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Algeria has long limited the use of solar to villages in the Sahara, but two large-scale tenders for 3 GW of generation capacity are expected to change that. By including a local content clause, the North African nation aims to build an industry around renewable energy.
By the end of 2023, Algeria had 437 MW of solar generation capacity, according to the national Commission for Renewable Energies and Energy Efficiency (CEREFE). The country has an average of 3,000 hours of sunshine per year and global horizontal irradiation of almost 1,700 kWh/m²/year in the north and 2,263 kWh/m²/year in the south.
Nevertheless, nearly 100% electrified Algeria generates 99% of its energy from domestic gas. Solar has long been restricted to research projects and the electrification of villages too remote to be grid connected. Of the 11 MW of solar added in 2023, only 1.5 MW was grid connected. Of the remainder, 5.3 MW powered public lighting and 3.7 MW consisted 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 19% of Algerian GDP between 2018 and 2022.
“The investments made, and underway, in renewable energies will enable us to reach a production of around 4 GW by early 2025,” said Mourad Issiakhem, director of energy efficiency at CEREFE. He was referring 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 supply engineering, procurement, and construction (EPC) services to the sites for Sonelgaz to manage.
“Given that, in EPC mode, the cost per kilowatt-hour of energy generated is higher than in IPP [independent power producer] mode, most countries now choose IPP contracting,” 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 aimed to mitigate risks related to guarantees and the complexities of long-term, bankable contracts.” Bakli said he expects future tenders to be IPP-based.
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 Greybull Capital-owned inverter maker Fimer landed 250 MW of solar.
In the undersubscribed 2 GW part of the procurement exercise, 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 secured two projects in the provinces of Béchar (with 120 MW of capacity) and Toggourt (150 MW). Algeria’s Hamdi Eurl won two 80 MW plants and domestic PV panel maker Zergoun, alongside Ozgun, secured 80 MW in Guerara.
The 19 projects represent an investment of €1.8 billion ($1.96 billion) and the solar power prices proposed by the bidders ranged from €0.54/W to €0.81/W, with an average price of €0.625/W. The levelized cost of energy was estimated at $5/kWh to $6/kWh. The successful bidders are soon expected to enter the civil engineering phase. Additionally, two separate lots of 200 MW and 80 MW were also awarded at the end of September 2024 to China Railway and compatriot MCC International Corp., respectively.
It remains to be seen whether all those plants will actually be constructed. Despite having established a national renewable energy program as early as 2011, Algeria has experienced several setbacks in the past, including undersubscribed or canceled tenders that have marred the renewable energy sector. “A 4 GW tender announced in 2017 never materialized, while several solar energy tenders failed to award all lots,” noted a representative of US-based consultancy Albright Stonebridge. More recently, the “Solar 1,000 MW” tender, launched in 2021 under IPP rules, was ultimately abandoned and transformed into a 1 GW tender based on the EPC model.
Domestic ownership
This time could – and must – be different if Algeria wants to achieve its goal of having 15 GW of renewable energy generation capacity by 2035. Amid existing hurdles – particularly regarding foreign investor access to the local market and complex administration processes – the government has started to relax certain rules. Changes include abolition of the “51/49” rule, which capped foreign investor participation in the capital of an Algerian company at 49%. That requirement was abolished for renewable energy projects in 2022. “This constraint had been identified by many international companies as a major barrier to investment” said the Albright Stonebridge representative. “Foreign companies can now hold a majority stake in project companies, which represents a positive development.”
Moreover, the development of PV projects is now accompanied by a genuine strategy to establish a local industrial sector, with the aim of creating 12,000 jobs. Addressing such “made in Algeria” products, the tender specifications included an explicit clause related to local content. If more than 35% of the value of materials comes from domestic production, candidates receive a 25% bonus on the total cost of their installation in dollars per watt. Project components covered are photovoltaic panels, mounting structures, wiring, civil engineering, and construction services.
For example, the Zergoun-Ozgun consortium benefited for its project because it will equip its solar plants with its own solar panels, produced at the Ouargla factory 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-sized cells. “In total, Algeria has an assembly capacity of 500 MW for solar modules, which is expected to increase to 600 MW to 700 MW by the end of 2025,” said Clean Power’s Bakli. Alongside Zergoun, the manufacturer Lagua Solaire has 200 MW of annual capacity for solar panel production in Algeria. The production plant of Algerian telecommunications and renewable energy company Milltech has a facility in Mila, in the east of the country, with a production capacity of 100 MW for M3-based modules.
Manufacturing hub
In addition to solar panels, which represent about 20% of the cost of a solar project, the country is also rapidly establishing production capacities for cables. In its report, CEREFE mentioned the presence of two solar cable manufacturers with an annual production capacity of 1,250 km. Regarding fixed metal structures, several manufacturers have a capacity of around 800 MW and can rely on steelmakers already present in the country such as India’s ArcelorMittal, Turkey’s Tosyali, and Qatari Steel.
Offering its companies a low electricity price of about DZD 4.68 ($0.03)/kWh, Algeria envisions becoming a hub for solar glass production, both for its domestic market and for US manufacturers, to replace Asian markets affected by an import ban on their photovoltaic equipment. “Far from slowing down projects, the local content requirement in tenders stimulates domestic demand and represents a real export opportunity,” said Bakli. He cited the Mediterranean Float Glass (MFG) company, a subsidiary of the Cevital group, which plans to establish a new, 5 GW solar glass production line.
To gradually replace its gas and oil exports, Algeria aims to position itself on the international energy scene as a supplier of blue hydrogen (produced by steam reforming gas equipped with carbon capture technology) and green hydrogen (produced via electrolysis powered by renewables). In September 2023, the country developed a national strategy with those aims. Algeria aspires to produce and export between 30 TWh and 40 TWh per year of gaseous liquid hydrogen, and its derivatives, which could generate around $10 billion annually. To achieve that, the government promises that a “regulatory framework governing all activities related to the production, storage, transportation, and use of hydrogen will be established during the 2025-30 period.”
Bakli, however, warned that “several technical barriers remain, particularly the fact that in Algeria, solar and wind resources are not located near the sea.” The best wind resources are primarily in the high plateau regions several hundred kilometers from the Mediterranean, which necessitates using the grid to transport green wind energy to the northern coast. That could be a disqualifying factor for export prices to the European Union. |
