Algeria's energy transition plan
Amid profound shifts in global energy and its first new government in nearly twenty years, Algeria announced the transition of its energy model away from hydrocarbons to renewable energy. This is significant given that Algeria generates almost all its power from hydrocarbon resources. But years of low oil prices and an absence of significant oil discoveries have left the government with a stark choice to either push a bold renewable energy agenda or consume its oil and gas export revenues. Since Algeria’s state-driven economy is 60 percent funded by oil and gas export revenues, it is no surprise that it chose the former and unveiled a comprehensive energy transition plan as part of its 2020 Five Year Development Plan. Algeria’s energy transition plan consists of three structural components - a new government ministry, a regulatory reform, and a new national renewable energy company.
• Ministry of Energy Transition and Renewable Energies (METRE): In June 2020, the government created METRE, the first of two new bodies to manage and carry out the transition plan. The government hopes to end managerial problems of competing prerogatives witnessed in earlier renewable energy initiatives by creating this new ministry. The government will also provide the new ministry with the resources that energy transition planners need to better manifest initiatives.
• Regulatory Reform: On January 25th, 2021, the Ministry of Energy declared that the 2002 law on electricity would soon be reformed to open the market to small and medium-sized enterprises working in renewable energies, reduce natural gas consumption, and accelerate renewable energy production. Furthermore, the ministry indicated that any price changes would only apply to electricity operators and large consumers versus consumers at large.
• National Renewable Energy Company: On April 19th, 2021, the government created a stand-alone renewable energy company, SHAEMS, under the authority of METRE. It will serve as a one-stop-shop for all prospective investors, EPC contractors, service providers, and other renewable energy ecosystem players. It will also issue renewable energy tenders, award contracts, and negotiate power purchase agreements.T
The plan includes three substantive pillars: a National Energy Conservation and Efficiency Program, a National Renewable Energy Development Program, and a new National Energy Mix Model. Energy conversation and efficiency efforts will improve energy efficiency by ten percent annually in transportation, housing, and industry. Renewable energy development will focus on developing extensive solar resources in the high plateaus and Sahel regions and substituting natural gas consumption with blue and green hydrogen. Finally, the country’s energy mix model aims to reach at least 30 percent power generation from renewables by 2030 and generate 25 gigawatts of power from green and blue hydrogen by 2050.
Despite the urgent need to transition to renewable energy, some analysts are skeptical of the renewed energy transition plans due to the failure to meet similarly ambitious goals announced in the last decade. For example, in 2011, Algeria issued its first renewable energy plan, which sought to install and generate 22 gigawatts (e.g., 40 percent of its generation capacity) from renewable energy by 2030. Instead, today Algeria generates only 411 megawatts from renewable energy sources. Nonetheless, officials hope that the new strategy described will reinvigorate attempts to bring more than 1 gigawatt of solar energy online by year-end and an additional 13 gigawatts by 2030.
To understand opportunities for American exporters in Algeria’s developing renewable energy landscape, contact Kamal Achab, Senior Commercial Specialist at kamal.achab@trade.gov.