A flurry of activity at the end of 2021 saved it from being another year of disappointment for Algeria’s underdeveloped clean energy sector.

Late December saw the government make good on 18 months of promises to hold a second solar auction with a tender from the newly created Algerian Renewable Energy Company (Shaems) to install 1GW of PV across the inland north.

Two weeks earlier, Italy’s Eni, the main foreign player in the country’s upstream oil and gas industry, committed to partner government-owned Sonatrach in the development of clean hydrogen and other elements of the decarbonised energy value chain.

Algeria has no shortage of conventional energy resources, possessing some of the world’s largest natural gas reserves, but it has nevertheless suffered financially from a failure to act on renewables: fast-rising domestic energy consumption has been eating into flat or declining natural gas production for several years, reducing the export income that provides the bedrock of government finances.

Fast-rising domestic energy consumption has been eating into flat or declining natural gas production for several years

Yet the country had less than 500MW of installed renewables capacity by the end of 2021, with only another 50MW in the pipeline from its first auction, when weak investor interest resulted in only a third of intended capacity being allocated. And this is despite a target adopted a decade ago to have 22GW onstream by 2030, a goal quietly revised downwards last year to 15MW by 2035.

Chronic inefficiency in policy implementation by both the government and its main energy corporates—Sonatrach and gas distributor Sonelgaz—exacerbated by interminable changes of senior management, have persistently hindered progress.

Meanwhile, when the debut auction for 150MW of solar PV was finally launched in June 2019, developers baulked at the tender rules—notably the 49pc cap on the foreign shareholding.

Financing problems, an unwelcoming investment environment and local content rules inappropriate to a country with a limited domestic solar manufacturing sector also contributed to its disappointing outcome—with a single 50MW plant, at Biskra in the northeast, allocated to local solar manufacturer Condor for a comparatively costly $0.069/kWh.

For most of last year, events seemed to augur more of the same. Chems Eddine Chitour, a veteran energy scientist selected in mid-2020 to lead the newly created Ministry of Energy Transition and Renewable Energies, was replaced in July by Ben Attou Ziane, a medical doctor, while the government repeatedly failed to meet promised launch dates for the 1GW tender, originally intended to comprise ten 100MW plants.

Cabinet approval

However, a cabinet meeting chaired by President Abdelmadjid Tebboune in late November gave final approval for the auction to proceed in its final form, under which developers have been invited to submit both technical and financial bids by 30 April for 50-300MW projects at 11 sites across Bechar, El Bayadh, El M'Ghair, El Oued, Ghardaia and Ouargla provinces.

Prospective investors are allowed to bid for a maximum of 300MW across one or several facilities and are required to have experience in executing independent power projects—a qualification Algiers lacks. Selected developers will sign 25-year power-purchase agreements with the unnamed public procurer—presumably Shaems or Sonelgaz.

500MW – Installed renewable capacity end-2021

The local content requirements alluded to in the public tender notice was not immediately clear, but independent sources suggest they will be relatively light, bearing in mind the lessons of 2019. Similarly, the shareholding to be assigned to Shaems was unspecified, but unofficial reports have put it at only 25pc.

The first auction showed significant latent interest, with over 90 investors initially registering to participate. Algeria’s solar irradiation levels are among the highest in the Middle East and North Africa, at an estimated annual average of 2,000kWh/m². The government intends to auction another 1GW each year in 2022-24, and while history suggests the chances of adherence to that accelerated schedule are slim, a successful first attempt would likely galvanise progress.

Clean hydrogen

Algeria’s vast renewable and gas resources, coupled with its proximity and existing links to the EU, are also garnering it recognition as a potential source of both blue and green hydrogen.

Unlike its more dynamic Mideast Gulf peers, Sonatrach has had little independently to say about the fledgling industry—being focussed on persuading IOCs to resume long-withheld investment in raising oil and gas production on the back of the passage of a landmark new Hydrocarbons Law two years ago. However, its foreign counterparts are taking note. In July, Eni agreed to conduct technical and commercial feasibility studies on a pilot green hydrogen project while, in December, the pair signed a new memorandum of understanding to assess joint opportunities in renewables, hydrogen, carbon capture and storage and other decarbonisation-oriented initiatives.

The end goal of Algeria’s nascent hydrogen plans was indicated weeks before by a deal struck for Italian gas grid operator Snam to acquire a 49.9pc stake in the Eni-owned pipelines transporting Algerian natural gas to Italy. The move was billed as creating synergies of expertise that would ultimately enable “potential development initiatives within the hydrogen value chain from North Africa”. In other words, the infrastructure could be converted to carry Eni-produced hydrogen to the EU as the bloc decarbonises. “North Africa could become a hub for producing solar energy and green hydrogen,” says Snam chief executive Marco Alvera.

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Author: Clare Dunkley