Full speed ahead for Jordan to get power agreements wrapped up

Jordan has introduced a direct proposals scheme to encourage private companies to install renewable power projects.

Applications for 34 projects, mostly photovoltaic solar, have been submitted and it has approved 30 of them, according to National Electric Power Company (Nepco), which will add 860 megawatts to the grid. Of the agreed renewable energy capacity, 220MW are from photovoltaic solar projects, 225MW from concentrated solar power and 395MW are from wind farms.

Developers generating wind power are entitled to 12 US cents per kilowatt, 19 cents per kWh for concentrated solar power, 17 cents for photovoltaic solar, 12.7 cents for biomass and 8.5 cents for biogas. Power purchase agreements for photovoltaic solar projects included in the first phase are in the final stages of negotiation. “We have almost finished negotiations, they’re around 90 per cent completed and we’re about to issue the final drafts,” said Nepco’s Ahmed Aldohni.

Both Nepco and the developers are in a hurry to complete the agreements before the end of the year, when the current tariffs expire. “They need to be signed by the end of the year. If they’re not signed by the end of the year, the tariffs could be revised,” said Mr Aldohni.

Not everyone is convinced that this will be possible. “The developers are positioning themselves to sign before year-end but that doesn’t mean that we are going sign before the end of the year,” says Tareq Murad from Kawar Energy, a solar power developer.

The tariff may well be reduced significantly for round two. The higher rates may have been introduced to draw investors to get the first renewables projects up and running. While set at a lower level than power generated from fuel oil, the renewable energy tariffs have been criticised for being too generous. Changes to the tariff and the need to conclude agreements in phase one have the potential to stall progress on the programme’s second phase. “The reason why I feel that phase two might not move as fast is because we think that phase one will need to be done first before the government and developers can focus on phase two,” said Mr Murad.

Part of the reason behind the tariff placement was the way in which the tariff regime evolved. When Jordan started designing its direct proposals scheme, the benchmark tariffs were intended to be guidelines, not outright guaranteed tariffs. “The benchmark tariffs were meant to be a guide,” said a developer. “Article six of the renewable energy law states that the tariffs should fall ‘within an acceptable range’ and this was interpreted as ‘at or below.’ This turned [the benchmark tariffs] into a feed-in tariff style scheme. Most of the photovoltaic solar [bidders] submitted almost exactly at the [benchmark] tariff.”

But while Spain adopted a similar method to instigate a renewable energy boom, it did not impose a cap on the amount of capacity that would be built. Jordan has.

This prevents the cost of renewable energy to the spiralling out of control. Nevertheless, in a bid to move quickly, Jordan may not be getting renewable power for the cheapest possible prices. “The feed-in tariff has encouraged it to move along quicker but it doesn’t mean that Jordan will get the best deals,” added the developer. Nevertheless, “I believe it’s the best way … It’s a compromise between working exclusively on price and speed [of development].”

Time is certainly in short supply for Jordan. The government is keen to move away from its current situation, which is characterised by a lack of security of energy resources and high costs. The country has the opportunity to become more energy independent and a leader in clean power in the region. While it might be in the government’s interests to delay the signing of its power-purchase agreements to access cheaper tariffs, it is unlikely to do so as this would cost the country dearly in time and reputation.

Ultimately, the current renewables tariffs are still attractive to a government that is tired of spending heavily on fuel oil for power generation. The current feed-in tariff is “very competitive, very favourable” for the developers, said Mr Murad. And “it’s still cheaper than what they’re currently paying [for power] from fossil fuels”.

business@thenational.ae