Solar Plan Report 2010

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

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

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

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

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

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

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

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

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

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

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

! 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

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

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

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

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.

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

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


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


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 : www.odyssee-indicators.org


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
structure
Egypt
structure
Israel
! Final energy intensity at 2005 GDP structure 0.069 0.071 0.068 0.062
structure
Jordan
! Primary energy intensity adjusted to EU structure 0.149 0.223 0.207 n/a
structure
Lebanon
structure
Morocco
structure
Palestinian Territories n/a n/a n/a n/a
Syria
structure


Koe/$2005 at Purchasing Power Parities (PPP) 1980 1990 2000 2007
Tunisia
structure
Source: Enerdata / Energy Efficiency Policies around the World: Review and Evaluation World Energy Council 2007


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

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.


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.


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),

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).


! 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.


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.


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


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


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.


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.


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;


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.


! 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.


Solar Plan Report 2010

Recommended

Recommended

More Related Content

What's hot

What's hot (7)

Similar to Solar Plan Report 2010

Similar to Solar Plan Report 2010 (20)

More from PARIS

More from PARIS (20)

Solar Plan Report 2010