Monday 8th May 2017


May 8, 2017

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Wind Watch
By Ilaria Valtimora

Last week, it emerged that Norwegian utility Statoil is looking at making investments in wind farms in Algeria – and, if Statoil is showing an interest in an emerging market, so should we!

When it comes to renewables, Algeria is often overshadowed by other North African nations, primarily Morocco and Egypt, but this underestimates its importance in the region. Algeria is Africa’s largest nation and a major energy exporter. Its economy has relied on hydrocarbons for its exports and government revenues, standing at 95% and 75% respectively.

However, the steep drop in oil prices has eroded its finances and trade balance. The latest figures from the World Bank show that fiscal deficits have risen from 1.4% of GDP in 2013, to 15.7% of GDP in 2016. Also, the deterioration of the country’s terms of trade led to a 20% depreciation of the Algerian dinar against the US dollar between mid-2014 and 2016; and a monthly inflation rate that last February reached 8.3%. As a consequence, Algeria’s export revenues have halved.

The oil price crash means that Algeria’s historic economic model is no longer sustainable. For this reason, in December the Algerian Prime Minister Abdelmalek Sellal established a taskforce to diversify the country’s oil-dependent economy; and in April it released its ‘new model of growth’ to develop sectors other than oil to 2030, including renewable energy.

Algeria has the resources to achieve growth in renewables. Its mountains and Mediterranean coastline mean it has wind energy potential with an estimated capacity of 35TWh per year.

But it has not exploited this potential: recent Global Wind Energy Council data shows that the country ended 2016 with barely 10MW of installed wind capacity.

To address this, its ‘new model of growth’ led to the country outlining an National Renewable Energy Programme that seeks to install about 22GW of clean energy by 2030, including 5GW of wind farms. Algeria’s Energy Minister Nourredine Bouterfa has recently mentioned plans for a scheme with a capacity of 3GW from wind energy, but he hasn’t disclosed any detail on the project yet.

The country is also gaining international support for this strategy. For example, last March the European Union signed off a $43m package to back renewable energy in the country, a third of which will be allocated to support institutional and regulatory framework.

US multinational General Electric, which has been present in the country for over 40 years in sectors like oil and gas, transportation and water, also expressed its commitment in March to support the ambitious renewables plan developed by the Government.

And just last week Norwegian utility Statoil showed its interest in investing in Algeria’s wind and solar sector. Statoil is already active in Algeria’s gas sector, but it was the first time the utility has expressed public interest in renewables projects, including wind, in the country. Last February, the oil giant launched a new fund dedicated to investing up to $200m in renewable energy projects and new wind schemes in Algeria could then benefit from that.

This sounds promising but, to implement its programme, the country would need a lot more commitment from foreign investors – and we can see obstacles to securing this support.

Algeria was ranked 156th among 190 countries in 2017 research from the World Bank about the ease of doing business. This is because its administrative procedures are very slow, the legislation is very complex, especially tax law, and there is a requirement in place for all new investments to have at least 52% local ownership.

However, the Algerian government seems to be well aware of that and has started to put in place some measures to attract more foreign investments. For example, last year, it adopted a new investment promotion law that seeks to align benefits based on the strategic importance of each sector, and the energy sector is definitely strategically important to the country. It has also put in place tax exemptions and reductions on investments bringing advantages to the national economy in every sector, including renewable energy.

Given its strategic position in the Mediterranean Sea, and its political effort to attract foreign investors, the country looks to be well placed to reform its economy.

Also, the commitment of giants like GE and Statoil in developing its wind sector, make the country even more interesting.

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