentives from tax exemption to government land grants and funds, while allowing investors to negotiate directly with the MEMR for establishing renewable energy projects: which was in the past a time consuming process. In addition, the new law obliges the National Electric Power - 15 -
  • 17. Sheffield MBACompany “NEPCO” to purchase the electricity produced by renewable energy projectsthroughout the entire lifetime of the renewable project as well as covering the expenses forconnecting these projects to the electricity grid (Ministry of Energy and MineralResources, 2010).Conversely, the new law states that potential investors must provide a development andfinancial plans for the project, while stating clearly the proposed tariff for the electricityunits sold by these facilities. The tariff must be fixed and expressed as an amount perkilowatt hour within an acceptable range in terms of the reference pricelist (Ministry ofEnergy and Mineral Resources, 2010). In addition, all investors need to have previousexperience in developing similar renewable energy facilities in order to gain approval.2.8 Nuclear EnergyNuclear energy has been projected as a technological miracle that can generate carbon freeelectricity at low rates; nevertheless, the use of nuclear energy for civil purposes has longbeen surrounded by controversy. The utilization of nuclear technology was linked withfears of potential nuclear accidents, radiation effects on human health, nuclear wastedisposal risks and nuclear proliferation, thus posing a dilemma for environmentalists(Walker, 2006).According to Writers (2009), the next decade will witness a growing appetite for nuclearenergy utilization, since the International Atomic Energy Agency (IAEA) is expecting 25nations to start developing nuclear facilities by 2030 (Tirone, 2010). The recent growingdesire to acquire nuclear technology could be associated with the increase in concerns overglobal warming, increase in fossil fuel prices and the need to meet future energy demands.In this respect, nuclear energy would be the best option in providing clean, competitivelypriced base load electricity (Henriques, 2010). As of 2007, almost 6 per cent of theworld’s energy was derived from nuclear power (Agency, 2009), and there are currentlyabout 436 nuclear commercial power reactors operating in 30 countries, providing almost15 per cent of the world’s electricity on a continuous basis (World Nuclear Association,2009).What is nuclear power? Nuclear power is formed by non-explosive nuclear reactions in aprocess called nuclear fission by which uranium atoms are split; the high temperature - 16 -
  • 18. Sheffield MBAreleased by these reactions is used to heat up water and produce steam which subsequentlyrotates turbines to generate electricity. Uranium is a radioactive metal that occursthroughout the earth’s crust and is the source of fuel for nuclear power; however, naturedoes not provide uranium in a form that can be utilized directly in nuclear power plants.Uranium found in uranium ore contains two forms of isotopes: uranium-238 with 99.3 percent concentration and uranium-235 with 0.7 per cent concentration. However, onlyuraniuim-235 can be used to power nuclear reactors and it has to be within a concentrationthat ranges between 2 to 4 per cent. This percentage of uranium can be acquired in aprocess known as uranium enrichment (Quaschning, 2005).To investigate the sustainability of nuclear energy, four key components need to beconsidered, these are: nuclear fuel supply, environmental consequences, political aspectsand economic efficiency.Nuclear power was considered to be a limitless source of energy in its early days(Paffenbarger, 2009). However, it was found that earth has limited reserves of uraniumand according to IAEA as cited by Henriques (2010), uranium deposits will last for afurther 100 years if consumed at the current rate. This indicates that with the currenttechnology employed in nuclear reactors, nuclear energy is still considered, like other non-renewable energy sources, to be finite source of energy (Paffenbarger, 2009).On the environmental front, nuclear power has been projected as a two-edged sword; onone hand, the technology was promoted as a cheap, clean source of power with zerogreenhouse gas emissions, thus making a major contribution to the reduction ofenvironmental pollution and the effects of global warming. On the other hand, nuclearenergy was associated with a number of environmental issues, including the disposal ofhigh-level radioactive waste. Hence, a 1GW nuclear power plant can produce about 30tonnes of high-level radioactive waste per year, which needs to be securely managed andstored (OCED, 2008). Moreover, Caldicott (2007) states that nuclear power is not as freeof carbon as it is claimed to be, since processes such as mining and enriching the uraniumneeded to fuel the nuclear reactors and transportation and storage of nuclear wastes, allrely on fossil fuels. Nevertheless, the greenhouse gas emissions from a nuclear powerplant equate to only one third of those emitted from a fossil power plant. - 17 -
  • 19. Sheffield MBANuclear reactor accidents are also recognized to be a major environmental risk, as theoccurrence of such an incident could lead to catastrophic damage to the environment andhuman health, as in the incidents at Three Mile Islands in 1979 and the city of Chernobylin 1986 (Caldicott, 2007). Nevertheless, the risk of accidents has been reduced by theimposition of strict precautions and regulations.Political challenges have a significant effect on the future of nuclear energy (InternationalEnergy Agency, 1998). As access to nuclear technology might be used for militarypurposes like developing an atomic bomb, which could provoke an international crisis bydestabilizing international relations and ultimately lead to atomic warfare. Hence, imaginewhat might be the consequences if nuclear technology were to be accessed by politicallyunstable nations (Quaschning, 2005). According to Caldicott (2007), even if the nucleartechnology were to be used for civil purposes, it could still be dangerous. As a 1 GWnuclear reactor has the ability to produce 500 pounds of plutonium annually, and only 18pounds of plutonium is needed for one Nagasaki type bomb, countries that acquire nuclearreactors for civil purposes will thereby also acquire the technology needed to developnuclear weapons, which is the situation faced by Iran today.On the economic front, nuclear power plants, once they are built, have the ability toprovide low-cost, reliable electricity which is often cheaper than that produced by othergenerating means (OCED, 2008). In addition, nuclear energy is characterised by lack offluctuation in the generating costs, since, as only a small amount of uranium is needed toproduce a large amount of energy, it is considered to be a highly inelastic commodity, thusmaking the fuel cost a minor part of the nuclear plant equation (Regheb, 2010).Nevertheless, nuclear power plants have various charges attached, including highconstruction costs, compliance to nuclear regulations, waste disposal costs anddecommissioning costs (World Nuclear Association, 2009).Nuclear energy is currently at a crossroads, in balancing concerns about public health andenvironmental consequences from wastes and hazards on one side, and the great promise itholds as an environmental technology that can lower greenhouse gas emissions and reducemankind’s dependence on fossil fuel sources on the other (OCED, 2008). - 18 -
  • 20. Sheffield MBA2.9 Nuclear Energy in JordanJordan relies for 96 per cent of its energy needs on imports, at an annual cost of almost 4billion US dollars, and is considered to be one of the poorest five countries in terms ofwater reserves in the world. However, the year 2007 brought great news for the Hashemitekingdom through the discovery of 65,000 tonnes of uranium. This extract could boost upto a total of 110,000 tonnes, if uranium extracted from phosphate deposits was considered,representing almost 2 per cent of the global uranium reserves (JAEC, 2010). Thisdiscovery led King Abdullah, the ruler of Jordan, to command a drastic reshaping of theenergy mix strategy, which presently calls for 30 per cent of Jordan’s energy mix to bederived from nuclear power by the year 2030.This will consequently utilize the country’snatural resources and reduce its dependency on foreign oil.The nuclear program will help Jordan to supply its water needs, increase its economicstability and meet the growing demand for electrical load. Jordan plans to build its firstnuclear plant by 2019; nevertheless, the Jordanian government’s enthusiasm to employnuclear energy is affected by various environmental, economic and political challenges(JAEC, 2010).Jordan’s public finances suffer from persistent distortions and deficits, hence by the end ofMay, 2010 Jordans public debt rose to 14 billion US dollars (Jordan News Agency- Petra,2010); therefore the Jordanian Atomic Energy Commission (JAEC) might need to startsearching for sources of self funding in order to avoid overburdening the state treasury(JAEC, 2010).On the environmental front, a nuclear program would reduce Jordan’s greenhouse gasemissions to the atmosphere, although Jordan contributes only 0.1 per cent of the totalglobal carbon emissions (Irani, 2009). As for the site of the nuclear facility, it is proposedthat the reactor be located close to the Red Sea port city of Aqaba to meet the requirementfor water for the cooling process (Toukan K. , Challenges Facing Emerging NuclearStates: Jordan as a Case Study, 2010). Aqaba with its 23 Km of shoreline is considered tobe a major destination for tourism in the country; therefore, precautions and preventive - 19 -
  • 21. Sheffield MBAmeasures must be put in place to prevent any alteration to the marina’s coastalenvironment and any potential accidents.The political front could have a major impact on the future of Jordan’s nuclear program.Although the Obama administration is supportive of Jordan’s nuclear ambitions, theUnited States is still worried that the spread of nuclear power will open the door to theproliferation of nuclear weapons, especially in Middle Eastern countries. Therefore, theUnited States will only secure a nuclear agreement with Jordan if and only if Jordansurrenders its right to enrich its own uranium fuel (BBC News, 2010).However, even though Jordan may have the right to enrich its own fuel under the nuclearnon-proliferation treaty, it still lacks technology and finance to enrich uranium on its own.Nevertheless, the Jordanian government is currently focusing on developing a nuclearpower plant as a first step in cooperation with nations such as France and South Korea,and purchasing the uranium fuel from the open market, without surrendering the right toenrich uranium in the future (Solomon, 2010). - 20 -
  • 22. Sheffield MBA Chapter 3- Research MethodologyThis chapter presents an outline of the research methodology utilized throughout thedissertation and describes the methods used for data collection. It further lists potentiallimitations and restrictions that can be incurred during the research process.3.1 Research MethodResearch method is “simply a technique for collecting data” (Bell & Bryman, 2003). Theresearch method primarily depends on the extent of the clarity about the theory used in theresearch, and research methods can be divided into two main approaches: • Deductive approach. • Inductive approach.The deductive approach should be used when the researcher develops a theory and thendevelops a strategy to test the correctness of this theory, whereas the inductive approachstarts with observations and data collection, which will then be analysed to develop atheory or a hypothesis (Lewis, Thornhill, & Saunders, 2007). Since the nature of thisresearch is evaluative judging the effectiveness of certain policies, strategies and laws aninductive approach will be applied; though there will always be an element of deduction inthe research: as it is impractical to collect data without at least having a model in mind(Veal, 2005).The inductive research method uses qualitative data to arrive at the research objectives.Qualitative data is content-rich information collected from a small number of people ororganizations, thus allowing the researcher to experience the research issues from therespondents’ perspective and to become a part of the research process throughunderstanding these issues (Veal, 2005). - 21 -
  • 23. Sheffield MBA3.2 Data CollectionResearch data can be collected in a variety of ways and methods, but, since the nature ofthis research is qualitative, it was decided that the best method for data collection wouldbe through semi-structured interviews combined with documents and articles fromdifferent resources (Veal, 2005).Data sources can be classified into two main categories: primary data and secondary data.However, a combination of both is usually required to provide sufficient data for theresearcher to analyse and answer the research questions (Lewis, Thornhill, & Saunders,2007).Secondary data refers to “the information gathered by someone other than the researcherconducting the study” (Sekaran, 2000). Secondary data can save the researcher time andmoney in acquiring information that can assist in answering the research questions.However, the drawback of using secondary data is that it might not fit the researchproblem and sometimes might not be of the desired quality (Lewis, Thornhill, & Saunders,2007). There are different sorts of secondary data, but for this research annual reports,government publications and research reports will be used as well as books andperiodicals.Primary data refers to new information collected as a part of the research project. Thereare different methods for collecting primary data, including questionnaires, surveys, focusgroups and interviews. However, the primary data for this research will be based oninterviews as they are flexible and can provide the kind of detail essential to the research.Interviews can be divided into three main categories (Lewis, Thornhill, & Saunders,2007): • Structured interviews • Semi-structured interviews • Unstructured or in-depth interviews - 22 -
  • 24. Sheffield MBAEach of these categories has its own criteria, advantages and disadvantages. However, forthis research, face-to-face semi-structured interviews were given priority over othermethods, since this type of interview can drill deep into the topic and help to extract richinformation from the interviewee. In addition, and in view of the fact that only threeinterviews were conducted for this research, it would be meaningless to have a structuredinterview with a fixed list of questions.Instead, thirty minutes were allocated to each interview session and a check list ofquestions and themes was prepared to guide the researcher through the interview process.The interviewees were also asked to sign a participants’ consent form to prove theirparticipation in the research and to adhere to the university ethical standards (seeAppendix B).The first interview was conducted with Mr. Hanna Zaghloul the chief executive officer ofKawar Group. Kawar Group is a potential investor in the renewable energy sector inJordan; the company is currently executing a technical and economic study concerninginvestment in a project called (Sham Ma’an), under which there are plans to install a 100MW PV Power plant in the Ma’an desert in Jordan. The interview was intended to providethe researcher with information regarding renewable energy investment, expenses andreturn on capital as well as issues faced by the private sector in terms of law andgovernment policies.The second interview was held with Eng. Ziad Jibril; Mr. Jibril is the director of therenewable energy and energy efficiency department in the Ministry of Energy and MineralResources. The purpose of the interview was to investigate the newly released renewableenergy law, discuss the incentives offered and inspect how the public sector can work sideby side with the private sector to achieve national energy strategy goals.The third interview was conducted with Dr. Khaled Toukan, the chairman of the JordanAtomic Energy Commission. Dr. Toukan would help in providing the latest updates aboutthe advancement of the nuclear program in Jordan, as well as stating any obstacles andchallenges that might stand in the way of establishment of a nuclear reactor in thekingdom from economic, environmental and political perspectives. - 23 -
  • 25. Sheffield MBA3.3 Research Limitations and BoundariesInvestment in low carbon energy in Jordan is still in the initial stages; therefore, with theexistence of so few potential investors, the data collected could not be generalised. Inaddition, this research is investigating confidential issues related to political and economicviews, which might lead interviewees to refuse to answer sensitive questions due toconfidentiality concerns.Furthermore, data and statistics relating to the energy sector are changing constantly withtime, price fluctuations, new technologies ...etc; as a consequence there is a risk that datamight be out of date and this could affect the research analysis and the outcomes. - 24 -
  • 26. Sheffield MBA Chapter 4- ResultsThe main objective of this research was to gain a deeper understanding of the feasibility oflow-carbon investments in Jordan. To achieve this, face to face semi-structured interviewswere conducted with top directors from both private and public organizations. Theinterviews were designed to gather the latest information and data related to the researchtopic while filling in any gaps in the secondary data and helping the researcher to answerthe questions posed in chapter 1.The interviews were conducted with two public organizations, MEMR and JAEC, and aprivate company. This combination would allow the researcher to develop a holistic viewof the situation and comprehend the different perspective communicated by eachinterviewee. The interviews, conducted in Arabic, were not tape recorded, given that thethemes and questions discussed in the interviews were a bit sensitive and using a taperecorder might have disconcerted the respondents and hindered them from speaking freely;therefore, notes were taken instead. The next section will summarize the main findings ofthese interviews and present them in the form of quotations since the data is qualitative:Interview #1To understand the feasibility of renewable energy investment in Jordan it was necessary toinvestigate a company that was already engaged in renewable energy investment.However, most of the renewable energy investments in Jordan were either of a small scaleor off-grid projects and therefore could provide only limited and imprecise information.Nevertheless, a consortium comprising Amman-based Kawar Energy and the Italian firmSolar Ventures has recently become involved in the development of a 100 MW solarpower plant that is expected to become the world’s largest photovoltaic plant. The cost ofthe project, known as “Shams Ma’an”, is estimated to be up to 400 million US dollars andit should help Jordan to achieve 25 per cent of its targeted 7 per cent renewable energycontribution toward the kingdom’s power capacity by the year 2015, and it could reduceannual carbon dioxide emissions by up to 160,000 tonnes (Luck, Plans for world’s largestphotovoltaic power plant unveiled, 2010). - 25 -
  • 27. Sheffield MBAKawar Group is currently examining the feasibility of Sham’s Ma’an and, therefore, theirfindings will shed the light on the feasibility of renewable energy investment in Jordan interms of the estimated return on investment and potential risks. The following presentscrucial parts of the interview that was conducted with Mr. Hanna Zaghloul (Zaghloul,2010).Mr. Hanna, please can you update us on the progress of the Shams Ma’an project andwhen it will be in production?“As you know the project will be carried out in four phases: evaluation, pilot, feasibilitystudy and implementation. Up to now we have completed the research into the locationand the economic feasibility of the project. However, we still have to decide which typeof technology we need to use for PV cells between regular solar cells and concentratedsolar technology. The project is expected to be completed by the end of 2012.”As an investor, what was your main objective in engaging in renewable energyinvestments?“I will tell you that making profit is a central part of engaging in any investment.Nevertheless, Kawar group has always been a pioneer in investing in new technologiesand delivering innovative solutions. Therefore, we would like to be the first to step up andinvest in this type of business, which has the potential to reduce the carbon footprint andprovide a sustainable source of energy, and that is exactly what we are aiming for.”How much are you expecting as a return on the investment from Sham’s Ma’an?“Usually energy companies expect an internal rate of return that ranges between 15 and 17per cent. However, we are going to be moderate by only expecting a 10 per cent rate ofinternal return.”Can you provide us with a copy of the economic feasibility study, or any data related tothe estimated costs, expenses, etc...?“I am sorry, but I cannot give you any data regarding the economic study as it isconfidential. All that I can say is that the selling price of one unit of electricity KWh will - 26 -
  • 28. Sheffield MBAbe in the range of 25 cent/KWh, and this might increase if annual inflation is to be takeninto consideration.”Why did Kawar Group decided to engage in PV technology rather than wind energy, eventhough wind is globally more competitive?“It is true that wind power is cheaper. However, this is not the case in Jordan due to thehigh prices attached to wind power from transporting wind turbines, land capturing andhigh fluctuation in wind energy output. This can be observed through the fact that both theAL-Fujaj and Al-Kamshah wind farm projects, that were supposed to have beenimplemented a long time ago, have not yet been executed. Therefore, if you areconsidering a large scale renewable energy project it would be more reliable to use PVtechnology. In addition, Ma’an desert in the south of Jordan has an excellent irradiationindex, since it is located at an attitude of 1100 meters above sea level with at least 300sunny days per year.”Did the renewable energy law released recently have any effect on your decision to engagein renewable energy investment?“The law is still new, and we started the research and the feasibility study long before thelaw was issued. As for the law, it is still very general as there are no details of incentivesor funds; therefore it still requires time to mature.”Interview #2The second interview was conducted with Eng. Ziad Jibril, director of the renewableenergy and energy efficiency department in the MEMR. The interview provided a clearinsight into the new released law along with the challenges facing the MEMR.What are the targets of the national strategy for establishing investment from renewableenergy resources?“The government should cover 10 per cent of its energy mix from renewable energysources by the year 2020 and these should be divided into the following: 600-1000 MWwind energy, 300-600 MW solar energy and 30-50 MW waste energy”With a choice between wind power and PV technology, which technology would youconsider more feasible for implementation in the kingdom? - 27 -
  • 29. Sheffield MBA“Both of them are considered to be good options; however, there are issues attached towind power relating to the high cost of acquiring land and high fluctuations in windenergy. For example, in a recent study four wind turbines were placed 100 meters apartfrom each other; however, the energy output difference between the first and the fourthturbine was almost 25 per cent, which is a huge difference. As for PV technology, theMa’an desert in the south of Jordan has almost 300 sunny days a year with almost 10hours of sunlight per day, hence the estimated energy per square meter of land is in therange of 6 - 7 KWh/m²/day, which is about 2000 - 2500 KWh/m² of electricity per year”What does the reference list that is mentioned in article 6 of the renewable energy lawrefers to?“The reference list consists of a range of renewable energy estimated prices which help theministry in negotiating with private investors over the proposed price of energy supplied.However, the reference list is not ready yet and it is expected to be completed at the end ofthis year.”I conducted an interview with Mr. Hanna Zaghloul and, according to him, Kawar group isplanning to sell one unit of electricity for 25 cents, what are your comments regardingthat?“According to the law, NEPCO is obliged to purchase all the power generated by theserenewable investments, but the cost of the supplied electricity will be decided through anegotiation process with reference to the reference list. However, 25 cents is way toomuch, our figures suggest that is should be in the area of 13 cents/KWh.”Then Eng Ziad continued:“NEPCO has already incurred a loss of 45 million JD in 2009 due to the fluctuation of oilprices, and thus the government had to pay them for the loss. Furthermore, the governmentis currently experiencing a deficit in its budget, so it would be impossible for it to purchaseunits of energy at the figure that you just have mentioned. In addition, we already have agas source from Egypt that can generate electricity at a low rate of almost 7 cents/KWh. sowhy should we incur additional losses and burden both the government and citizens withextra expenses. This could have been an option if the factories building the PV cells were - 28 -
  • 30. Sheffield MBAJordanian: in that case we would be encouraging domestic investment. However, this isnot the case as all PV equipment and tools come from outside the country”What is the relation between NEPCO and MEMR, as, according to my knowledge,NEPCO is a private company?“That is right, NEPCO is a private company under private management; however, there isa bond between the company and the government that allows the government to decide theelectricity tariff, and therefore any losses incurred by the company will be compensated bythe government.”Is MEMR obliged to achieve its 10 per cent renewable energy objective, and will it do themax to arrive at that figure?“Like any strategy, there are always objectives to achieve, but this does not mean that thegovernment needs to pay from its own pocket to achieve that figure. Currently, Jordandoes not have the financial capability to do that. The main objective of the law was tocreate a friendly environment to encourage investors, and that could be by providing freegovernment land, customs exemption, as well as helping with the grid connectionexpenses.”Interview #3The last interview was conducted with Dr. Khaled Toukan, the chairman of Jordan AtomicEnergy Commission. The interview provided the latest updates on the nuclear energyprogram in Jordan and the different challenges facing its implementation (Toukan K. ,Nuclear Energy Program in Jordan, 2010).Dr. Toukan, would you kindly enlighten us as to the latest updates on the nuclear energyprogram in Jordan?“The nuclear program is moving on various major fronts; the first is mining. In 2010, weestablished a joint venture with Arriva for uranium mining as well as resource estimationand a feasibility study for different areas in Jordan. The estimated resources of centralJordan are 65,000 tonnes and the field studies done so far indicate that, hopefully, we - 29 -
  • 31. Sheffield MBAshould be able to achieve this figure and confirm it for the whole of central Jordan. Weexpect to build the mine by the end of 2011 and the mining will be in production by thebeginning of 2013 at the latest. We are also working in parallel on the extraction ofuranium from phosphoric acid.”Do you have any data regarding the extraction costs and the production rate of uranium?“Uranium is found in most of the Jordanian desert. However, it is available at differentconcentrations; the most developed uranium project so far is the one in central Jordan,where 60 per cent of the resources is buried at 0 to 5 meter and, therefore, extraction costsare expected to be low and revenues and profit coming from this mining activity should bequiet substantial. So the exploration and mining of nuclear materials is one of the mainparts of the project and we believe that uranium mining will be a major resource for thecountry in terms of providing future nuclear fuel for our reactors and substituting this forimports coming from outside the country. Uranium production should be around 2,000tonnes per year and we expect the mine to last for 30 years.”Dr. Toukan then carries on:“The second front will be the construction of nuclear power plant with 1GW capacity. Weare now planning to build two units; we have started the site study and characterisationand we except to finish the site characterisation work by the end of 2011 in order to issuethe construction permit. In parallel we started technology selection, taking intoconsideration the cost and the power of the plant as well as the financing of the plan. Sonow we are going into serious negotiation with the different suppliers, in coming up with areasonable financial plan that will allow Jordan to build its plant and produce electricity.Our aim is that one of the units, one of the 1000 MW electrical units, will be used to meetthe electric power energy growth; the other one will be used maybe for water distillation.Now if things go to plan, by 2013 we should start the construction of the first nuclearpower plant to have it operational by the year 2019.”What is the estimated cost of the nuclear plants and how is the government planning tofinance such a huge project, taking into consideration its current financial state? - 30 -
  • 32. Sheffield MBA“The nuclear plant is estimated to last for 60 years and the approximate cost of 1 GWnuclear plant will be between 4 and 4.5 billion US dollars. As for financing, it will be amajor factor, however, we are working on a model of public-private partnership and weare looking now at different companies for finance, working on possibly 30 per cent equityin terms of the initiation of the project and the rest will be based on 70 percent deptfinancing.”What about the nuclear waste, how it is going to be managed?“For the time being, we will purchase the enriched uranium from the open market;therefore this waste will be managed outside the country. As for the spent fuel dischargedfrom the reactor, this still contains appreciable quantities of plutonium and other chemicalsincluding reaction poisons. However, we are planning to resend the spent fuel abroad to berecycled and recovered as it is a complicated procedure and can only be done in highly-sophisticated facilities.”According to the article in Wall Street Journal (Solomon, 2010), the United States aresupporting the Nuclear program in Jordan but under what conditions?“That is right, United States would agree on establishing a deal with Jordan, only if Jordansurrendered its right to enrich its own uranium. However, we have the right to enrichuranium under the Nuclear Non-proliferation Treaty, and we will not give up that right,since that would also restrict the country from becoming a nuclear energy supplier.Nevertheless, Jordan will try to work with other countries to establish its uraniumenrichment plants, but this will be in the later stages since there are both economic andpolitical strings attached at the current time.” - 31 -
  • 33. Sheffield MBA Chapter 5- DiscussionThis chapter will examine the data from previous sections and present a holistic view oflow-carbon investments in Jordan, then interpret these findings to answer the researchquestions posed in chapter 1.It is clear from the laws and strategies recently released by the Jordanian government thatit is striving to diversify its energy mix and reduce its dependency on exported fuel. Theaim of these laws and strategies is to facilitate and support low-carbon energy investmentsand create an investment friendly atmosphere: given that private investment in Jordan isusually hindered by the unfavourable taxation structure combined with high infrastructurecosts, which limit profit, productivity and, hence, investors’ interest (National Agenda,2006-2015).The interviews with MEMR and Kawar Group presented parallel perceptions regardingthe future of renewable energy in Jordan; nevertheless, there were a few critical points thatwere misapprehended and miscalculated by both parties. It was obvious from bothinterviews that the renewable energy law released early this year is still immature, takinginto account the absence of some key ingredients that should have been included, such asreference list, details of incentives, terms of funds...etc. Until these gaps are filled out,presumably by the end of this year, it will be very difficult for any investor to judge theprofitability of his/her own investment.The renewable energy law has provided many enticements, such as obliging NEPCO topurchase all and any electricity produced by renewable energy projects and covering theexpenses for connecting these projects to the main electrical grid (Ministry of Energy andMineral Resources, 2010). This will raise a sigh of relief from investors as they will notneed to worry about how to market the high cost energy from their projects. Nevertheless,the law also states that a fixed electricity tariff within an acceptable range needs to beclearly stated in the proposal submitted to the government before being approved.From another perspective, the new released law stipulates certain conditions that will deterthe interest of potential investors, particularly inexperienced investors: as the law only - 32 -
  • 34. Sheffield MBApermits investment by those who possess previous experience in the development ofsimilar renewable energy facilities. Although this condition might help the government inreducing the potential for failure, on the other hand, this could prevent prospectiveinvestors with no previous experience from engaging in this new form of venture.The interviews also uncovered a few contradictions regarding the estimated tariff for theenergy supplied from Shams Ma’an. According to Zaghloul (2010) Kawar group isplanning to sell one unit of energy at 25 cents/KWh, while expecting 10 per cent IRR inreturn. On the other hand, it was indicated by Jibril (2010) that it would be next toimpossible for the Jordanian government to purchase the electricity at that rate, since thegovernment is already facing financial constraints and such a high electricity tariff is animpractical option in view of the fact that almost 14 per cent of Jordanians are livingbelow the poverty line (National Agenda, 2006-2015).This illustrate that although Jordan has a high potential of solar energy, however, the PVtechnology is still uncompetitive. Therefore, investors might need to reconsider whetherrenewable energy investments should yield a return on capital or not? Whether improvingthe quality of life has a higher priority than just making profit? However, it is still early forall these enquiries to be furnished as renewable energy investments and policies are still intheir early stages.The second part of this research concentrated on nuclear energy development in Jordan,and whether producing nuclear energy will act against the interests of renewable energyinvestment. The results threw up a variety of challenges that need to be addressed by theJordanian government in order to move forward with the nuclear program; thesechallenges are as the following: • Political Environment • Exploitation of Uranium • Human Resource Development • Choice of Reactor Technologies • Funding - 33 -
  • 35. Sheffield MBAIn addition to all of these, Jordan has a disadvantage in starting up in that the country hasno previous experience of using nuclear technology and no nuclear infrastructure in place;thus, the entire project presents new and immense challenges to the Jordanian government.It would be a waste of opportunity if Jordan continues to depend on its traditional sourcesof fuel and electricity, especially when electricity demand is projected to double in fewyears (see figure 5), and considering the rise in energy costs and scarcity of waterresources. Figure 5 Jordan’s Electric Loads Forecast (Toukan K. , 2010)The question to be raised now is whether moving ahead with the Jordanian nuclearprogram could have detrimental effects on investment in renewable energy in thekingdom.Developing a nuclear power plant, with all its facilities and processes, requires time, and itwill take Jordan at least another 9 years to arrive at the production phase and 20 years toachieve the 30 per cent of the energy mix that the government is aiming for. Moreover,renewable energy plants need to be backed up with a base load power plant supplied byeither nuclear or fossil sources due to the intermittent nature of renewable resources.Therefore, for the near future there will be no adverse effects on renewable investmentsfrom nuclear power plants. In addition, there is always the option of exporting excessenergy to neighbouring countries. - 34 -
  • 36. Sheffield MBAOn the environmental front, there was a previous discussion earlier, in the literaturereview, about the advantages and disadvantages of renewable and nuclear energy and howthey can play a major part in reducing global warming and greenhouse effects. However,the interviews have shown that Jordanians are more anxious about energy security and theability to meet future energy demands, rather than establishing a green source of energy.This does not mean that the government is not concerned with global warming and itsconsequences on the environment, but that, with the current financial position, globalwarming is not its major priority.On the political front, as mentioned previously, cooperation with the US for passing onnuclear technology and knowhow to Jordan would be attached to the condition that Jordansurrendered its right for enriching its own nuclear fuel: to limit the risk of proliferation ofarms in the Middle East. However, the fact that Jordan has not yet agreed to this conditionmight jeopardise the entire agreement (Solomon, 2010). Nevertheless, Jordan has alreadysigned nuclear co-operation deals with eight countries – including France, the UK, Chinaand Russia, these agreement involve employee training, technical exchange, nuclear-fueldisposal, nuclear safety and advice on regulatory frameworks (Ma’ayeh, 2010).According to Solomon (2010), it would appear that Israel is at the root of all thedifficulties that Jordan is encountering: as King Abdullah II has accused Israel ofattempting to thwart Jordanian nuclear ambitions by applying pressure on countries likeFrance and South Korea to deter them from selling nuclear reactors to Jordan. As KingAbdullah is quoted, "There are countries, Israel in particular, that are more worried aboutus being economically independent than the issue of nuclear energy, and have beenvoicing their concerns". Although, Israel denies these accusations, Israeli officials havepublicly voiced concerns about a reactor being situated so close to the border, since theport city of Aqaba, where the nuclear reactor will be situated, is just miles away from theresort city of Eilat on the Israeli side.On balance, if all these economic and political challenges to nuclear energy were able tobe surmounted, then it could provide a contribution towards sustainable energy, and woulddefinitely assist Jordan in achieving its national energy strategy objectives. - 35 -
  • 37. Sheffield MBA Chapter 6 –Conclusion and RecommendationsThat the Jordanian government is trying to escape from the deep hole of depending onexported fuel and is striving to enhance its energy security can be clearly observed throughthe new national energy strategy. However, Jordan is considered to be one of the smallestand poorest economies in the Middle East, with a large budget deficit, and thisconsequently hampers the government’s ability to invest directly in low-carbon energyprojects. Therefore, in order to overcome these obstructions, the Jordanian governmentneeds to follow a holistic developmental approach through a private-public partnership.Renewable energy sources can address challenges posed to global communities by effectsof global warming and greenhouse gas emissions, while enhancing energy security andmeeting future energy demands. However, it is apparent that renewable energy generationis burdened with high investment costs and risks compared to fossil fuel energy generationand these are the main reasons why investors tend to steer clear of renewable energyinvestment.To address these concerns and to promote renewable energy investments, the Jordaniangovernment released a new renewable energy law early in 2010. The current analysis ofthe effectiveness of the law has shown that the law provides investors with a broad list ofincentives, including free taxes, free government land, customs exemptions andconnectivity expenses. However, these incentives are not expanded on in any detail andthere are still some missing ingredients, such as the reference list, which are essential tothe investor in making a reasoned decision as to whether to proceed or not. As aresearcher, I am not daunted by the idea of renewable energy investment in Jordan and Iknow the first movers will benefit the most from the new law; however, considering thesefacts from an investor’s perspective, it would be wise to halt any decision on theinvestment in any renewable energy project until the reference list is available and all theincentives are made explicit. - 36 -
  • 38. Sheffield MBAIn addition, despite dramatic technical and economic advances in renewable energysystems, the previous results illustrated that there is still a wide gap between the energycost generated from fossil fuel sources and that of renewable energy sources even withJordanian government intervention. However, it is still early to conclude the prospect ofrenewable energy in Jordan as the estimated cost of one unit of energy was only based ona single investor, and that cannot be generalised.As in the case of renewable energy, potentially, the benefits of nuclear energy in Jordancould be immense, especially with the availability of its own nuclear fuel resources.Nuclear plants are secure long term investments that can offer electricity at low and stablecosts for up to 60 years, depending on the nuclear reactor’s life span. However, provisionof nuclear energy is burdened with significant initial capital costs: which the Jordaniangovernment would find difficult to fund in the light of its current liabilities. To overcomethis, the Jordanian government has initiated a private-public partnership, which from mypoint of view is a remarkable step forward for the nuclear program.Because renewable energy involves issues of intermittency, nuclear energy would have tobe used as a base load; thus, nuclear must be a part of the equation at the current time. Butunlike renewable energy, nuclear is tied by political constraints and the Jordaniangovernment needs to use its diplomatic avenues to arrive to a solution that will notcompromise its interests.In the end we can say that Jordan’s challenges are not unique and other countries face asimilar situation, but by adopting a transformational strategies and effective policiesJordan should be able to achieve its objectives. And it remains to be seen whether policiesand governmental intervention combined with technological improvements will permitlow-carbon investments to achieve the national energy mix. - 37 -
  • 39. Sheffield MBALimitations and Future Recommendation:Although this research has provided a clear insight into the future of low-carbon energyinvestments in Jordan, due to the lack of existing investment and the gaps in renewableenergy law, it would be difficult to conduct an economic feasibility for these investmentsat the current time. In addition, there was only limited access to research studiesundertaken by the National Energy Research Centre: as such reports provided to investorson a monetary basis and are not available free of charge.The following are few recommendations that can improve and facilitate the low-carbonenergy sector in Jordan and are totally based on the researcher’s point of view: • It was noted that there are weak communication channels between the private and public sectors; therefore, the government needs to establish better communication channels and open up discourse between the two parties. • The Ministry of Energy and Mineral Resources needs to make sure that policies are presented in full detail before releasing them, as this can have a negative impact on the trust between them and potential investors. • A proper published time plan needs to be set for the different projects, in line with identification of technical, financial and legislative requirements for the projects. • The government needs to open the door to inexperienced investors, and at least let them conduct pilot projects, as the current restrictions could lead to a loss of potential foreign and local investors who have the will to invest in low-carbon energy. In addition, diversification of investors will create competition that will provide a stronger impetus for cost reduction and innovation. • The MEMR need to organize a marketing campaign to promote renewable energy investments in the kingdom and to attract foreign and local investors, as, currently, the potential of renewable energy investment in the kingdom remains in the shadows. • It would be advantageous for the Jordanian government to identify the different locations where renewable resources could be utilized and to assist the potential private investor by providing relevant research. - 38 -
  • 40. Sheffield MBA • The government should empower the National Energy Centre to develop the exploitation of new renewable energy resources and to offer investors such research studies free of charge to encourage their participation.Further Research:It would be better to take the current research a further step down the road when all thepolicies are fully mature, and then an economic feasibility study on low-carbon investmentbecomes a possibility. - 39 -
  • 41. Sheffield MBAReferencesAgency, I. E. (2009). Key World Energy Statistics. Paris: International Energy Agency.Aglietti, G., Redi, S., Tatnall, A. R., & Markvart, T. (2009). Harnessing High Altitude SolarPower. IEEE Transactions on Energy Conversion , 442-451.Al-Qahtani, M. Y. (2007, October 25). Addressing The World’s Energy Supply Challenges.Retrieved August 4, 2010, from Aramcoservices:https://www.aramcoservices.com/news-publications/news-events/documents/NCUSAR-speech-10-24.pdfBBC News. (2010, June 15). Israel blocks Jordan nuclear bid, King Abdullah says. BBC .BBC News. (2010, May 8). Jordan country profile. Retrieved August 5, 2010, from BBCNews: http://news.bbc.co.uk/1/hi/world/middle_east/country_profiles/828763.stmBell, E., & Bryman, A. (2003). Business Research Methods. New York: Oxford UniversityPress.Black, A. (2005, August). PV ENERGY PAYBACK VS PV INPUT ENERGY DUE TO MARKETGROWTH. Retrieved August 1, 2010, from ongrid.net:http://www.ongrid.net/papers/PVvsInputEnergySWCph.pdfBP. (2010). Renewable energy. Retrieved August 3, 2010, from British Petroleum:http://www.bp.com/sectiongenericarticle.do?categoryId=9023767&contentId=7044196Caldicott, H. (2007). Nuclear Power Is Not the Answer. New York: New Press.Development, T. A. (2000). Power for the people: Renerwable energy in developingcountries. Canberra: AusAID. - 40 -
  • 42. Sheffield MBAEDAMA. (2009, May). EDAMA Action Plan. Retrieved August 5, 2010, from EDAMA:http://www.edama.jo/Library/634068100585220224.pdfEuropean Commission. (2009, April). Climate change. Retrieved July 14, 2010, fromEuropean Commission Environment :http://ec.europa.eu/environment/pubs/pdf/factsheets/climate_change.pdfEuropean Commission. (2009). Climate change -what is it all about ?An introduction foryoung people. Luxembourg: European Communities.GWEC. (2010). GLOBAL WIND 2009 REPORT. Brussels: GWEC.Henriques, S. (2010, July 20). Uranium Fuels the Present and Future. Retrieved July 28,2010, from International Atomic Energy Agency:http://www.iaea.org/NewsCenter/News/2010/uraniumfuels.htmlIFandP Newsroom. (2010, January 14). Jordan – uranium hotspot. Retrieved August 7,2010, from Industrial Fuel and Power: http://www.ifandp.com/article/00560.htmlInternational Energy Agency. (1998). Nuclear Power: Sustainability, Climate Change andCompetition. Paris: International Energy Agency.Irani, K. (2009, October 15). Saving The World And Our Own Future. Retrieved July 29,2010, from 7iber.com: http://www.7iber.com/2009/10/blog-action-day-saving-the-world-and-our-own-future/JAEC. (2010). Jordan Atomic Energy Commision. Retrieved July 29, 2010, from JordanAtomic Energy Commision: http://www.jaec.gov.joJibril, Z. (2010, July 12). MEMR Views on Renewable Energy implementation in Jordan. (B.Zagha, Interviewer)Jordan News Agency- Petra. (2010, August 17). Jordan public debt rises to JD10 billion.Retrieved Sept 4, 2010, from Zawya:http://www.zawya.com/story.cfm/sidZAWYA20100818035752/Jordan%20public%20debt%20rises%20to%20JD10%20billion - 41 -
  • 43. Sheffield MBAKaltschmitt, M., Streicher, W., & Wiese, A. (2007). Renewable Energy: Technology,Economics and Environment. New York: Springer.Lang, P. (2009, Feb 16). Cost and Quantity of Greenhouse Gas Emissions. Retrieved July30, 2010, from http://www.wind-watch.org/documents/wp-content/uploads/lang-wind-power-co2-emissions.pdfLewis, P., Thornhill, A., & Saunders, M. (2007). Research Methods for Business Students(4th Edition). Alexandria, VA: Prentice Hall.Luck, T. (2010). New law streamlines renewable energy investment. The Jordan Times .Luck, T. (2010, May 20). Plans for world’s largest photovoltaic power plant unveiled.Retrieved August 16, 2010, from http://www.jordantimes.com/?news=26730Luque, A., & Hegedus, S. (2003). Handbook of Photovoltaic Science and Engineering. NewYork, NY: Wiley.Ma’ayeh, S. P. (2010, August 25). Jordan presses ahead with energy programme despiteUS disapproval. Retrieved September 5, 2010, from Aletho News:http://alethonews.wordpress.com/2010/08/25/jordan-presses-ahead-with-energy-programme-despite-us-disapproval/Milborrow. (1998). Dispelling the Myths of Energy Payback Time. Windstats , vol 11, no 2.Ministry of Energy and Mineral Resources. (2010). Renewable Energy and EnergyEfficiency Law. Retrieved August 5, 2010, from MEMR:http://www.memr.gov.jo/Portals/0/Renewable%20Energy%20Law%20Translation.pdfMinistry of Energy and Mineral Resources. (2007). Updated Master Strategy of EnergySector in Jordan for the period 2007-2020. Amman: Hashemite Kingdom of Jordan.National Agenda. (2006-2015). National Agenda : The Jordan we strive for. RetrievedMarch 18, 2010, from National Agenda:http://www.nationalagenda.jo/Portals/0/EnglishBooklet.pdfNEPCO. (2009). Annual Report 2009. Amman: National Electric Power Co. - 42 -
  • 44. Sheffield MBANewsroom, I. (2010, January 14). Jordan – uranium hotspot. Retrieved March 20, 2010,from Industrial Fuel and power: http://www.ifandp.com/article/00560.htmlOCED. (2008, October). Policy Breif. Retrieved July 18, 2010, from Organisation forEconomic Co-operation and Development: http://www.oecd.orgOCED/NEA. (2007). Nuclear energy risks and benefits in perspective. NEA News , 25 (2), 4-8.Paffenbarger, D. J. (2009, October 1). Nuclear Power. Retrieved June 29, 2010, fromInternational Energy Agency:http://www.iea.org/textbase/nppdf/free/1990/nuclearpower98.pdfQuaschning, V. (2005). Understanding Renewable Energy Systems. London: EarthscanPublications Ltd.Regheb, D. (2010, January 23). Uranium Resources in Phosphate Rocks. Retrieved July 29,2010, from university of illinois at urbana-champaign:https://netfiles.uiuc.edu/mragheb/www/NPRE%20402%20ME%20405%20Nuclear%20Power%20Engineering/Uranium%20Resources%20in%20Phosphate%20Rocks.pdfREN21. (2010). Renewables 2010 Global Status Report. Paris: Renewable Energy PolicyNetwork for the 21st Century.Royal Hashemite Court . (n.d.). Jordan’s Water Shortage. Retrieved August 5, 2010, fromKeys to the Kingdom: http://www.kinghussein.gov.jo/geo_env4.html#Jordan’s WaterShortageSabra, Z. J. (2010). Jordan Renewable Energy Law & Energy Efficiency Fund. Energy in theMediterranean Region-The Challenges Ahead,. Valencia: Ministry of Energy and MineralResources.Sawin, J. l., & Moomaw, W. r. (2009). Renewable Revolution: Low-Carbon Energy by 2030.Washington D.C.: Worldwatch Institute.Sekaran, U. (2000). Research Methods For Business. New York : John Wiley & Sons. - 43 -
  • 45. Sheffield MBASnead, J. M. (2008, November 19). The End of Easy Energy and What to Do About It.Retrieved August 4, 2010, from mikesnead.net:http://mikesnead.net/resources/spacefaring/white_paper_the_end_of_easy_energy_and_what_to_do_about_it.pdfSolomon, J. (2010, June 12). Jordans Nuclear Ambitions Pose Quandary for the U.S. TheWall street Journal .The National Academies. (2008). Understanding Responding to Climate Change. TheNational Academies.Tirone, J. (2010, May 17). UN Atomic Chief Amano Warns That Nuclear Accidents MayRise. Retrieved July 28, 2010, from businessweek:http://www.businessweek.com/news/2010-05-17/un-atomic-chief-amano-warns-that-nuclear-accidents-may-rise.htmlToukan, D. K. (2010). Jordan’s Nuclear Energy Programme. Amman: Jordan AtomicEnergy Commission.Toukan, K. (2010). Challenges Facing Emerging Nuclear States: Jordan as a Case Study.Amman: Jordan Atomic Energy Commission.Toukan, K. (2010, July 19). Nuclear Energy Program in Jordan. (B. Zagha, Interviewer)Veal, A. J. (2005). Business Research Methods : A Managerial Approach, 2nd Edition.South Melbourne: Pearson Addison Wesley.Walker, J. S. (2006). Three Mile Island: A Nuclear Crisis in Historical Perspective. Berkeley:University of California Press.World Energy Council. (2007). Financing Renewable Energy Projects. Retrieved August 24,2010, from World Energy Council :http://www.worldenergy.org/work_programme/technical_programme/financing_renewable_energy_projects/66.asp?textsize=2 - 44 -
  • 46. Sheffield MBAWorld Nuclear Association. (2009, March). Nuclear Power in the World Today. RetrievedJuly 17, 2010, from World Nuclear Association: http://www.world-nuclear.orgWorld Wind Energy Association. (2010). World Wind Energy Report 2009. Istanbul: WorldWind Energy Association.Writers, S. (2009, April 20). UN atomic chief warns of nuclear power dangers. RetrievedJuly 27, 2010, from Nuclear Power Technology, Science And Industry News:http://www.nuclearpowerdaily.com/reports/UN_atomic_chief_warns_of_nuclear_power_dangers_999.htmlZaghloul, H. (2010, July 5). Updates on Jordans Shams Ma’an project. (B. Zagha,Interviewer)Zweibel, K., Mason, J., & Fthenakis, V. (2007, December 16). A Solar Grand Plan. ScientificAmerican Magazine . - 45 -
  • 47. Sheffield MBAAppendix - 46 -
  • 48. Sheffield MBAAppendix A- Mind Map - 47 -
  • 49. Sheffield MBAAppendix B- Interviewee Consent Forms - 48 -
  • 50. Sheffield MBA- 49 -
  • 51. Sheffield MBA- 50 -
  • 52. Sheffield MBAAppendix C- Research Ethics FormFull Research Project Title: Feasibility Study of Low-Carbon Energy Investments in JordanIn signing this Student Declaration I am confirming that: • The research ethics application form for the above-named project is accurate to the best of my knowledge and belief. • The above-named project will abide by the University’s ‘Good Research Practice Standards’ : www.shef.ac.uk/researchoffice/gov_ethics_grp/grpstandards.html • The above-named project will abide by the University’s ‘Ethics Policy for Research Involving Human Participants, Data and Tissue’: www.shef.ac.uk/researchoffice/gov_ethics_grp/ethics/system.html • Subject to the above-named project being ethically approved I undertake to adhere to any ethics conditions that may be set. • I will inform my Supervisor of significant changes to the above-named project that have ethical consequences. • I will inform my Supervisor if prospective participants make a complaint about the above- named project. • I understand that personal data about me as a researcher on the research ethics application form will be held by those involved in the ethics review process (e.g. my Supervisor and the Ethics Administrator) and that this will be managed according to Data Protection Act principles. • I understand that this project cannot be submitted for ethics approval in more than one department, and that if I wish to appeal against the decision made, this must be done through the original department.Name of Supervisor: Prof. Andrew TylecoteName of student: Bashar Al-ZaghaSignature of student:Date: 8th July 2010 - 51 -