Renewable Energy Industry in Tunisia: Challenges and Opportunities

Renewable Energy Industry in Tunisia: Challenges and Opportunities

The demand for energy in Tunisia has been steadily growing over the last decade due to socio-economic development and energy subsidies from the government. In 2000, the country reached its energy balance equilibrium and by 2010, the energy need has grown to the oil equivalent of an additional 8.2 million Toe..^[1]High dependence on fossil fuel and suitable natural opportunities for renewable energy (RE) generation urged the Tunisian government to develop a new sustainable energy policy.

Starting in 1985 first major measures were taken with several energy laws in 2004 and 2009, setting renewable energy development as a priority in energy policy. A three year programme for 2005-2007 was implemented and led to the installation of around 120,000 m² of solar water heaters, distribution of over a million energy saving lamps and to the establishment of over 230 energy efficiency programme contracts. The total investment amounted to TND 250 million (EUR 140 million), of which an estimated 90 % came from private investors. ^[2]

During the same period the government launched a US$ 31,8 million Energy Efficiency Program in the Industrial Sector (Programme Efficacité Energétique dans le Secteur Industriel) managed by the World Bank. Local private sector sources were main investors in the project (US$18.4 million) with the rest (US$ 8.5 million) being provided by Global Environmental Facility (GEF) and public funds. ^[3]

These programmes proved to be efficient and a four year plan for 2008-2011 was approved to further develop renewable industry. As a result, the contribution of renewable energy increased from 43 kToe in 2007 to 306 kToe in 2011 and constituted 13 % in total primary energy consumption. The plan was also backed up by the World Bank and it’s Energy Efficiency and Renewable Investment Project. ^[4]

Tunisia now is one of the major targets for the investment in solar power facilities in the MENA region. With nearly 40 per cent of country’s territory lying in Sahara desert, it is a perfect location for harnessing solar energy and the total area of installed solar thermal collectors in the country increases constantly (Figure 1).

Figure 1. Installed solar power collectors 1990-2010

Source: ANME, retrieved from GIZ^[5]

In 2009 the Tunisia’s Solar Plan was approved to promote the RE industry and reduce consumption of fossil energy sources. The aim of the plan is to cover 40 potential solar projects, and when completed in 2016, national energy consumption is expected to shrink by 660 ktoe per annum^[6].

A major private initiative came from the TuNur Ltd. – a joint partnership between a group of Tunisian investors and UK-based Nur Energie, aimed at constructing a 2,000 megawatt Concentrated Solar Power (CSP) plant in the Kebili Governorate of Tunisia in 2015.

The project, supported by the DESERTEC Foundation, will supply some 700,000 houses across the Mediterranean by a high-voltage transmission cable. It puts a value on land that has no or little alternative use, providing a low cost (around €0.08/kWh) clean energy^[7]. According to the DESERTEC statement, only 0,3 percent of the desert area in Africa is enough to support the electricity need of Europe, Middle East and North Africa (EMENA).^[8]

The TuNur project might bring along many economic and political benefits for Tunisia in short and long-term perspectives. According to the organisation, the creation of around 1,500 direct and 20,000 indirect jobs for the manufacturing and operation of the CND plant is expected^[9]. As the construction requires around 825,000 flat plate mirrors and steel heliostats, it will also build up a demand for new local manufacturing industries.^[10] Till Stenzel, the German chief operating officer of Nur Energie, noted that up to 60 percent of the total investment will stay within the country.^[11] In case of success, the TuNur project will strengthen economic and political interdependence between Europe and Tunisia and will boost further North-South cooperation.

With a certain successful developments in the RE industry, there are still setbacks mainly related to the legislation and government policies. According to OECD, Tunisia is a transition country with political risk perceptions and has some milestones in the process of the liberalisation of its energy market. A major restraint for investors is a lack of transparency and little communication surrounding national energy policies. ^[12]

As the Regional Centre for Renewable Energy and Energy Efficiency reports^[13], there is a number of issues the government has to cope with, such as:

– absence of policy of providing financial guarantees to private investors to ensure payment under power purchase agreements

– no feed-in tariffs for RE

– no priority access for RE

– no land allocated for the development of large-scale wind projects.

– no detailed solar atlas published

– Land for large-scale solar projects is not allocated yet for private development.

However, an official target for RE is to constitute 10 % in total energy mix by 2016 and 40 % by 2030. Therefore a number of tax incentives is provided by the the National Fund for Energy Saving (FNME). These include financial assistance for projects in agriculture and rural areas, solar roofs, biogas and wind energy generators. A research and development is supported by Borj-Cedria Science and Technology Park, which consists Research and Innovation Park, University Park, and Production Park. The ease of doing business in Tunisia is relatively easy with a rank 46 out of 183 by the respective index of the World Bank.^[14]

The political situation in Tunisia has been challenging since the 2011 Jasmine Revolution and a change of several governments. The newly formed government led by Ali Larayedh since March 2013 has been unfavorable amongst citizens. The ruling coalition introduced tax rises on petrol, milk and alcohol as well as subsidy cuts aimed to reduce the budget deficit. Moreover, the petrol prices were increased by 6.8 percent, which instigated strikes of owners of petrol stations.^[15]

But despite massive protests the economy showed growth already in 2012 as a result of the rebounded tourism and mining industries and increased domestic consumption caused by raised public expenditures on wages.^[16] A $1.75 billion standby loan from the IMF is expected to “support the implementation of the Tunisian authorities’ reform program to promote private investment, foster sustainable job-creation, reduce economic and social regional disparities, and strengthen social policies to protect the most vulnerable.” – according to IMF Managing Director Christine Lagarde.^[17] The overthrow of the dictatorship and a democratic path are attracting foreign investment. The World Bank has reported that, “Tunisia has successfully completed the first phase of its political transition to a multi-party democracy”.^[18]

This article was written by Oleh Holodnyak. Graduate in International Business Management, currently pursuing Master’s Degree in Global Studies at the University of Vienna. Since 2010 he has been working as a writer/editor for Bokeh.com.ua – a social media for photographers. He also volunteered for the Youth Leader Magazine, doing translation into the Russian language. His professional interests renewable energy and sustainable development. He enjoys doing sports and photography.