Earlier this year Algeria announced its updated plan to install up to 22 gigawatts (GW) of renewable energy capacity by 2030, with reports suggesting that Algeria could generate up to 27% of its energy needs from renewables by this time through the development of solar PV, CSP and wind power.
Solar PV and wind projects will benefit from a 20 year power purchase agreement (PPA), a draft of which was published by the Commission for Regulation of Electricity and Gas earlier this month. The PPA was issued in French only, however Eversheds has translated the document into English.
The preferential feed in tariffs (FiT), announced by the Algerian Ministry of Energy in April of 2014 will be guaranteed for the 20 year term of the PPA. Base tariffs will range from 12.75 Algerian dinars per kilowatt hour (DZD/kWh) (approximately 11.87 US cents) to 15.94 DZD/kWH (approximately 14.83 US cents) for solar PV projects.
Following an initial five-year phase during which base tariffs are applicable according to the operating hours of the power plant, the applicable feed in tariff will be revised based on the plant's effective output. Accordingly, the FiT for facilities with a low output will be increased by up to 15%, while the feed-in tariff applicable to facilities with a high output will be reduced by up to 15%.
FiT rates for renewable projects will be subsidised by a 1% levy on oil revenues charged by the National Fund for Renewable Energies and Cogeneration.
Solar PV projects have been awarded to Yingli Solar and Belectric and will be developed by a subsidiary of the state-owned utility, Sonelgaz, with Yingli Solar and Belectric being responsible for design and construction. There are also plans to construct a further 19 solar power plants in the southern isolated networks.
In terms of Algeria’s general investment climate, in the face of falling oil prices and a strong US dollar, the heavily managed Algerian dinar has depreciated sharply against the dollar since mid-2014, albeit a large stock of foreign-exchange reserves and rigid capital controls will allow the Central Bank to stabilize the dinar should it wish to do so. In addition, under Algerian corporate law, an Algerian company must have at least 51% Algerian national ownership.
International financing has not yet been explored in Algeria – since 2009, all infrastructure projects have been financed through local Algerian banks or government entities. Government guarantees are not readily provided, and power purchase agreements (PPAs) are negotiated in dinars, with conversion of revenues through the Central Bank.