Sonelgaz is on the verge of finalizing contracts with 19 national and international firms to commence the construction of twenty photovoltaic solar power plants. This development marks a significant stride in Algeria''s ambitious renewable energy agenda, particularly within the scope of the 1000-megawatt and 2000-megawatt projects, with the ultimate goal of generating 15,000 megawatts of solar electricity. This initiative is anticipated to result in substantial savings of natural gas, amounting to several billion cubic meters annually.
Professor Boukhalfa Yaïci, Director-General of Algeria’s Green Energy Cluster, announced on national radio yesterday Sonelgaz’s intention to sign multiple contracts with national and predominantly Chinese companies today for the establishment of 20 photovoltaic solar power plants. These projects, aligned with the 2000-megawatt and 1000-megawatt initiatives, will involve Algerian firms overseeing 42% of the project executions.
The 2000-megawatt initiative involves building 15 photovoltaic solar power plants spread across 12 provinces, with each plant having a capacity ranging from 80 to 220 megawatts. Similarly, the Solar 1000 project includes the installation of five plants across five provinces, each with capacities ranging from 50 to 300 megawatts. These endeavors form integral parts of the overarching 15,000-megawatt program, with plans for similar projects in the country in the near future.
In terms of the project schedule, Yaïci projected a timeframe of 22 months for the completion of both initiatives, with certain plants anticipated to commence operations gradually within the current year.
These projects also hold potential for exports, with ongoing discussions between the European Union and Algeria. Yaïci emphasized Sonelgaz''s pivotal role in the nation’s energy transition strategy, aiming to progressively incorporate renewable energies, particularly solar power, into the national electricity mix.
In terms of financing, Yaïci clarified that Algeria would entirely fund the projects but highlighted the potential for additional financing sources such as public-private partnerships and foreign direct investment. He also noted that the projects would surpass the initially set 35% integration rate, resulting in significant natural gas savings and potentially saving six to eight billion cubic meters annually upon completion of the 15,000-megawatt solar project.
Addressing inquiries about global progress in photovoltaic technology accessibility and affordability, Yaïci acknowledged Algeria’s lag in solar energy development compared to global trends. Yet, he voiced hope that current endeavors would facilitate the development of a specialized domestic solar sector, in line with international progress in deploying renewable energy.
Algeria has long limited the use of solar to villages in the Sahara, but two large-scale tenders for 3 GW of generation capacity are expected to change that. By including a local content clause, the North African nation aims to build an industry around renewable energy.
By the end of 2023, Algeria had 437 MW of solar generation capacity, according to the national Commission for Renewable Energies and Energy Efficiency (CEREFE). The country has an average of 3,000 hours of sunshine per year and global horizontal irradiation of almost 1,700 kWh/m²/year in the north and 2,263 kWh/m²/year in the south.
Nevertheless, nearly 100% electrified Algeria generates 99% of its energy from domestic gas. Solar has long been restricted to research projects and the electrification of villages too remote to be grid connected. Of the 11 MW of solar added in 2023, only 1.5 MW was grid connected. Of the remainder, 5.3 MW powered public lighting and 3.7 MW consisted of PV kits for isolated areas.
President Abdelmadjid Tebboune wants an energy transition to diversify domestic energy sources and protect natural gas export capacity. Hydrocarbons contributed an average 19% of Algerian GDP between 2018 and 2022.
"The investments made, and underway, in renewable energies will enable us to reach a production of around 4 GW by early 2025," said Mourad Issiakhem, director of energy efficiency at CEREFE. He was referring to two major solar tenders launched in 2023 by national electricity and gas company Sonelgaz, with a combined capacity of 3 GW.
"Given that, in EPC mode, the cost per kilowatt-hour of energy generated is higher than in IPP [independent power producer] mode, most countries now choose IPP contracting," said Mouloud Bakli, CEO and founder of energy consultant Clean Power Engineering. "By making this choice for its first large-scale tenders, the Algerian government aimed to mitigate risks related to guarantees and the complexities of long-term, bankable contracts." Bakli said he expects future tenders to be IPP-based.
The 1 GW solar tender was awarded to five bidders. Algeria''s Amimer Energie, will use JinkoSolar tunnel oxide passivated contact (TOPCon) modules at its 100 MW and 50 MW sites. Turkish infrastructure company Ozgun secured 300 MW, as did China State Construction Engineering Corp. (CSCEC). A consortium of Algerian company Cosider and Greybull Capital-owned inverter maker Fimer landed 250 MW of solar.
In the undersubscribed 2 GW part of the procurement exercise, a consortium of China International Water & Electric Corp. and China Nuclear Industry Huaxing Construction secured five projects with a total capacity of 780 MW. PowerChina was awarded a 200 MW site with Sinohydro and a 150 MW plant with Zhongnan Engineering Corp. CSCEC won another 200 MW, and Shanxi Installation Group took 80 MW.
Cosider and Fimer secured two projects in the provinces of Béchar (with 120 MW of capacity) and Toggourt (150 MW). Algeria''s Hamdi Eurl won two 80 MW plants and domestic PV panel maker Zergoun, alongside Ozgun, secured 80 MW in Guerara.
The 19 projects represent an investment of €1.8 billion ($1.96 billion) and the solar power prices proposed by the bidders ranged from €0.54/W to €0.81/W, with an average price of €0.625/W. The levelized cost of energy was estimated at $5/kWh to $6/kWh. The successful bidders are soon expected to enter the civil engineering phase. Additionally, two separate lots of 200 MW and 80 MW were also awarded at the end of September 2024 to China Railway and compatriot MCC International Corp., respectively.
Moreover, the development of PV projects is now accompanied by a genuine strategy to establish a local industrial sector, with the aim of creating 12,000 jobs. Addressing such "made in Algeria" products, the tender specifications included an explicit clause related to local content. If more than 35% of the value of materials comes from domestic production, candidates receive a 25% bonus on the total cost of their installation in dollars per watt. Project components covered are photovoltaic panels, mounting structures, wiring, civil engineering, and construction services.
In addition to solar panels, which represent about 20% of the cost of a solar project, the country is also rapidly establishing production capacities for cables. In its report, CEREFE mentioned the presence of two solar cable manufacturers with an annual production capacity of 1,250 km. Regarding fixed metal structures, several manufacturers have a capacity of around 800 MW and can rely on steelmakers already present in the country such as India''s ArcelorMittal, Turkey''s Tosyalı, and Qatari Steel.
Offering its companies a low electricity price of about DZD 4.68 ($0.03)/kWh, Algeria envisions becoming a hub for solar glass production, both for its domestic market and for US manufacturers, to replace Asian markets affected by an import ban on their photovoltaic equipment. "Far from slowing down projects, the local content requirement in tenders stimulates domestic demand and represents a real export opportunity," said Bakli. He cited the Mediterranean Float Glass (MFG) company, a subsidiary of the Cevital group, which plans to establish a new, 5 GW solar glass production line.
Bakli, however, warned that "several technical barriers remain, particularly the fact that in Algeria, solar and wind resources are not located near the sea." The best wind resources are primarily in the high plateau regions several hundred kilometers from the Mediterranean, which necessitates using the grid to transport green wind energy to the northern coast. That could be a disqualifying factor for export prices to the European Union.
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