According to the National Commission for Renewable Energy and Energy Efficiency (CEREFE), Algeria had 437 MW of solar power generation capacity at the end of 2023. The country has an average of 3,000 hours of sunshine per year and a global horizontal irradiation of almost 1,700 kWh/m²/year in the north and 2,263 kWh/m²/year in the south.
Nevertheless, almost 100% electrified Algeria generates 99% of its energy from domestic gas. Solar energy has long been limited to research projects and the electrification of villages too remote to connect to the electricity grid. Of the 11 MW of solar energy added in 2023, only 1.5 MW was connected to the grid. Of the remainder, 5.3 MW of public lighting consisted of electricity and 3.7 MW of PV kits for isolated areas.
Solar tenders
President Abdelmadjid Tebboune wants an energy transition to diversify domestic energy sources and protect natural gas export capacity. Hydrocarbons contributed an average of 19% to Algeria’s GDP between 2018 and 2022.
“The investments made and ongoing in renewable energy will allow us to reach a production of around 4 GW by early 2025,” said Mourad Issiakhem, director of energy efficiency at CEREFE. He referred to two major solar tenders launched in 2023 by national electricity and gas company Sonelgaz, with a combined capacity of 3 GW.
The successful bidders, announced in March 2024, will provide engineering, procurement and construction (EPC) services to the sites that Sonelgaz will manage.
“Considering that in EPC mode the cost per kilowatt hour of energy generated is higher than in IPP [independent power producer] In this mode, most countries are now opting for IPP contracts,” said Mouloud Bakli, CEO and founder of energy consultant Clean Power Engineering. “By making this choice for its first large-scale tenders, the Algerian government wanted to limit the risks associated with guarantees and the complexity of long-term, bankable contracts.” Bakli said he expects future tenders to be based on IPP.
The 1 GW solar tender was awarded to five bidders. Algeria’s Amimer Energie will use JinkoSolar tunnel oxide passivated contact (TOPCon) modules at its 100 MW and 50 MW sites. Turkish infrastructure company Ozgun secured 300 MW, as did China State Construction Engineering Corp. (CSCEC). A consortium of Algerian company Cosider and inverter manufacturer Fimer, owned by Greybull Capital, has landed 250 MW of solar power.
In the signed part of the 2 GW tender, a consortium of China International Water & Electric Corp. and China Nuclear Industry Huaxing Construction secured five projects with a total capacity of 780 MW. PowerChina was awarded a 200 MW site with Sinohydro and a 150 MW plant with Zhongnan Engineering Corp. CSCEC won another 200 MW, and Shanxi Installation Group took 80 MW.
Cosider and Fimer have won two projects in the provinces of Béchar (with a capacity of 120 MW) and Toggourt (150 MW). Algeria’s Hamdi Eurl won two 80 MW power stations and domestic solar panel manufacturer Zergoun, together with Ozgun, secured 80 MW in Guerara.
The 19 projects represent an investment of €1.8 billion ($1.96 billion) and bidders’ proposed solar prices ranged from €0.54/W to €0.81/W, with an average price of €0.625/W. Leveled energy costs were estimated at $5/kWh to $6/kWh. The successful bidders are expected to enter the civil engineering phase soon. In addition, two separate lots of 200 MW and 80 MW were also awarded to China Railway and compatriot MCC International Corp. respectively at the end of September 2024.
It remains to be seen whether all those power stations will actually be built. Despite setting up a national renewable energy program in 2011, Algeria has suffered several setbacks in the past, including signed or canceled tenders that have marred the renewable energy sector. “A 4 GW tender announced in 2017 never materialized, while in several solar energy tenders not all lots were awarded,” said a representative of the American consultancy Albright Stonebridge. More recently, the ‘Solar 1,000 MW’ tender, which was launched in 2021 under the IPP rules, was eventually abandoned and converted into a 1 GW tender based on the EPC model.
Domestic ownership
This time could – and must – be different if Algeria is to achieve its goal of having 15 GW of renewable energy generation capacity by 2035. Amid existing hurdles – especially regarding foreign investors’ access to the local market and complex administrative processes – the government has started to relax certain rules. The changes include the abolition of the “51/49” rule, which limits the participation of foreign investors in the capital of an Algerian company to 49%. That requirement was eliminated in 2022 for renewable energy projects. “This restriction has been identified by many global companies as a major barrier to investment,” said Albright Stonebridge representative. “Foreign companies can now hold a majority stake in project companies, which is a positive development.”
Moreover, the development of PV projects is now accompanied by a real strategy to create a local industrial sector, with the aim of creating 12,000 jobs. With regard to such “made in Algeria” products, the tender specifications contain an explicit clause regarding local content. If more than 35% of the value of the materials comes from domestic production, candidates will receive a 25% bonus on the total cost of their installation in dollars per watt. Project components covered include photovoltaic panels, mounting structures, wiring, civil engineering and construction services.
For example, the Zergoun-Ozgun consortium benefited from its project because it will equip its solar power plants with its own solar panels, produced at the Ouargla plant in the north of the country. Since June 2022, the manufacturer has had a factory with an annual production capacity of 200 MW for modules based on M10 cells. “In total, Algeria has a solar panel assembly capacity of 500 MW, which is expected to increase to 600 MW to 700 MW by the end of 2025,” Clean Power’s Bakli said. In addition to Zergoun, the manufacturer Lagua Solaire has an annual capacity of 200 MW for the production of solar panels in Algeria. The production plant of Algerian telecommunications and renewable energy company Milltech has a factory in Mila, in the east of the country, with a production capacity of 100 MW for M3-based modules.
Production center
In addition to solar panels, which represent about 20% of the cost of a solar project, the country is also rapidly building cable production capacities. CEREFE mentions in its report the presence of two solar cable manufacturers with an annual production capacity of 1,250 km. In terms of fixed metal structures, several manufacturers have a capacity of around 800 MW and can rely on steel producers already present in the country, such as India’s ArcelorMittal, Turkey’s Tosyalı and Qatari Steel.
By offering its companies a low electricity price of around DZD 4.68 ($0.03)/kWh, Algeria aims to become a hub for solar glass production, both for the domestic market and for American manufacturers, replacing Asian markets that have been affected by an import ban on their photovoltaic equipment. . “Rather than delaying projects, required local content in tenders stimulates domestic demand and represents a real export opportunity,” Bakli said. He mentioned the company Mediterranean Float Glass (MFG), a subsidiary of the Cevital group, which plans to set up a new solar glass production line of 5 GW.
To gradually replace its gas and oil exports, Algeria wants to position itself on the international energy stage as a supplier of blue hydrogen (produced by steam reforming gas equipped with carbon capture technology) and green hydrogen (produced via electrolysis powered by renewable energy sources). In September 2023, the country developed a national strategy with those objectives. Algeria aims to produce and export between 30 TWh and 40 TWh per year of gaseous liquid hydrogen and its derivatives, which could generate around US$10 billion annually. To achieve this, the government promises that a “regulatory framework will be set up in the period 2025-2030 that regulates all activities related to the production, storage, transport and use of hydrogen.”
However, Bakli warned that “several technical barriers remain, in particular the fact that in Algeria solar and wind energy resources are not located near the sea.” The best wind resources are mainly located in the high plains, several hundred kilometers from the Mediterranean Sea, which necessitates the use of the electricity grid to transport green wind energy to the north coast. That could be a disqualifying factor for export prices to the European Union.
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