Solar Plan Report 2010


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This study was carried out at the request of the European Commission between January and
June 2009. Its main objective was to identify the most effective strategy for developing and
implementing the "Mediterranean Solar Plan” and to suggest how this plan might be
developed and implemented effectively in the region.

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Solar Plan Report 2010

  1. 1. ENPI - Neighbourhood – Mediterranean & Eastern Europe FWC Beneficiaries Lot 4 - N° 2008/168828 “Identification Mission for the Mediterranean Solar Plan” Final Report January 2010 The project is funded by The project is implemented by the European Union Resources and Logistics The content of this publication is the sole responsibility of RAL and can in no way be taken to reflect the views of the European Union
  2. 2. Table of contents Page EXECUTIVE SUMMARY ................................................................................................................8! 1.! INTRODUCTION .............................................................................................................16! 2.! MAIN FINDINGS: ENERGY SITUATION AND PERSPECTIVES ...............................................18! 2.1! Key issues .................................................................................................................18! 2.2! Electricity sector ........................................................................................................23! 2.3! Energy efficiency and renewable energy...................................................................31! 3.! RECOMMENDATIONS ....................................................................................................60! 3.1! Developing policy tools for a progressive development of an EE & RE sector in MPCs ...................................................................................................................................60! 3.2! Developing appropriate financing instruments ..........................................................73! 3.3! Supporting technology transfer..................................................................................83! 4.! CONCLUSIONS .............................................................................................................89! 2
  3. 3. List of figures Figure 1: The Euro-Mediterranean Power Systems ...............................................................26! Figure 2: Existing and potential future connections................................................................28! Figure 3: Electricity Tariffs for Residential Use ......................................................................53! Figure 4: Egyptian Sustainable Loan Mechanism approach ..................................................56! Figure 5: Supporting schemes for RE development in the EU...............................................56 3
  4. 4. List of Boxes BOX 1.....................................................................................................................................32! BOX 2.....................................................................................................................................39! BOX 3.....................................................................................................................................57! BOX 4.....................................................................................................................................62! BOX 5.....................................................................................................................................65! BOX 6.....................................................................................................................................67! BOX 7.....................................................................................................................................84! BOX 8.....................................................................................................................................87! 4
  5. 5. List of tables Table 1: MPCs’ main economic & energy figures ..................................................................19 Table 2: Energy Efficiency indicators .....................................................................................21 Table 3: Generation Capacity and Annual Electricity Production and Consumption in the Mediterranean Basin ......................................................................................................23 Table 4: Current Electricity Laws and their status in MPCs ...................................................25 Table 5: Electricity Sector Overview in Selected Countries ...................................................30 Table 6: Energy Efficiency Institutional Arrangements in MPCs ............................................34 Table 7: Share of Renewables in Electricity (%)*...................................................................36 Table 8: RE technologies - Cost Estimates............................................................................38 Table 9: Main characteristics of RE policies in MPCs Countries............................................42 Table 10: Stakeholder Analysis Matrix ...................................................................................47 Table 11: PV Generation Costs (source: EPIA, 2008) ...........................................................52 Table 12: Generation Costs for Wind, Solar PV and CSP in MPCs .......................................52 Table 13: Existing Support Mechanisms for RE / EE projects ...............................................54 Table 14: Cost and performance parameters of high voltage AC and DC transmission systems ..........................................................................................................................81 Table 15: Investment costs of a sample of projects ...............................................................81 5
  6. 6. Acronyms and Abbreviations AC Alternating Current AFD Agence Française de Développement ANME Agence Nationale de Maîtrise de l’Energie (Tunisia) APRUE Agence pour l’Utilisation Rationnelle de l’Energie (Algeria) AUPTDE Arab Union of Producers, Transporters and Distributors of Energy BO Build–Operate BOT Build–Operate–Transfer CCT Clean Coal Technology CDER Centre de Développement des Energies Renouvelables (Algeria and Morocco) CDM Clean Development Mechanism CEER Council for European Energy Regulators CER Certified Emission Reduction COP Conference of Parties CSP Concentrated Solar Power DC Direct Current EC European Commission EE Energy Efficiency EU European Union EEA Egyptian Electricity Authority EEHC Egyptian Electricity Holding Company EIT EIB: European Investment Bank EnR Club European National Energy Management Agencies Network EREC European Renewable Energy Council ESCO Energy Service Company ETAP Eco-Technologies Action Plan FEMIP Facility for Euro-Mediterranean Investment and Partnership FNME Fonds National de Maîtrise de l’Energie (Tunisia) FODEP Fonds de Dépollution Industrielle (Morocco & Tunisia) GDP Gross Domestic Product GTZ Deutsche Gesellschaft für Technische Zusammenarbeit HVAC High Voltage Direct Current HVDC High Voltage Alternative Current KfW Kreditanstalt für Wiederaufbau IEA International Energy Agency IFI International Financial Institution IGF Inspection Générale des Finances (France) IPP Independent Power Producer KIC Knowledge and Innovation Communities LCECP Lebanese Centre for Energy. Conservation Project (UNDP/GEF) MEDELEC Mediterranean Committee for Electricity MEDENER Mediterranean Energy Agencies Network MEDREG Mediterranean Regulators for Electricity and Gas MEDREP Development Program of the Renewable Energy in the Mediterranean Region MedRing Mediterranean energy ring study financed by the EU MED-EMIP Euro-Mediterranean Energy Market Integration Project financed par the EU Energy Efficiency in the Construction Sector in the Mediterranean Project MED-ENEC financed par the EU MENA Middle East & North Africa MEP Mediterranean Energy Perspectives MPCs Mediterranean Partner Countries MIRA Mediterranean Innovation and Research Coordination Action MNI Ministry of National Infrastructures (Israel) MSP Mediterranean solar Plan MSSD Mediterranean Strategy for Sustainable Development 6
  7. 7. NERC National Energy Research Center (Jordan and Syria) NIF EU's Neighbourhood Investment Facility NRA Jordanian Natural Resources Authority NREA New & Renewable Energy Authority (Egypt) O&M Operation and Maintenance OME Observatoire Méditerranéen de l’Energie PEC Palestinian Energy & Environment Research Center PERC Palestinian Electricity Regulatory Council PPA Power Purchase Agreement PPP Public Private Partnership PPP Power Purchase Parity PV PhotoVoltaic R&D Research & Development RE Renewable Energy RCREEE Regional Centre for Renewable Energies and Energy Efficiency RES Renewable Energy Sources SB Single Buyer SPB Special Purpose Vehicle STEG Société Tunisienne de l'Electricité and du Gaz SWH Solar Water Heater TFEC Total Final Energy Consumption TPA Third Party Access TPES Total Primary Energy Supply UNDP United Nations Development Program UfM Union for the Mediterranean UNEP United Nations Environment Program UTCE Union for the Coordination of Electricity Transmission VAT Value Added Tax WEO World Energy Outlook (IEA) 7
  8. 8. Executive summary Context This study was carried out at the request of the European Commission between January and June 2009. Its main objective was to identify the most effective strategy for developing and implementing the "Mediterranean Solar Plan” and to suggest how this plan might be developed and implemented effectively in the region. This includes analysing the role and coordination needs of the various actors involved. Launched on July 13, 2008 at the Paris Summit, the Mediterranean Solar Plan (MSP) is one of the six initiatives of the Union for the Mediterranean (UfM), which builds upon the "acquis" of the Barcelona process. Based on concrete projects, the UfM focuses on resource management in the Mediterranean (water, energy), addresses environmental challenges and more broadly fosters economic development and trade in the Mediterranean basin. The UfM specifically identified the need to support the deployment of alternative energy sources in order to cope with rising demand and to address security of supply concerns. Market deployment as well as the research and development of alternative sources of energy are considered as major priorities in the effort towards ensuring sustainable development. The Mediterranean Solar Plan (MSP) is expected to cover numerous projects based on various technologies involving the countries of the Southern and Eastern regions of the Mediterranean. The general objective of the MSP is the creation of a total of 20 GW of new generation capacity from solar and other renewable energy sources around the Mediterranean Sea by 2020. These individual power plants are expected to respond to the demand of local markets and to export part of the electricity generated from renewable sources to the European Union (EU). This will be possible if sufficient interconnections are developed and if article 9 of the EU Directive on the Promotion of the Use of Energy from Renewable Sources1 is effectively applied. Although the quantified target set by the MSP relates to renewable energy (RE) generation, the MSP will also include efforts to control energy demand (the Mediterranean Energy Agencies Network -MEDENER- suggested an objective of 20% of energy savings or 60 Mtoe by 2020) which will curb the strong increase in domestic requirements in the countries to the south of the Mediterranean. Main findings Based on in-depth interviews and meetings with key stakeholders in the Mediterranean Partner Countries (MPCs) and in the EU, a summary of the study’s main findings is presented below. 1 Directive 2009/28/EC of 23/04/2009 of the European Parliament and the Council 8
  9. 9. Demographic, legal and economic context Mediterranean countries will face, by 2020, a very significant change in their energy mix: Energy demand, in the Southern countries, is expected to double, while the increase in the countries of the Northern Mediterranean shore will represent only 30% over the same period; The share of RE in the total energy consumption will reach 5,3% in the North versus 3,3% in the South. Increasing the share of RE in total energy consumption is the main challenge of the MSP, because of its often uncompetitive generating costs. For the moment, most MPCs have not yet implemented regulations fostering a strong involvement of private operators in the RE sector (third-party access or specific feed-in-tariff schemes for electricity produced from renewable sources), despite the existence of a number of Independent Power Producers (IPPs). The MSP will cover projects promoted by both public and private operators, such as IPPs, and will rely to a large extent on project financing. These approaches require specific contractual structures and regulatory frameworks adapted to Public Private Partnership (PPP) schemes. MPCs currently have limited human capital to develop and implement ambitious policies concerning RE and EE, and in particular to define an action plan with specific guidelines for actions that must achieve the policy objectives of rational use of energy and of RE development. The reinforcement of the electrical interconnection between MPCs as well as between the Southern and Northern shores of the Mediterranean is a key issue that needs to be addressed for both technical as well as political reasons. For the moment, only the Maghreb interconnected grid is connected to the European one through Morocco and Spain. The Turkish block will be connected to the European grid between 2010 and 2012 depending on the selected technical option. Increasing the capacities of existing connections (Morocco- Spain, Syria-Turkey, Turkey-Bulgaria, etc.) will favour the development of new projects in the EU. A number of cooperation initiatives that address EE & RE issues already exist around the Mediterranean. The MSP should support these initiatives in order to increase coordination and to avoid unnecessary competition. Development of Renewable Energies The relative generating prices for renewable energy technologies remain uncompetitive when compared to conventional technologies. Current market prices do not take into account environmental externalities (environment and health impacts) and therefore favour traditional energy sources. However technology and market drivers (such as energy prices) could strongly improve the competitiveness of certain RE technologies in the short term. Other barriers to RE deployment include: ! Poor knowledge of renewable energy sources and their potential, by the private sector, the general public and policy makers in the MPCs. ! The relative small number of domestic electricity supply companies which would be sufficiently robust or able to support the development of industrial clusters. ! Lack of differentiation in existing regulations and incentives between energy production sources or between the different segments. The control of energy consumption and the increased use of energy from renewable sources, together with energy savings and increased energy efficiency are essential pillars for developing the MSP. The analysis of international best practices leads to a number of lessons useful in formulating the development strategy for the MSP. 9
  10. 10. International Best Practice for Implementing RE and EE Strategies The first lesson from an international review of policies, measures and programs for EE & RE is that there is no unique instrument but rather a successful use of a mix of properly articulated instruments. All successful programs, taken from a variety of different countries, illustrate the importance of a solid architecture, a coherent mix of instruments using complementary incentives, and the promotion of already tested and innovative applications. The second lesson is that the wide range of means used by EU countries for the implementation of energy management in EE and in RE is aimed at meeting the commitments of the Kyoto Protocol. The importance of regulation was found to be an important tool in each country. The importance of institutions dedicated to energy conservation at the national, regional and local levels is also significant but also the legal status and responsibilities of these agencies which vary from one country to another. The general trend towards giving greater responsibility to the energy and financial operators in implementing EE & RE projects is widespread.. As a result, the regulatory role of the State becomes very important in order to set market rules that allow for the development of the rational use of energy and for RE development. The third lesson is the remarkable diversification of public incentives, particularly finance, which has accelerated in recent years with the emergence of public private partnerships and the use of specific funds for the support of different forms of investments. In addition to traditional funding, financial mechanisms exist which provide a greater share of assistance to private operators. Indeed, in this era of the liberalization of European energy markets, member states are seeking to increase the role of the private sector in financing EE & RE. These instruments may include "leasing" or "third party funding" which involve energy service companies (ESCOs), through the development of investment funds or guarantee funds, or by granting loans at subsidized rates and on favourable terms with banks or private investors. As a result, the most successful programs are those with the following characteristics: consistency (well-defined target group and a clear articulation of the measures), the cost spread between stakeholders and the State, flexibility, simplicity, information quality and awareness, the participation and motivation of different actors (which implies the acceptability of these programs by actors), continuity (introducing a policy of structural efficiency, programmed and durable) and substantial environmental benefits. Based on the study’s findings, recommendations to successfully implement the MSP have been produced and are organized into three, inter-related areas: ! Institutional Environment ! Financing ! Technology Transfer A general and brief presentation of each thematic area is provided below. A summary table regroups the detailed recommendations, along with the proposed timing for implementation. Important details and more precise explanations are to be found in the last chapter of this report. 10
  11. 11. 1. Institutional Environment: Developing policy tools for the progressive development of an EE & RE sector in MPCs 1.1 A comprehensive framework for an incentive EE & RE policy A number of accompanying measures are needed which include: the reorganization of the industries, financial support mechanisms, regulatory reform, industrial policy, and public communication. Some measures are horizontal, such as sections of industrial policy, communication and advocacy. Others are more specific to each sector including regulatory aspects, financial and organizational: these measures concern the four main RE sectors: solar thermal (solar water heating), wind, solar photovoltaic and thermodynamic solar energy. 1.2 Relying on National energy agencies and their Mediterranean network to develop and implement EE & RE policies Most of the EE & RE projects implemented in the region are necessarily limited in terms of geography and/or time scope. Moreover, the proliferation of initiatives makes it difficult to understand the conditions and results of implemented projects. Despite this apparent fragmentation, the energy agencies in the Mediterranean region are in agreement with the long term need for the development and implementation of national public policies. Their network within MEDENER offers a regional perspective. MEDENER should be reinforced and play a key role in terms of monitoring and coordination of actions related to energy efficiency and renewables in the Mediterranean region. 1.3 Supporting the emergence of a structured network of RE & EE industry players Since market transformation is very difficult to achieve and consists of several stages, it requires combinations of policy tools as well as the involvement of several actors such as manufacturers and other private service providers, end-users and government agencies. Concerning professionals, information sharing on objectives, facts, and other country experiences is a powerful tool to identify options and adapt them to the local context. 2. Developing appropriate financing instruments The development of innovative financing mechanisms will be critical for the successful implementation of the MSP. As the estimated financing needs of the MSP will be greater than the potential contribution of International Financial Institutions (IFIs), the key challenge will be to identify conditions which are necessary to attract private investments to participate in financing MSP projects. In order to achieve this, support from IFIs will be needed to encourage the establishment of a favourable RE/EE investment framework and to demonstrate the economic viability of certain technologies in MPCs; develop innovative business models and test new mechanisms such as exporting electricity to the EU 3. Technology Transfer: Supporting technology transfer Technology transfer is identified as one of the four priority areas of the MSP, based on the principle that development of RE/EE projects in MPCs should lead to the emergence of local industrial activity, job creation, as well as research and innovation capacities. For these reasons, technology transfer and development of local jobs is a key issue for Governments in MPCs. Developing an industrial capacity in the RE/EE will require significant efforts from MPCs in order to acquire operational know-how in terms of producing equipment, operating and maintaining RE/EE installations. In addition to developing local businesses in the clean energy sector, manufacturing a significant share of components locally may also reduce the investment costs of RE/EE projects, thereby contributing to address the issues related to the competitiveness of RE/EE technologies. Technology transfer appears as a critical issue for the implementation of the MSP, as it plays a key role in: ! Gaining acceptance of projects by policy makers in MPCs due to its industrial development and job creation potential, 11
  12. 12. ! Reducing project costs by manufacturing part of the components required on-site, ! Ensuring the development of proper operation and maintenance (O&M) capacities locally which will be called upon during the lifetime of the project, ! Reinforcing cooperation between clusters and research centres from the EU and from MPCs. 12
  13. 13. Priorities Suggested measures Completion date INS 1. Developing a 1.1 Developing an overall energy policy that ! 2010 Comprehensive Framework emphasizes energy efficiency and renewable " 2012 for an EE and RE Incentive energy # 2020 Policy 1.2 Establishing a database of national EE & RE # 2010 policies and projects in the MPCs ! 2012 # 2020 1.3 Establishing a directory of projects developed # 2010 within the framework of international cooperation ! 2012 ! 2020 INS 2. Relying on National 2.1 Targeted Capacity Building of Institutional ! 2010 Energy Agencies and their Agencies " 2012 Mediterranean Network to # 2020 Develop and Implement EE & RE policies 2.2 Developing Capacities to Promote the Role ! 2010 of MPCs in RE Development # 2012 # 2020 2.3 Developing National Renewable Energy ! 2010 Action Plans # 2012 # 2020 2.4 Developing a Monitoring Tool concerning the ! 2010 MSP project pipeline # 2012 # 2020 INS 3. Supporting the 3.1 Creation in each country of a dedicated MSP # 2010 Emergence and Structuring “one stop shop” for potential developers ! 2012 of an EE & RE Network # 2020 3.2 Setting up a MSP facility dedicated to public ! 2010 and private partners in order to support pre # 2012 feasibility studies on RE projects # 2020 3.3 Organization of Mediterranean Sustainable ! 2010 Energy Week # 2012 # 2020 13
  14. 14. Priorities Suggested measures Completion date FIN 1. Supporting the 1.1 Improving knowledge-sharing on RE/EE ! 2010 implementation of support financing needs in MPCs and on the experience # 2012 mechanisms for RE/EE from existing support schemes in the EU # 2020 development 1.2 Implementing support schemes appropriate # 2010 for each MPC (tax credits, feed-in-tariffs, ! 2012 renewable energy obligations, etc.) ! 2020 FIN 2. Defining adequate 2.1 Improving knowledge on challenges facing ! 2010 financing instruments the financing of RE/EE in the region, including # 2012 analysing options for developing innovative # 2020 financial mechanisms at regional level, ensuring the dissemination of knowledge resources in order to facilitate capacity-building, updating the analysis of market conditions. 2.2 Developing a regional guarantee facility or ! 2010 credit enhancement mechanisms ! 2012 # 2020 2.3 Establishment of equity-type mechanism, ! 2010 including a specific window aimed at ESCOS ! 2012 and dedicated a Special purpose vehicle (SPVs), # 2020 as well as a technical assistance facility FIN 3. Developing 3.1Setting up a dedicated carbon finance ! 2010 complementary revenue programme for the MSP # 2012 streams from RE/EE # 2020 projects 3.2 Defining the technical, legal and # 2010 administrative framework for the export of ! 2012 electricity from MPCs to the EU network # 2020 FIN 4. Analyzing possible 4.1 Analyzing financing requirements and ! 2010 approaches to finance options for interconnections # 2012 Interconnections # 2020 14
  15. 15. TECH 1. Setting up 1.1 Developing a long-term regional strategy for ! 2010 specialized clusters technology-transfer in the clean energy field, # 2012 building upon other initiatives developed by the # 2020 Union for the Mediterranean (Mediterranean research network, Mediterranean university network, etc.). 1.2 Identify potential clusters in the energy field ! 2010 (review of existing initiatives, call for projects, # 2012 etc.) # 2020 1.3 Supporting the emergence of specialized # 2010 clusters, in particular through a dedicated ! 2012 funding programme providing both technical # 2020 assistance (studies, training, public communication) and co-financing for research initiatives, essentially by channelling existing resources for innovation support 1.4 Supporting the networking of regional # 2010 clusters and stakeholders as a priority by ! 2012 facilitating the exchange of experience and joint ! 2020 initiatives (communication, research, etc.) through the establishment of a regional focal point. TECH 2. Improving quality 2.1 Reinforcing and coordinating efforts to # 2010 standards and training support to the improvement of RE/EE quality ! 2012 capabilities standards for both equipment and services. This # 2020 will include: training and capacity-building for the implementation of quality labels, as well as co- financing of testing facilities and equipments 2.2 Developing of bi- or multicultural training ! 2010 programmes, based on current initiatives from # 2012 MPCs or from EU MS # 2020 15
  16. 16. 1. Introduction Primary energy demand within the Mediterranean Partner Countries (MPC2s) is forecasted to increase by 70% over the next 20 years. Despite the substantial potential for renewable energy (RE) production in the region, meeting this demand increase would rely on up to 87% on fossil fuels in a 'business-as-usual' scenario, which would lead to reduced energy security and to increased negative environmental impacts. The DESERTEC report3 identified the development of the region's RE potential mainly based on the very favourable solar resource conditions as well as its suitability for accommodating large-scale solar facilities. A combination of solar, as well as other appropriate RE technologies such as wind, could provide a long-lasting solution to the aforementioned challenges if deployed on a large scale within the MENA region. From a European industry perspective, Southern and Eastern Mediterranean Countries (MPCs) present great potential in terms of solar radiation and land availability, but they lack the regulatory framework, market, technology, and finance capacity to ensure large-scale RE developments. Mass deployment of RE technologies would trigger further economic development and job creation in Mediterranean countries. In this framework, the Mediterranean Solar Plan (MSP) was established as one of the main initiatives of the Union for the Mediterranean (UfM) at the Summit in Paris on 13- 14 July, 2008. The MSP is expected to both: ! Develop RE in the region on a scale capable to contribute significantly to satisfying the increasing energy demand in the Mediterranean Partner Countries (MPCs); ! Contribute to developing an integrated "Euro-Mediterranean green electricity market", to satisfy the MPCs' own electricity needs with renewable energy sources (mainly solar), and to export part of the electricity produced with renewable energy to consumers in other countries, and particularly to the EU. The objectives of the MSP are in line with the goals of the EuroMed Partnership initiated in 1995 with the Barcelona Declaration. The Euro-Mediterranean Partnership (Regional Strategy Paper 2007-2013) aims at promoting regional trade integration, infrastructure networks and improved environmental protection. In addition, the EuroMed Energy Priority Action Plan established at the Limassol Conference for the period 2008-2013 features the promotion of renewable and sustainable energy, as well as improvements to the institutional, legislative and political framework that governs the development and dissemination of RE technologies. In this context, the MSP has been declared by Ministers and Heads of State and Governments as one of the key 2 Morocco, Algeria, Tunisia, Egypt, Israel, Palestinian Territories, Lebanon, Syria and Turkey 3 Trans-Mediterranean Renewable Energy Cooperation (November 2007). Clean Power from Deserts: The DESERTEC Concept for Energy, Water and Climate Security. White Paper.
  17. 17. projects of the UfM, in order to promote both partnership with MPCs and to improve energy security for all partners involved in the UfM. The MSP is not restricted to any particular technology. Even though it has a specific focus on solar CSP (Concentrated Solar Power), solar PV (Photovoltaic) and wind- based power generation, it integrates an important component that considers energy efficiency and will also consider smaller-scale decentralised systems based on other RES technologies. The priority areas which have been defined for the plan are the following: ! Support the convergence of national energy policies with a particular stress on implementation of legislative, regulatory and institutional framework enabling RE development in order to meet the growing demand in MPC markets, with the possibility to export part of the electricity produced to EU markets; ! Energy demand management, energy efficiency and energy savings; ! Technology transfer; and, ! Infrastructure development including the strengthening of electricity interconnections ! The implementation of the MSP by 2020 will require adequate framework conditions in MPCs. The fundamental conditions involve mainly regulation and policy frameworks, adequate financing mechanisms, technology transfer and development of local industrial capacities, as well as infrastructures. This last point relates to the adoption by the European Parliament and the Council of Directive 2009/28/EC of 23/04/2009 on the promotion of the use of energy from renewable sources, which provides an opportunity for the further development of “green” electricity imports from the third countries to the EU. In particular, Article 9 of the RES Directive enables implementation of joint projects between Member States and third countries concerning the generation of electricity from renewable sources. Major growth in electricity imports from MPCs will however require a significant increase in the capacity of transmission networks. This report is the final report of the study carried out at the request of the European Commission by Denis Levy and Alexis Gazzo between January and June 2009. Work carried out includes mostly literature review and field work in 4 EU Member States (France, Germany, Italy, Spain) and in 9 MPCs (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Territories, Syria, Tunisia), during which more than 100 stakeholders were interviewed. The purpose of this report is to provide an overview of the main framework conditions for the implementation of the MSP, and to suggest priority areas for donor support. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 17
  18. 18. 2. Main findings: energy situation and perspectives 2.1 Key issues Despite being located around a common Mediterranean sea, the countries from the Southern and Eastern shores have contrasting energy situations with respect to their Northern neighbours and also between themselves. This situation can be explained by two main differences: demographic trends and economic growth. Northern countries account for over 70% of the total Mediterranean energy demand; while the remainder is equally divided between the Mediterranean Maghreb and Mashrek countries. The South and East Mediterranean Countries referred to in this report as Mediterranean Partner Countries (MPCs) face rapid demographic growth combined with relatively low incomes, rapid urbanization, and significant socioeconomic development needs. These characteristics translate into a growing demand for energy services and related infrastructure. Northern Mediterranean countries are characterized by economies in transition from industry toward services which implies less energy intensity. In addition, the Mediterranean countries can be divided between energy importers and exporters. Countries from the North are exclusively net importers of fossil fuels, whereas the Southern countries are divided between exporters (Algeria, Egypt, Libya, and Syria) and importers (Morocco, Tunisia, Israel, Jordan, the Palestinian Territories and Turkey) of energy. In the Southern and Eastern Mediterranean, energy import dependence is also high in most importing countries, with Morocco, Lebanon, Israel, and Turkey ranking at the top. Tunisia recently became a net importer and is expected to reach a much higher dependency level in the coming years. Primary energy consumption in the MPCs has been growing very rapidly over the last decades from 74.6 Mtoe in 1980 to 218.2 Mtoe in 2005 (around a 4.5 % average annual increase over the period). This sustained increase is mainly due to demographic growth, the improvement in the standard of living and the expansion of the industrial, commercial and residential sectors. This growth is also driven by the increase in electricity demand. Energy consumption per capita increased from 458 kWh to 1,577 kWh (more than 5% average annual increase over the same period). It is important to remember that the average energy consumption per capita level in the MPCs is much lower than in the Northern Mediterranean countries (over 5 times lower compared to France in 2005). Total Primary Energy Supply (TPES) is increasing faster than GDP in the region, indicating that the economic development is becoming increasingly energy intensive. The energy intensity increased by more than 20% over the period 1980 – 2005 (1.2% annual growth rate over the period), as described in table 2 (see below). This average situation hides large disparities between countries. The average energy intensity in the region should decrease as countries in the region implement energy efficiency and conservation programs. It is clear that there is a great potential for energy efficiency and conservation in the region and that energy intensity may be reduced, along with the energy-related greenhouse gas emissions. The energy intensity of the region’s economies cannot be explained simply by differences in their energy resources. MENA energy-abundant countries are among the most energy-intensive. But some energy-importing countries (for example, Lebanon and Jordan) also have quite energy-intensive economies, as well as some other countries that are facing the gradual depletion of their fossil fuel reserves (for example Syria). At the same time, an energy-abundant country like Algeria has a fairly low level Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 18
  19. 19. of energy intensity. Tunisia and Morocco fall below the world average (and even below the OECD average), while others are significantly above even the MENA regional average. There is no universal correlation between the natural resource endowment of the region’s countries and their energy productivity. Table 1: MPCs’ main economic & energy figures Primary Final energy Primary Final energy* energy Population GDP per energy consumption consumption Country (2006) capita (PPP) Consumption consumption per capita per capita million $ 2005 2006 M toe 2006 M toe 2006 toe 2006 toe Algeria 33.36 7 308 36,44 21,17 1,09 0,63 Egypt 75.48 4 775 62,32 42,18 0,83 0,56 Israel 7.04 27 699 21,7 13,69 3,08 1,94 Jordan 5.73 5 947 7,05** 4,7** 1,23** 0,82** Lebanon 3.61 5 690 4,68 3,57 1,3 0,99 Morocco 31.07 4 841 12,89 10,04 0,41 0,32 Palestinian 3.7 n/a 1,14*** 1,02*** 0,31*** 0,28*** territories Syria 19.53 3 932 19,73** 12,85** 1,01** 0,66** Tunisia 10.1 9 226 8,99 6,69 0,89 0,66 Turkey 73,92 7 154 90,11 67,76 1,22 0,92 * Non energetic usages included** Year 2005 *** Year 2000 Source: Enerdata The energy intensity of an economy is based on its structure, whether or not energy intensive sectors are large contributors to the GDP, and the efficiency of energy use in each of the consuming sectors. Energy intensity is therefore a useful measure to compare economies and trends; it is not a value judgment on the choice of a specific economic structure. It does, however, allow decision makers to look at alternative patterns of energy consumption for a certain rate of economic growth and to maintain the competitiveness of their economies. The use of purchasing power parities in measuring energy intensities greatly improves the comparability between regions with different levels of economic development, as it narrows the gap between regions, compared to what would be shown with exchange rates. To achieve this, GDP and value-added data are converted at purchasing power parities to reflect differences in general price levels. Using purchasing power parities rates instead of exchange rates increases the value of GDP in regions with a low cost of living and therefore decreases their energy intensities. On average, for non-OECD countries the GDP at purchasing power parties is 2-7 times higher than if it is expressed at exchange rates. Energy intensity is widely used to evaluate how efficiently energy is used, and it can provide signals to decision-makers about energy efficiency trends. However, energy intensity is influenced by many factors, among which energy efficiency is only one component. Changes in the structure of a country’s national economy (the “economic Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 19
  20. 20. structure”) or in its energy mix can have a strong impact on the energy intensity indicators. The ODYSSEE4 project uses an alternative indicator, calculated from an evaluation by end-use (bottom-up approach); this new indicator replaces the overall energy intensity to monitor energy efficiency trends in the EU. Most MPCs governments are aware of the benefits (in terms of economic and environmental impacts) of promoting renewable, clean and efficient technologies in their countries along with demand side management measures, as it leads to: ! reduced environmental impact by eliminating mining and drilling pollution, ! “healthier” overall economy with the new jobs provided by the new industries necessary to produce and support renewable energy technology, ! a healthier population with the reduction in pollutants caused by burning fossil fuels, ! a stronger national security with a reduction in dependence on foreign oil, ! a reduction in potential conflicts as the focus shifts away from the control of oil, ! an improvement in impoverished developing countries as new opportunities arise in the untapped renewable energy industry, ! a more efficient overall economy as people are able to save significant amounts of money in their heating and cooling bills by using solar and wind power. But despite the availability of the large potential resources, renewable energies are still marginal in their contribution to electricity generation in the region. Given the present context and in order to meet their growing electricity demand, the MPC countries are facing three major challenges related to the development of their respective electricity sectors: ! Difficulties in mobilizing financial resources for new power generation capacity and transmission/distribution networks; ! Electricity interconnections and the creation of regional power markets (both South-South and South-North); ! Sustainable development (that is, the rational use of energy and renewable energy sources). These three challenges can be seen, in the framework of the Euro-Mediterranean Partnership, as an opportunity for investment and for the promotion of a Mediterranean regional interconnected market. This situation also highlights the importance of regional initiatives such as the Mediterranean Solar Plan in addressing these issues. 4 Source : Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 20
  21. 21. Table 2: Energy Efficiency indicators Koe/$2005 at Purchasing Power Parities (PPP) 1980 1990 2000 2007 European Union (27) ! Primary energy intensity 0.201 0.173 0.146 0.129 ! Primary energy intensity adjusted to EU structure 0.197 0.168 0.140 0.122 ! Final energy intensity 0.138 0.112 0.095 0.086 ! Final energy intensity at 2005 GDP structure 0.088 0.075 0.066 0.062 ! Final energy intensity adjusted to EU economic 0.088 0.075 0.066 0.062 structure Algeria ! Primary energy intensity 0.104 0.154 0.161 0.158 ! Primary energy intensity adjusted to EU structure 0.064 0.103 0.120 0.137 ! Final energy intensity 0.051 0.074 0.075 0.082 ! Final energy intensity adjusted to EU economic 0.048 0.073 0.086 0.098 structure Egypt ! Primary energy intensity 0.150 0.183 0.172 0.180 ! Primary energy intensity adjusted to EU structure 0.126 0.159 0.136 0.129 ! Final energy intensity 0.119 0.121 0.112 0.112 ! Final energy intensity adjusted to EU economic 0.095 0.113 0.097 0.092 structure Israel ! Primary energy intensity 0.129 0.127 0.118 0.111 ! Primary energy intensity adjusted to EU structure 0.050 0.060 0.058 0.051 ! Final energy intensity at 2005 GDP structure 0.069 0.071 0.068 0.062 ! Final energy intensity adjusted to EU economic 0.038 0.043 0.041 0.036 structure Jordan ! Primary energy intensity 0.154 0.257 0.231 0.219 ! Primary energy intensity adjusted to EU structure 0.149 0.223 0.207 n/a ! Final energy intensity 0.114 0.181 0.165 0.146 ! Final energy intensity adjusted to EU economic 0.112 0.159 0.148 0.121 structure Lebanon ! Primary energy intensity 0.316 0.278 0.302 0.208 ! Primary energy intensity adjusted to EU structure 0.208 0.209 0.303 0.216 ! Final energy intensity 0.203 0.179 0.218 0.132 ! Final energy intensity adjusted to EU economic 0.156 0.148 0.216 0.129 structure Morocco ! Primary energy intensity 0.084 0.081 0.094 0.095 ! Primary energy intensity adjusted to EU structure 0.038 0.039 0.052 0.053 ! Final energy intensity 0.066 0.057 0.071 0.069 ! Final energy intensity adjusted to EU economic 0.028 0.027 0.037 0.038 structure Palestinian Territories n/a n/a n/a n/a Syria ! Primary energy intensity 0.186 0.326 0.297 0.248 ! Primary energy intensity adjusted to EU structure 0.265 0.233 0.191 0.168 ! Final energy intensity 0.148 0.231 0.174 0.139 ! Final energy intensity adjusted to EU economic 0.198 0.166 0.137 0.120 structure Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 21
  22. 22. Koe/$2005 at Purchasing Power Parities (PPP) 1980 1990 2000 2007 Tunisia ! Primary energy intensity 0.115 0.121 0.113 0.097 ! Primary energy intensity adjusted to EU structure 0.099 0.114 0.106 0.086 ! Final energy intensity 0.083 0.091 0.084 0.067 ! Final energy intensity adjusted to EU economic 0.074 0.081 0.076 0.061 structure Source: Enerdata / Energy Efficiency Policies around the World: Review and Evaluation World Energy Council 2007 Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 22
  23. 23. 2.2 Electricity sector 2.2.1 Overview Energy consumption per capita is currently three and a half times lower in the Southern than the Northern countries of the Mediterranean; however, the growth factors in the South are significantly stronger, particularly due to demography, population growth, increasing living standards and business needs. Thus, according to the OME5, energy demand will grow by 4.8% per year until 2020 in the South and East6, compared to 1.3% in the North7 As a result of these demand forecasts, the region must develop additional production capacity of 191 GW (106 in the South and East and 85 in the North) compared to the current installed capacity of 424 GW today (103 in the South and 321 North)8. Table 3: Generation Capacity and Annual Electricity Production and Consumption in the Mediterranean Basin Generation Capacity Annual Production Consumption GW TWh (per capita) kWh Northern shore 2005 321 1 380 6 471 Northern shore 2020 406 1 780 8 815 Southern and Eastern 103 500 1 862 shores 2005 Southern and Eastern 209 1 000 3 077 shores 2020 Source: Energy perspective in the Mediterranean 2008, OME December 2008 Some countries in the Southern & Eastern Mediterranean region face strong demand for electricity, due to their economic development trends and population growth. The electrical power sectors in these countries are mostly structured around vertically integrated state- owned monopolies. Tariffs are set by governments and include a social bracket in the tariff structure in order to ensure that all people have access to electricity, including the poor. 5 Energy perspective in the Mediterranean 2008, OME December 2008 6 South and East Mediterranean Countries: Morocco, Algeria, Tunisia, Libya, Egypt, Jordan, Israel, Palestinian Territories, Lebanon, Syria, Turkey 7 North Mediterranean Countries: Portugal, Spain, France, Italy, Albania, Bosnia – Herzegovina, Croatia, Macedonia, Serbia, Slovenia, Greece, Malta, Cyprus 8 Source: Energy perspective in the Mediterranean 2008, OME December 2008
  24. 24. Over the last 30 years, the MPCs have developed their electrical systems and have recently begun power sector restructuring, which has contributed to their economic growth and expanded access to electricity. Some countries have delegated the distribution function to the private sector, and others have elaborated new electricity laws that create regulatory bodies and unbundled natural monopoly functions (transmission) from potentially competitive functions (generation and supply). Most of the countries (Morocco9, Algeria, Tunisia, Egypt, Palestinian Territories10 and Turkey) have introduced independent power producers (IPPs) on the basis of long-term power purchase agreements (PPAs). As a result, about 16% of the current installed capacity of Morocco, Turkey, Tunisia, and Egypt is in the hands of private producers. Concerning distribution, Jordan, Lebanon and the Palestinian Territories have concessions dating back from the first half of twentieth century, while in the late 1990’s, Morocco awarded distribution concession contracts (Casablanca, Rabat, Tangiers and Tetouan) to private companies. In Egypt, six private companies are licensed to distribute electricity in different areas. Nevertheless, state controlled utilities remain predominant in the MPCs region. The share of private generation should slightly increase over the coming years with the completion of several projects (Algeria, Morocco, Tunisia…). The introduction of the new electricity laws in some of the countries, in theory, may also further increase the share of the private sector in power generation. Irrespective of the form of liberalization which is likely to emerge, most of the MPC governments and energy utilities are favourable to introducing competition and regional trade, as well as the following reforms: ! Legal separation of activities within the gas and electricity sectors; ! Corporatization11 of public enterprises; ! Introduction of the private sector for new power generation or energy production; ! Fragmentation of the sector for distribution; ! Tariff levels which meet revenue requirements, phasing out of cross subsidies and adjustment to market and international prices, and the creation of funds or stabilization mechanisms to handle lifeline tariffs for the poor or to extend uniform tariffs throughout the country; ! The need to gradually go beyond single buyer arrangements towards third party access. ! 9 Where more than 60% of electricity is generated by private companies (mainly with foreign shareholders) including RE generation from wind 10 in Gaza a 140 MW gas turbine plant started commercial operations in 2004 11 Corporatization refers to the transformation of state assets into state-owned corporations in order to introduce corporate management techniques to their administration. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 24
  25. 25. In several MPCs, electricity production is open to IPPs and energy is purchased by a "quasi single buyer"; conditions are fixed by the "quasi single buyer" and not by the regulator. The "single buyer" also imports / exports electricity as is the case in Morocco. The governments and representatives from the electric power sectors of a majority of MPCs envisage the gradual introduction of a wholesale market (or even a retail market) open to large industrial consumers (mainly those connected to the 225-400 kV main grid, i.e. a small number of industries). Regulated Third Party Access (TPA) will therefore be introduced for participants in the free market. The market arrangements will involve bilateral contracts between generators and distribution companies or eligible consumers, a spot market and / or balancing mechanisms, as well as settlement mechanisms and solutions for the system operator to acquire ancillary services. Independent system operators and a market operator (for regulating the Wholesale Electricity Markets) based on the US or the Australian electrical power system models are likely to be established. Table 4: Current Electricity Laws and their status in MPCs Separate Third- Private / accounts Regulatory Market Distinct Country Date party Municipal body opening TSO (G/T/D) access distribution Algeria 2002 Yes CREG 30% in 3 Yes Yes No years Egypt Under No EEUCPRA No No No No development Israel No PUA No No Yes No Jordan 1999 Yes ERC No No No Yes Lebanon 2002 Yes NERA No Yes No Yes Morocco Under Yes No No No No Yes development Palestinian Letter of Sector Yes PERC No No No Yes Territories Policy (1997) Syria None No No No No No No Tunisia None No No No No No No Source: OME Note: TSO = transmission system operator. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 25
  26. 26. 2.2.2 Interconnections Developing cross-border interconnections is considered as a key condition by the countries of the two shores of Mediterranean to reinforce the reliability of their electrical systems and to optimize the installed capacity by creating an integrated Mediterranean energy market. Figure 1: The Euro-Mediterranean Power Systems United Kingdom Power System UCTE Nordic Countries Power System Interconnected/Unified Power System of the commenwealth of Independent States and Baltic States Turkey South-Western Mediterranean Block South-Eastern Mediterranean Block Ireland Israel, Cyprus and Malta Source: MEDELEC The main sub-regional groups around the Mediterranean Sea are more or less in the advanced stages of linkage or integration: ! In Europe, exchanges take place within the UCTE power system (Union for the Coordination for the Transmission Electricity), which is comprised of 23 European countries, 35 transmission system operators (TSO) and which supplies around 450 million people for a total electricity consumption of around 2,600TWh in 2007 via 230,000 km of high voltage lines. ! On the eastern flank, the Turkish block does not yet operate synchronously with other systems despite the existence of many interconnections such as those to Azerbaijan, Armenia, Bulgaria, Georgia, Iran, Iraq and Syria. The interconnections between Turkey and Bulgaria and between southern Turkey and the northern part of Syria, however, are not currently used (these relate to “pocket” operations and do not ensure electrical continuity). Turkey is planned to start a synchronisation trial with the UCTE again in mid-2009. If successful synchronisation is achieved, the connection with UCTE will immediately become available (the transfer capacity will be limited to 500 MW),
  27. 27. Nevertheless, Turkey will still need to be connected in an asynchronous mode to other neighbouring countries (Iran, Armenia, Georgia, etc.) except Syria. ! In the Maghreb area, Morocco, Algeria, and Tunisia are interconnected. The electrical liaison between the Maghreb and Europe has existed since 1997 by means of two Spain-Morocco lines via the Strait of Gibraltar. Currently two 700 MVA, 400kV AC undersea lines are in operation. Discussions are ongoing between Morocco and Spain to increase the transfer capacity. ! The South-Eastern Mediterranean system (Libya, Egypt, Jordan, Syria and Lebanon). Egypt, Jordan, Syria and Lebanon are already interconnected. Lines between Egypt and Libya have existed since 1998 but are not operational. ! The electrical systems of Israel, Cyprus and Malta are mostly isolated; however Israel is connected with the Palestinian Territories. Inter-Mediterranean electrical exchanges are quite limited, especially between the Maghreb countries, despite the strong interconnections and a history of cooperation. The only link that fully functions, essentially in the North-South direction,12 is the Spain-Morocco interconnection. Expected developments Several new interconnection projects are under way to reinforce existing connection between Morocco and Algeria (third connection), Algeria to Tunisia (fifth connection), and to connect Egypt with Libya, and the other Maghreb countries. On November 2005, a first attempt was undertaken to connect Tunisia and Libya. This attempt was suspended to prevent any damage on the South-Western system. Actions are currently underway to cope with the identified difficulties. As for the next connection attempts, Libya alone will first be connected to Tunisia, and then the other countries will follow. This connection test could be expected in the near term. If the new tests are not successful, a DC interconnection between Libya and Egypt would then be considered (and would require 2 years for commissioning). In addition with linking MPC systems, several submarine interconnection projects are under consideration: ! The feasibility study for Algeria-Spain was completed in 2003. The project is still under consideration and the decision on a possible implementation is now in the hands of AEC, Sonelgaz and Red Electrica de España. In terms of connection, the study suggests a 1,000 MW and 500 kV direct HVDC connection between Terga (Algeria) and the Litoral de Almeria (Spain), together with a 200 MW AC connection crossing Morocco. However some technical difficulties are still to be overcome (the significant sea depth (1900 m) would require substantial engineering work). 12 South-North flows have occurred during the initial years of operation of the interconnection (operational since 1997). Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 27
  28. 28. ! The Algeria-Italy feasibility study was completed in June 2004. Two solutions for a 500 to 1,000 MW 400 kV interconnection were studied: a “direct” line between Algeria and Italy and an “optimised” line between Algeria and South Sardinia. The “direct” line would face major technical difficulties due to the sea depth in the region (2,000 m). The “optimised” solution would have to cope with similar technical problems but with lower investment levels and power losses (cost estimated to € 750-900 million for the direct line; € 205-578 million for the optimised line) and would benefit from the existing lines between Italy and Sardinia. The construction of this line, however, is also still under consideration as its financial feasibility is uncertain. ! A feasibility study for a 1,000 MW Tunisia-Italy interconnection was carried out in 2006. The project is underway and is linked to the construction of a 1,200 MW conventional fossil-fuel power plant in Tunisia. The project would be a merchant line owned by the generation company. ! A project for an interconnection between Libya and Italy is also under study. Two DC cables of 500MW could potentially connect Italy and Libya through Malta. This would in particular end Malta’s isolation. However several points are still under discussion such as the route of the line: the easiest connection would end in Sicily but could entail congestion difficulties (especially if the connection Tunisia-Italy is realized). ! Greece is considering a link to Crete, which could be extended to Egypt. Figure 2: Existing and potential future connections Source: OME Besides the construction of submarine interconnections, which are extremely costly, the reinforcement of existing links could provide short term additional capacity for the export of electricity, mostly through the reinforcement of the interconnection between Spain and Morocco (an additional 700 MW AC cable) and adding new 400 kV overhead circuits between Turkey and Greece and/or Bulgaria. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 28
  29. 29. When the current and planned projects are completed, the MPCs will be linked together via the MEDRING (Mediterranean Electrical Ring), an electric ring that encircles the Mediterranean region and is linked to the European network. The MEDRING project, which would interconnect all Mediterranean systems, is expected to enhance system stability, optimize generation capacity, and develop commercial energy exchanges between countries linked by the electrical ring. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 29
  30. 30. Table 5: Electricity Sector Overview in Selected Countries Morocco Algeria Tunisia Egypt Jordan Palestine Israel Lebanon Syria Legislation introducing Under 2002 No Draft 2002 Draft 2003 2002 No electricity liberalisation preparation Independent regulators No Yes No Yes Yes No Yes Yes No Tariffs enabling the sector No No Yes No Yes No Yes No No to cover costs Electrification rate % 84 96 96 95 99 93 98 85 95 Utilities Corporatisation No Yes Yes Yes Yes Yes Yes No No Unbundling of transmission No Yes No Yes Yes Yes No No No IPP in generation % 60 15 25 12 2 Gaza forecaste 5 No d Status SB* SB* SB* SB* SB* !TPA** Unbundled distribution rate 50 100 No No 40 100 No 10 No % Limits to self-generation 50 MW No 50 MW No 50 MW No No Yes Yes Existing Feed-in tariffs No Yes Forecast No No No Yes No No Electrical Interconnections Spa / Mor / Alg / Tun / Lib Egy / Jor / Pal / Syr * SB: Single Buyer **: Third party access Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 30
  31. 31. 2.3 Energy efficiency and renewable energy 2.3.1 Energy efficiency Several MPC countries stand out as having longstanding and sustained commitments to energy efficiency. These include Algeria, Israel and Tunisia—all of which introduced legislation and created agencies focused on energy efficiency in the mid-1980s. Beside these countries, a second set of countries introduced institutional arrangements that are not as comprehensive but may well be optimal given respective sector conditions. For example, Israel has a legal framework in place (the Energy Resources Law of 1987), rules and regulations governing some forms of consumption (household appliances), and an agency specializing in energy efficiency (Infrastructure Resources Management Division of the Ministry of National Infrastructure), but, it lacks a financing facility. Most of the countries have created agencies to implement energy efficiency initiatives. Some of these agencies are dedicated solely to energy efficiency, and several have been in place for a long time, including Algeria’s National Agency for the Promotion and Rational Use of Energy (established in 1985), the Infrastructure Resources Management Division of Israel’s Ministry of National Infrastructure (1987), and the Rational Use of Energy Division of Jordan’s National Energy Research Center (1998). These countries have promulgated rules and regulations for energy efficiency in production and consumption. Several are developing some form of regulation concerning energy efficiency (usually appliance standards or building codes). Among the active regulatory regimes in the region are the following: ! In Algeria, thermal building codes apply to houses and commercial buildings. Energy audits for large consumers are mandatory. ! In Egypt, standards and labelling programs cover refrigerators, air-conditioners, and washing machines. ! In Israel, energy efficiency standards apply to refrigerators and air-conditioners. ESCOs must be licensed. ! In Morocco, the Law on Energy Efficiency is being adopted by the Parliament. The Renewable Energy Development Centre, created in 1982, focuses also on energy efficiency. Financing is available, mainly for solar water heaters, and an energy efficiency code for new construction is under development. ! In Tunisia, efficiency requirements are applied to buildings and appliances. ! In Syria, energy efficiency labels are required on refrigerators, air-conditioners, and washing machines. New houses and buildings must conform to a thermal insulation code Most governments in the region consider energy efficiency as a priority issue, although for different reasons. The key issue for many is the relative size of energy subsidies in government budgets; for others, the key drivers also include the necessity to mitigate the volatility of hydrocarbon prices and generating enough financing for energy investments to satisfying the energy demand of their fast-growing economies. These factors have prompted governments to renew their efforts to improve energy efficiency. The governments have experimented with programmes since the 1980s to promote the rational use of energy (compulsory audits and incentives to facilitate investment for large industries, higher tariffs for large residential electricity consumptions, building standards, appliance labelling, etc) mainly in energy intensive industries and large buildings, with support from multilateral and bilateral organizations. These programmes have contributed to raising general awareness among industries, involved in-depth energy audits and led to some investments. In the MPC region, some programmes focusing on industry are being conducted in Morocco and in Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 31
  32. 32. Tunisia (the latter which has set up a dedicated national energy management fund in order to finance energy conservation and renewable energy investments). In the construction sector, energy building codes have been elaborated and partly implemented in the main Israeli and Turkish cities. Projects are underway with multilateral and bilateral support in Algeria, Lebanon, Morocco, the Palestinian Territories and Tunisia. Algeria and Tunisia have also launched several demonstration eco building projects. These projects face the global issues of the construction quality, including for anti-seismic standards. The EU-funded programme MED-ENEC contributes to developing and harmonising standards for energy-efficient buildings and the use of thermal solar technologies in all MEDA countries. Some countries, particularly Tunisia, are beginning to address energy efficiency in existing buildings. Tunisia’s STEG, the electric power company, has promoted rational use of energy and solar water heaters (ProSol program supported by MEDREP) in the residential sector. As stated in a recent World Bank assessment on energy efficiency in the MENA region13, Tunisia has “what might be deemed comprehensive institutional arrangements for energy efficiency”. Tunisia “most closely approaches the ideal both in its enabling framework (laws and decrees, national energy plans, regulation and rules, and an apex agency) and implementation arrangements (specialized agency plus programmatic, financing, and other supportive arrangements)”. BOX 1 Tunisia: A success story in implementing an energy management policy in a developing country Among developing countries, especially those in the Mediterranean region, Tunisia has undoubtedly been a pioneer in the initiation of EE & RE policy. Tunisia, since 1985, has put in place a policy of Rational Use of Energy, thus anticipating the widespread development of the energy deficit that was forecast for the mid-90s. From the outset, it has articulated its EE policy around three pillars on which any new policy must be based: (i) Establishing an appropriate institutional framework, with the Agency for Energy Management (AME) initially as a leader, which later became the National Agency of Renewable Energies (ANER) in 1998, and later the National Agency for Energy Management (ANME) from August 2004; (ii) setting up a regulatory framework, based on a comprehensive battery of measures to promote practices and more efficient energy; (iii) Creating financial incentives, focused on energy audits grants and investments, on the one hand, and fiscal measures or tax exemptions, on the other. The rising pressure in global oil markets, that has significantly increased since 2004, has strengthened the energy management policy with the launch of a series of concrete measures that are reflected mainly by the promulgation in 2004 of a specific law on EE & RE, the creation in 2005 of the National 13 Tapping a Hidden Resource: Energy Efficiency in the Middle East and North Africa February 2009 Sustainable Development Network, Middle East and North Africa Region, Energy Sector Management Assistance Program (ESMAP) THE WORLD BANK GROUP. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 32
  33. 33. Fund for EE & RE (FNME), the establishment of specific financing mechanisms and the creation of specialized task forces to ensure close monitoring of different priority actions. The impacts of this policy are significant, especially after the results of the 2005-2007 three-year program of EE & RE. The actions taken have yielded significant results in terms of attenuating energy demand growth (apart from improving the efficiency of power generation, the three-year program led to a cumulative energy saving of 770 Ktoe of which 710 Ktoe is attributable to energy efficiency actions, 61 ktoe of fossil fuels savings, resulting from renewable energy development actions), decoupling of economic growth and energy consumption (the period 1990-2007 was also marked by an increase in energy demand of 3.3% per year compared to 4.8% per year increase for economic growth. The contrasting GDP and primary energy demand trends, especially significant during the period 2005-2007, reflect the improved energy performance of the Tunisian economy over this period) and the improving energy intensity (The decoupling of economic growth and consumption of energy generated, from the 1990’s, down average annual energy intensity by 1.2% per annum, which greatly accelerated since 2005 to 2.9% per year over the period 2005-2007). In view of the continued increases of energy prices on the international market in 2007, the Tunisian government accelerated its EE & RE policy by augmenting the original objectives in the 11th development plan (2007-2011). The 2008-2011 four-year Energy Management program intends to accelerate its EE & RE policy aiming at: (i) reducing energy intensity by 3% per year; (ii) maintaining a moderate energy demand growth of f 2.8% per year with a reduction of primary energy consumption of about 2 Mtoe by 2011 and (iii) Increasing the renewable energy (excluding biomass) share for primary consumption to 4% in 2011. According to Law No. 2009-7 of 9, February 2009 which amends and supplements the Law of 2, August 2004 on EE & RE, the main measures which will support the completion of the four-year program, are: (i) the requirement to obtain prior permission, from the authorities, for the establishment (or extension) of projects for large energy consuming enterprises; (ii) lowering of threshold for energy audits in the industry sector from 1000 to 800 toe; (iii) the authorization for industrial plants or plant groups, which intend to self-generate electricity from renewable energy sources and cogeneration to have access to the national electricity grid, to transport the electricity produced, and to sell surpluses exclusively to the Tunisian Electricity and Gas Company and, (iv) to sell its surplus electricity exclusively to STEG within in the framework of a standardised contract approved by the energy sector authority which grants permission to electricity producers from renewables sources for their own consumption, and whose facilities are connected to the national network at low voltage,; (v) the requirement of the application of minimum technical specifications of energy efficiency in the construction of new buildings and extension projects for existing buildings. The analysis of the funding amounts required to accomplish the objectives of EE & RE over the four- year program, revealed real investment constraints, which prompted the Government to introduce new financial mechanisms to complement and expand the capacity of existing intervention means, in particular through: (i) consolidation of program funding by the establishment of credit lines dedicated to energy conservation financed by bilateral and multilateral financing institutions; (ii) the strengthening of the existing National EE &RE Fund (FNME) by establishing a new fee for the import or local production on lamps and tubes that are not energy efficient; (iii) extending the eligibility of FNME to other interventions or to certain sectors in particular, intangible investments, cogeneration and use of renewable energy such as biogas and electricity production in Solar Buildings and in the agricultural sector. Over the 2008-2011 period, the planned investments in energy efficiency in Tunisia are forecasted to reach about 1 billion dinars or the equivalent of 100 M US$ (outside STEG investments in wind energy). This amount reflects a real acceleration of the policy in the EE & RE field. However, this intensification of investment could not have been possible without the preparation, begun more than twenty years ago and resulting in the establishment of integrated institutional, regulatory, tax tools and the creation of a financial environment conducive to energy conservation in Tunisia. This lengthy process has also helped to prepare the conditions for change of scale: the general development and capacity building, awareness of all private and public stakeholders (government, households, industrial, financial sector, etc.) the development of public-private partnerships, and the strengthening of international cooperation, etc. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 33
  34. 34. Table 6: Energy Efficiency Institutional Arrangements in MPCs Algeria Egypt Israel Jordan Lebanon Morocco Palestine Syria Tunisia Institution Small responsible APRUE unit at MNI NERC LCEC CDER PEC NERC ANME for EE EEHC Institution responsible CDER NREA MNI NERC LCEC CDER PEC NERC ANME for RE 2004 Legislation Energy Resources In To be 1999 None None None Being drafted Updated for EE law 1987 preparation adopted Feb 2009 20x20 EE EE & RE framework master plan EE & RE National No Yes (20% reduction Yes No PNAP* adopted in Master plan objectives in energy plans from the "business 2008-2012 2007 in preparation the XI° Plan as usual" scenario by 2020) In In EE & RE fund Yes No No No No No Yes preparation preparation EE & RE R&D 80 M€ 5 years plan No No No No No No No No financing from 2008 * Main measures registered in the National Priority Action Plan 2008-2012: 1. Development of a wind capacity of 1 000 MW before 2012 within the framework of the program Energipro 2. Massive generalization of LBC use of with the distribution of 22,7 million LBC on the horizon 2012 (Disappearance in the peak load of 800 MW). 3. Setting up of a social tariff and incentive pricing for type -20 / -20 for all the residential and local authorities (Disappearance in the peak load of 300 MW). 4. Setting up of the super optional peak load pricing for industrial customers VHT-HT (87MW. 5. Setting up of the optional bi-hourly pricing for the driving strength LT (16 MW): 6. Development of energy efficiency appliances for street lighting such as stabilizers, savers and low consumption lamps (87 MW). 7. Energy efficiency in the building sector: elaboration of an energy code concerning the construction; Installation of 450 000 m ² of solar panels for solar waters heaters in the residential and tertiary sectors 8. Transformation of the CDER into ADEREE (EE & RE Agency): updating of the wind atlas and the solar atlas; evaluation of the national potential in biomass; Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 34
  35. 35. 2.3.2 Renewable energy The Mediterranean region benefits from abundant renewable energy resources. In particular, the region has some of the best locations in the world for solar technologies14. Sun hours range from 2,650 to 3,400 hours per year, and the average annual radiation ranges between 1,300 kWh/m2 per year in coastal areas to 3,200 kWh/m2 per year in the South and coastal areas. Wind potential is also significant mainly in Morocco and Egypt, with wind speed ranging between 6 and 11 m/s in some areas. The region also has potential in biomass and geothermal (low temperature; heating and cooling with geothermal heat pump) and hydraulic resources. In the MPC region, the total renewable primary energy supply reached approximately 19 Mtoe in 2005, representing 7% of the TPES in the region. Although renewables have doubled over the last three decades, their share is much lower than in the 1970’s, when renewables accounted for 18% of the TPES. This finding is attributable to the increase in the total primary energy supply, from 50 Mtoe in 1970 to 280 Mtoe in 2005. In mid-200715, total RE-based power installed capacity reached 17,718 MW, more than 93 % of which is large hydro with the greatest share located in Turkey, Egypt, and to a much lesser degree, in Morocco. The remaining 800 MW of capacity was dominated by small hydro and wind: ! Concerning small hydro (321 MW), the majority of the sites are located in Turkey (176 MW), Algeria (85 MW), Morocco (30 MW), Tunisia (30 MW) while in Egypt most of the hydro power plants are larger than 10 MW. ! Wind is still a new but marginal energy source in the region. Total installed capacity (410 MW) included sites in Zafarana (Egypt, total 225 MW), Tetouan (Morocco, 53.2 MW), Cap Bon (Tunisia, 19.3 MW), and Algeria (0.5 MW). ! Photovoltaic systems reached 13.3 MWp capacity in 2007. PV kits supplied a total of 76,367 households with electricity (59,800 in Morocco alone, 11,000 in Tunisia, 4,657 in Egypt and 1,000 in Algeria), representing 8.5 MWp. The remaining 5 MWp capacity concerned other applications, including telecoms, schools, mosques, pumping water for agriculture, street lighting, etc. ! Geothermal energy represented 20.4 MW (Exclusively in Turkey). Concentrated solar (CSP) energy is in the development phase in the following countries16: 14 2 The solar energy received on a horizontal surface of 1 m is of the order of 2 500 kWh a year in the sunny regions and of 800 kWh a year in the Northern Europe 15 OME : Renewable Energy in the Southern and Eastern Mediterranean countries; Current situation June 2007 16 In addition, in 2008, the Abu Dhabi Future Energy Company (Masdar16) issued an invitation to build, own and operate a 100 MW CSP plant in Madinat Zayad, Abu Dhabi. The plant will use parabolic trough technology and is expected to be operational by the end of 2010. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 35
  36. 36. ! Algeria: Integrated Solar Combined Cycle of 150 MW is under construction; ! Egypt: 140 MW Integrated Solar Combined Cycle with 20 MW CSP plant under construction; ! Israel launched last year a tender process for two 100-125MW CSP plants (IPPs) in the Negev (ASHALIM). ! Morocco: 470 MW Integrated Solar Combined Cycle station at Aïn Beni Mathar with 20 MW CSP. ! In addition, in 2008, the Abu Dhabi Future Energy Company (Masdar17) issued an invitation to build, own and operate a 100 MW CSP plant in Madinat Zayad, Abu Dhabi. The plant will use parabolic trough technology and is expected to be operational by the end of 2010. The total RE-based power generation in 2005 was 357 TWh, representing 15.5 % of total power generation for the same year. Large hydro sources dominate renewable energy use in power generation (97%), with Turkey, Egypt and Morocco accounting for most of the large hydro based generation. Excluding large hydro, the level of RE-based generation falls to only about 1.6 TWh (0.45 % of total power generation). Egypt ranks first, followed by Turkey, Morocco, Tunisia and Algeria. Noteworthy is the dominance of wind for RES (excl. Large Hydro)-based power generation in Turkey, Egypt and Morocco. Table 7: Share of Renewables in Electricity (%)* 1980 1990 2000 2007 Algeria Share of renewables in electricity generating capacity % 13.2 6.1 4.4 2.8 Share of electricity in gross electricity consumption % 3.6 0.8 0.2 0.6 Egypt Share of renewables in electricity generating capacity % 50.2 23.4 18.6 13.3 Share of renewables in gross electricity consumption % 51.8 23.5 17.7 11.1 Israel Share of renewables in electricity generating capacity % 0 0.1 0.1 0.1 Share of renewables in gross electricity consumption % 0 0.1 0.1 0.1 Jordan 17 MASDAR city has been chosen lte June 2009 to house the International Renewable Energy Agency (IRENA) headquarters. As part of its commitment to Irena, the UAE offered to support the agency with a grant of $136m over a six years period, while also covering all operational costs in perpetuity. Moreover, the Abu Dhabi Fund for Development created a special endowment of up to $50m annually to be used for loans in support of renewable energy projects in the developing world. Identification Mission for the Mediterranean Solar Plan, Final Report, January 2010 36