Executive Summary
Despite its significant renewable resources, renewable energy has played a small role in Algeria’s energy mix. For decades, Algeria used its hydrocarbon resources to supply ever-growing domestic energy demand. Due to its need to export (rather than burn) dwindling hydrocarbons, the country must now reconsider the role of renewables. Experts predict that unless Algeria adds significant renewable resources to its power generation mix by 2035, it will need to forego hydrocarbon export revenues to supply domestic power demand. Because oil and gas exports generate 95 percent of the country’s hard currency revenues, support up to 40 percent of national economic activity, and undergird a vast social welfare system, politicians are increasingly motivated to develop renewable resources.
Understanding that the clock is ticking, President Abdelmadjid Tebboune, Algeria’s first new president in more than twenty years, ushered in a new era of reform regarding renewables. Both his 2019 inaugural remarks and five-year national development plan included a commitment to a renewable energy transition. Over the last two years, the government has since followed through with the launch of feasibility and rollout studies, creating a new Ministry for Energy Transition and Renewable Energy, and establishing a new state-owned renewable energy company. With a renewed Presidential commitment to energy transition and additional reforms nearing finalization and publication, Algeria may finally be poised to close the gap in installed renewable capacity with its less well-endowed neighbors and break its longstanding resource curse1.
1 Egypt has 5,800 MW installed renewable capacity, and Morocco has 3,447 MW installed renewable capacity.
Current Market Trends
Extensive Renewable Resources
Thanks to its extensive landmass with geographic features conducive to renewable energy generation, Algeria possesses significant renewable energy resources. Its most abundant renewable resource is solar, followed by wind, hydro, and biomass.
Solar: With some of the world’s highest solar irradiance levels, solar generation in Algeria’s desert regions can reach 1,850 to 2,100 kilowatts per hour. Eighty-six percent of Algeria’s territory extends across the Sahel Desert where atmospheric, and geographic conditions enable sunlight to reach the ground year-round. This gives Algeria more than 3,000 hours of sunlight annually and 3,500 hours per year in the desert regions.2
Wind: With a nearly 1,000-kilometer Mediterranean coastline and wind speeds of more than eight meters per second, Algeria contains significant wind resources. In addition, wind power may also be generated from winds coming off the surface of the Sahel in its south.
Biomass: Algeria boasts a bio-power potential of nearly 1,706 GW per hour.3 Household waste makes up the overwhelming majority (96 percent) of potential biogas at 974 million cubic meters. The other sources of bio-power generation derive from olive oil industry waste (2.35 million cubic meters) and sewage (22.91 million cubic meters).
Hydro: Algeria contains modest hydropower potential. Studies conducted in 2020 estimate 103 potential dam sites. The country receives about 65 billion cubic meters of rain annually.4 Today, hydro is Algeria’s most-exploited renewable energy resource.
Renewable Energy Expansion
Algeria’s current renewable capacity of 686 MW is the result of the country’s first national renewable energy strategy launched in 2011.5 Solar and hydro comprise most of this renewable generation, with solar comprising 448 MW, hydropower comprising 228 MW, and wind power comprising 10 MW of the mix. According to new government targets, by 2035, Algeria will generate an additional 15 to 20 gigawatts (e.g., nearly one-third of total power generation) from renewable sources by 2030.
Solar energy will account for most of this growth. There are currently seven solar projects underway that will add 100 MW of installed capacity by the end of 2022. In addition, the government plans to develop 1GW per year for the next three years. To date, Regulatory Gas and Electricity Commission has issued solar energy tenders primarily focused on developing solar photovoltaic (PV) projects. Concentrated solar power (CSP) tenders have not yet been announced but are expected. Sonelgaz and SKTM have also issued hybrid PV project tenders. Companies can expect long-term (e.g., 20-year) power-purchase agreements (PPAs) with Sonelgaz as the counterparty for upcoming tenders. These will likely follow a reverse-tender scheme, in which PPAs are awarded to companies that offer to sell power at the lowest price.6
Expanding Solar PV Supply Chain
Algeria’s solar PV supply chain grew significantly in the last decade. Whereas logistics and civil engineering were once its only capabilities, today, the local ecosystem also includes manufacturers of solar cabling, solar mounting structures, and module manufacturing. The country now seeks to add domestic capacity in EPC services, inverters manufacturing, IPP development, storage solution manufacturing, and operations and maintenance services.
Transmission Expansion
To deliver the power generated at new renewable energy sites, many of which will be remotely located, Algeria will upgrade its existing transmission lines and develop new ones. Sonelgaz is currently building more than 9,930 kilometers of transmission lines and plans to add yet another 24,511 kilometers by 2030.7
2 Bouznit, Mohammed, et al. “Measures to Promote Renewable Energy for Electricity Generation in Algeria.” MDPI, Multidisciplinary Digital Publishing Institute, 16 Feb. 2020, www.mdpi.com/2071-1050/12/4/1468.
3 BOUZNIT, MOHAMMED, ET AL. “MEASURES TO PROMOTE RENEWABLE ENERGY FOR ELECTRICITY GENERATION IN ALGERIA.” MDPI, MULTIDISCIPLINARY DIGITAL PUBLISHING INSTITUTE, 16 FEB. 2020, WWW.MDPI.COM/2071-1050/12/4/1468.
4 HIMRI, Y., ET AL. “POTENTIAL AND ECONOMIC FEASIBILITY OF WIND ENERGY IN SOUTH WEST REGION OF ALGERIA.” SUSTAINABLE ENERGY TECHNOLOGIES AND ASSESSMENTS, VOL. 38, 2020, P. 100643., DOI:10.1016/J.SETA.2020.100643.
5 ALGERIA’S 2011 PLAN CALLED FOR 40 PERCENT (OR 22 GIGAWATTS) OF POWER FROM RENEWABLES BY 2030. HOWEVER, ALGERIA’S ENERGY MIX STILL LEANS HEAVILY ON HYDROCARBON ENERGIES, WITH MORE THAN 96 PERCENT OF POWER GENERATION FROM NATURAL GAS.
6 Tanchum, Michaël, et al. “Algeria Charts a Path for Renewable Energy Sector Development.” Middle East Institute, 20 July 2021, www.mei.edu/publications/algeria-charts-path-renewable-energy-sector-development.
7 Zahraoui, Younes, et al. “Current Status, Scenario, and Prospective of Renewable Energy in Algeria: A Review.” 2021, doi:10.20944/preprints202103.0260.v1.
Competitive Landscape
Domestic Players
State-owned companies dominate Algeria’s renewable energy sector. Traditional players include Sonatrach (the national oil company), Sonelgaz (the power utility), and the Algerian Energy Company (a joint venture between Sonatrach and Sonelgaz). Companies interested in doing business in Algeria will primarily interact with SHAEMS, a company owned by Sonatrach and Sonelgaz and created to serve as a one-stop shop for companies pursuing larger IPP renewable energy projects. Upcoming tenders will include Sonelgaz, Sonatrach, AEC, or SHAEMS as the main party to the agreement. Other governmental entities that work in renewable energy include the Ministry for Energy Transition and Renewable Energy, the Ministry of Energy, and the Regulatory Gas and Electricity Commission (CREG).
International Competitors
The following international companies are already working in renewable energy in Algeria:
- ABM (U.K.)
- AFD (France)
- Belectric (Germany)
- China Three Georges Corporation (China)
- Cobra (Spain)
- Duferco Energia (Italy)
- Elsewedy Cables (Egypt)
- Engie (France)
- Eni (Italy)
- Gaia Energy (Netherlands)
- NertaSolar (Spain)
- Mondragon Assembly (Spain)
- Özgün Inşaat (Turkey)
- Power China (China)
- Qi Energy (U.A.E.-U.K.)
- RnE (U.K.)
- SAIPEM (Italy)
- Total Energies (France)
- Veolia (France)
Best Prospects for U.S. Exporters
The Algerian government seeks foreign suppliers of new technology, technical know-how, and expertise in the following areas:
Solar PV
- PV modules
- Rotors, swiveling equipment, batteries
- Sun-tracking technologies
- Off-grid all-in-one solar solutions
- Portable water treatment solar-based units
- Solar applications kits for agriculture
Wind
- Wind turbines and related equipment
Grid Expansion and Stability
- Advanced utility-scale storage solutions
- Green hydrogen
- Microgrids
- Smart grid and grid stability solutions
- Maintenance and repair services, including artificial intelligence diagnostics
- Interconnection MV-HW lines for dissemination of renewable energy within the national electric grid
Regulatory Environment
Algeria’s regulatory environment is a state of transition. In 2019, the Algerian government passed new exemptions to its longstanding “51/49 Rule” that previously prevented foreign companies from owning majority stakes in Algerian companies. This change was the first step in opening the country to foreign investment. Algeria also adopted a new National Renewable Energy and Energy Efficiency Development Plan, the centerpiece of Algeria’s regulatory reform efforts. This plan includes the creation of new government agencies and market liberalization policies to encourage renewable energy growth.
To oversee Algeria’s renewable energy rollout, in June 2020, the government created the Ministry of Energy Transition and Renewable Energies (MTEER). By creating MTEER, the government hopes to end previous managerial problems and competing interests that plagued Algeria’s 2011 national renewable energy initiative. In 2021, the government also created a new renewable energy company, SHAEMS. Reporting to MTEER and owned by Sonatrach and Sonelgaz, this company serves as a one-stop shop for all prospective investors and contractors and will issue renewable energy tenders, award contracts, and negotiate power purchase agreements.
To truly open the market to new companies, however, the government needs to take additional measures. First, it needs to reform longstanding legislation that provides Sonelgaz with monopoly power over renewable energy development. Second, it needs to adopt a regulatory framework that complies with international IPP/PPA bankability standards. These elements include enabling foreign project financing, adopting long-term bankable power purchase agreements with guarantee packages, allowing foreign currency indexation, and setting up a sustainable administrative and financial operational ecosystem.
Market Entry Strategies
Algeria is a latecomer to the renewable energy space, and its need to close the gap in renewable power generation presents significant opportunities for American IPP and EPC companies. At the same time, Algeria seeks to develop domestic capacity in this area. American companies should therefore expect to encounter government-mandated local content requirements for modules, cables, and mounting structures. For EPC companies, it is essential to form consortiums with developers and well-vetted local companies who can obtain financing from local banks. For additional guidance on factors to consider when entering the Algerian market, visit our Country Commercial Guide.
Market Barriers
Multiple challenges face U.S. companies seeking to operate in Algeria. For a discussion of the most prominent issues facing companies in all sectors, visit our Country Commercial Guide.
Due to the multiplicity of stakeholders in renewable energy, projects developers should expect to undertake sustained coordination efforts during the initial phases of kick-off and implementation.
US Commercial Service Contact Information
For additional information, please contact:
Michele Smith, Senior Commercial Officer
U.S. Commercial Service Algeria
Michele.Smith@trade.gov
Kamal Achab, Senior Commercial Specialist
U.S. Commercial Service Abu Dhabi
Kamal.Achab@trade.gov
