Overview
Tunisia’s power sector is well developed, and nearly the entire population enjoys access to the national electricity grid. Tunisia has a current power production capacity of 5,944 megawatts (MW) installed in 25 power plants, which produced 19,520 gigawatt hours in 2022. State power utility company STEG controls 92.1% of the country’s installed power production capacity and produces 83.5% of the electricity. The remainder is imported from Algeria and Libya as well as produced by Tunisia’s only independent power producer (IPP) Carthage Power Company (CPC), a 471-MW combined-cycle power plant. The CPC plant was officially handed over to STEG in May 2022 ending a 20-year power purchasing agreement between both companies. As a result of delays in power plant construction, the power sector does not possess excess generation capacity and is susceptible to brownouts. STEG is hard-pressed to meet peak summer electricity demand, let alone keep up with Tunisia’s annual 5% growth in power consumption.
Approximately 97% of Tunisia’s electricity is generated from fossil fuels, mainly natural gas. Through June 2023, nearly 47% of Tunisia’s natural gas needs were met through imports (mainly from Algeria). Local gas production comes from the concessions of the country’s national exploration company, ETAP, as well as foreign companies’ concessions. The highly anticipated Nawara gas field, which finally started production in early 2020, is expected to help reduce the overall energy deficit by 20% and gas imports by 30% once it reaches peak production. In addition to local gas production, Tunisia receives natural gas as a royalty on the Algerian Transmed gas pipeline crossing Tunisia to Italy. In 2022, only 3% of Tunisia’s electricity is generated from renewables, including hydroelectric, solar, and wind energy.
While STEG continues to resist private investment in the sector, Parliament’s 2015 energy law encourages IPPs in renewable energy technologies. The law’s implementing decrees and a Power Purchase Agreement template were published in early 2017.
The first IPPs in renewable energy were announced in the second half of 2017, and so far, the GOT has awarded to private companies 24 solar projects of 10 MW each, two solar projects of 50 MW each, two solar projects of 100 MW each, one solar project of 200 MW, and four wind projects of 30 MW each. Most of the projects have yet to begin generating any power.
To meet increasing demand for electricity and promote energy conservation, the GOT allows private companies and households utilizing co-generation and renewable energy technologies to produce electricity for their own consumption and sell up to 30% of excess electricity exclusively to STEG at a fixed price. The GOT may provide grants and incentives for energy conservation and energy efficiency projects. In July 2021, the GOT announced the elimination of the pre-authorization requirement for private self-production of electricity from renewable energies under 1 MW. Through June 2023, the total capacity of installed renewable energies reached 565 MW.
In June 2022, the GOT announced an action program to promote green hydrogen production for the domestic and export markets as well as the creation of a legal framework to encourage foreign investment in this sector.
Leading Sub-Sectors
Renewable energies
Though hydrocarbon-based generation will continue to dominate Tunisia’s overall energy picture in the near term, the potential for growth in wind and solar power generation is significant. The GOT is highly interested in diversifying into renewable energy technologies to help meet growing domestic electricity demand. The renewable energy law adopted in 2015 encourages private businesses to generate and use clean energy. In May 2019, Parliament passed a bill to improve the business climate, permitting businesses to create separate special-purpose vehicles entirely dedicated to power generation. This policy change allows companies to produce power for their own consumption at more competitive prices.
Through June 2023, Tunisia had about 565 MW of installed renewable energy capacity of which 240 MW was wind power, 263 MW solar power, and 62 MW of hydroelectric power, representing a combined 8% of national energy production capacity. The GOT aims to raise the usage of renewable energy resources to 35% of total power capacity by 2030.
Green hydrogen
Tunisia’s abundant solar and wind resources, as well as its proximity to Europe (which has an increased need for new and clean energy sources), make it a very attractive location for green hydrogen production. The already-available Transmed gas pipeline that connects Algeria to Italy through Tunisia is an important asset for investors considering exports to Europe. The GOT is also working on establishing a new legal framework to promote the production and use of green hydrogen and its derivatives in the local market.
Power generation
During the last 10 years, STEG was active in launching power projects, some of which utilize General Electric (GE) combined-cycle technology. Two tenders for gas-fired power plants issued in 2014 were awarded in 2017 and 2018 and came online in 2019 and 2022. Tunisia is expected to continue launching tenders for gas-fired power plants over the next five years.
Opportunities
While projects are often subject to delays, excellent commercial opportunities exist for the sale of power generation equipment to STEG-operated and IPP electricity projects. The sector also offers opportunities for possible Build-Own-Operate (BOO) or Build-Operate-Transfer (BOT) projects. Much of Tunisia’s electricity production comes from gas turbines. Major players in this sector include General Electric (USA), Mitsubishi (Japan), Ansaldo (Italy), and Siemens (Germany).
In 2019, STEG launched a tender to install a pilot smart grid power distribution system of 400,000 smart meters. The project was awarded in April 2022 to several foreign bidders including U.S. bidders, with an implementation phase of 2023-2025.
In 2024, the GOT is also expected to launch a tender for the construction of at least one 470-550 MW combined-cycle power plant in Skhira (south Tunisia) as an IPP.
In May 2018, the Ministry of Energy and Mines published a call for private projects to build renewable power plants with a total capacity of 1,000 MW (500 MW wind and 500 MW solar). While the wind projects are still in the prequalification phase, the GOT awarded all 500 MW in solar projects to three private developers in 2019.
In January 2023, the Ministry of Energy launched three new calls for tenders for the development of solar and wind projects over 2023-2025 with a total capacity of up to 1,700 MW. These tenders include 10 photovoltaic power plants, eight of 100 MW each and two of 150 MW each in addition to eight wind farms of 75 MW each. The GOT plans to continue launching tenders after 2025 with the objective of reaching a total generation capacity from renewable energy sources of 3.5 gigawatts by 2030. One third of the projects will be for wind farms and two thirds for solar photovoltaics.
Tunisia’s national grid is connected to those of Algeria and Libya which together helped supply about 12% of Tunisia’s power consumption in the first half of 2023. Moreover, in August 2023, Tunisia’s sub-sea connection project with Italy, called ELMED, was approved for $337 million funding from the European Commission. The project, estimated to cost $932 million, consists of the construction of a 600 MW high-voltage direct current cable that will link the grids of Tunisia and Italy and enable bidirectional power flow between Africa and Europe via a 124-mile undersea cable. The ELMED project also received $268.4 million in financing from the World Bank, specifically to build an Alternative Current (AC)/Direct Current (DC) converter station in the Cap Bon region in addition to the construction of other connecting transmission lines. Construction works are expected to begin in 2024 and be completed in 2028. Once finished, the project will help expand European access to renewable energy.