In an exclusive interview with SolarQuarter Middle East, Ali Kanzari, Senior Expert in Energy Efficiency & President at CSPV – Renewable Energies threw light on Tunisia’s solar ambitions and plans. His overview on Tunisia’s solar policy, business environment, financing initiatives and further development plans will help readers to understand the region in detail.
1. How has the renewable sector in Tunisia performed under Covid crisis?
The Covid-19 pandemic is having a major impact on energy systems around the world, curbing investments and threatening to slow the expansion of key clean energy technologies. It causes a strong disruption in the development of renewable energies. The global pandemic has imposed unprecedented constraints on social and economic activity – particularly on mobility – with severe impacts on energy use. Global energy demand is expected to contract by 6% in 2020, the largest drop in more than 70 years.
Renewable power sources have so far demonstrated resilience in the face of the Covid-19 crisis. The share of renewables in global electricity supply reached nearly 28% in the first quarter of 2020, up from 26% during the same period in 2019. The negative impacts of COVID-19 on the clean-energy economy have been amply chronicled in recent months. A struggling economy will reduce demand for wind and solar development, and may limit the availability of tax equity financing.
Furthermore, restriction of movement of non-essential workers has caused delay in construction activity on renewable projects, as a result of the disruption of supply chains, the installation of distributed solar PV has dramatically reduced in the country. Supply chain disruptions, construction delays and macroeconomic challenges increase the uncertainty about the total amount of renewable capacity growth in 2020 and 2021. Due movement restrictions and closure of ports, renewable energy developers are facing significant challenges in obtaining equipment and are unable to access project sites.
The slow pace of economic recovery, heightened pressure on public budgets, and the poor financial health of the energy sector overall, further exacerbate the policy uncertainties and financing challenges that were already present. While renewables in several markets were already facing financing, policy uncertainty and grid integration challenges at the beginning of 2020, COVID-19 is now intensifying these concerns. Almost half of the wind and solar PV projects in development for the next five years are tied to planned – but not finalised
The Covid-19 crisis will in fact impede clean energy transition progress, particularly in heavy industries with tighter margins and fewer scalable technologies available to abate emissions, as attention is focused on reviving production levels and keeping companies financially buoyant.
Please give us a brief overview of the policy & business environment of Tunisia’s Solar Market .
To face the problem of energy dependence and to fight against climate change, Tunisia launched the Tunisian Solar Plan in 2009. The country aims to install 3.8 GW of renewable energy capacity by 2030.
To achieve these objectives, the government has passed the law N°12-2015 on electricity production from renewable energies in 2015. This law completes the existing regulatory framework and provides a legal framework for the development of large-scale renewable energy projects. The 2015-12 law distinguishes three main support mechanisms for renewable energy projects (GIZ, 2019):
- Electricity production for export: currently not used;
- Electricity production for self-consumption (“autoproduction”) and sale of surplus: mainly used by energy-intensive industries, either on-site (and planned off-site soon). The surplus is sold to STEG (Law 2009-7) in within the limit of 30% of the energy produced;
- Electricity production for the needs of the Tunisian local market sold under a Power Purchase Agreement (PPA) to be concluded between the producer and STEG for a period of 20 years, extendable for 5 years. This is divided into two regimes:
- The authorisation regime: Projects below 10 MW for solar energy and 30MW in Wind, awarded upon call for tender process;
- The concession regime: Projects over 10 MW for solar and over 30 MW for wind, awarded via concessions after calls for tenders;
Also the government was enacted in April 2019 the transversal law, it is the law relating to the improvement of the investment climate. It aims at removing the administrative obstacles in order to mobilise investments and facilitate procedures. This law gives the possibility to private companies to produce electricity from renewable energy for their own needs and to sell the surplus to STEG.
3. Currently, what is the situation of financing of the large scale solar projects in the region?
Tunisia also offers a large range of incentives and subsidies for renewable energy projects. Among these include:
- Fonds Tunisien de l’Investissement (Tunisian Investment Fund, FTI): a public fund created in 2016, which provides grants to projects in some specific sectors including renewable energy. The FTI can also invest in equity in some projects.
- Project d’Intérêt National (Project of National Interest): qualification criteria on investment size (> EUR 16 Million) or job creation (500 jobs). The project stipulates grants and tax reductions, following the approval of the Conseil Supérieur d’Investissement. In the framework of this project, the state also might finance a part of infrastructure work.
- Fonds de Transition Energétique (Energy Transition Fund, FTE): offers grants, equity financing and improved loan terms to firms willing to invest in renewable energies (mostly for self-consumption projects)
- Fiscal support, reduced VAT on “renewable energy components” and customs tariffs if there is no local equivalent available. There is also a reduced corporate income tax, depending on the firm’s income and location of the project (no tax for a few years, then reduced CIT)
4. What major improvements are required in rooftop solar projects in Tunisia?
The creation of an independent energy regulatory agency, under the Ministry of Energy is essential for the development of renewable projects. The features of such a regulatory entity could potentially mirror the similarly-purposed INT (Instance Nationale des Telecommunications). Regulatory and operational roles need to be clarified and clearly separated to avoid conflicts of interest. The state-owned energy utility STEG exerts significant influence over renewable project development by the private sector. STEG is the sole authorised off-taker of electricity produced by private projects for local consumption, and of up to 30% surplus from the self-consumption regime. Moreover, STEG is a member of the commission tasked with granting authorisations for renewable projects for local consumption and auto-generation. Finally, STEG is the grid operator responsible for ensuring overall efficiency and reliability in Tunisia’s grid.
Administrative processes for renewable energy development should be further streamlined to reduce transaction costs and increase investment attractiveness. Current challenges are due to delays in receiving information and responses from the grid operator STEG and in having the grid connection constructed. Some of these challenges could be addressed by simplifying procedures, introducing a one-stop shop, possibly a simple notification system for small projects, and enhancing the use of digital tools to provide information to and communicate with project developers.
5. How do you expect the solar sector to grow in the region in the next 5 years?
The Tunisian government has recently announced plans to invest US $1 billion towards renewable energy projects including the installation of 1,000 megawatts (MW) of renewable energy. According to the Energy General Direction of the Tunisian Ministry of Energy and Mines, 650 MW will come from solar photovoltaic, while the residual 350 MW will be supplied by wind energy. Under new plans, Tunisia has dedicated itself to generating 24% of its electrical energy from renewable energy sources in 2025,30% in 2030.