Legal Framework Analysis for RE and EE Porjects

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Chapter 2 Legal Framework Analysis for RE and EE projects

Introduction The global trends are claiming for declining hydrocarbon energy resources, coupled with an increased demand for energy for different uses (industrial, transport and household) from emerging markets, and growing awareness and concern about the impact of climate change. More, in order to reduce the threat of climate change, the Governments globally acknowledge the need of a rapid expansion of the use of renewable energy that will also help to reduce vulnerability to energy price changes and to address energy security concerns. The growth of RE also offers a forward-looking economic stimulus, through the prospects of the development of a new industrial sector, with corresponding economic and employment benefits. Africa has much to gain from the development of renewable energy provided that renewable energy already plays an important role in energy supply. At present Africa, primarily through biomass and hydropower, covers a substantial share of its energy supply from renewable energy. The usage of traditional biomass consists predominantly of wood fuels and accounts for 70-90% of primary energy supply of some SSA countries; on the other hand hydropower accounts for 45% of electricity generation in SSA. Although the sustainability of the use of biomass in Africa could be questioned. In fact, wood biomass is burned in open cooking fires and the smoke is a source of many health problems; the current biomass exploitation may also lead to deforestation problem and illegal logging, those together with land clearance for agriculture, could cause local fuel supply shortages Furthermore, only a small fraction of Africa’s vast renewable energy potential is utilized - 7% of the hydro and 1% of the geothermal potential. The hydro, solar, wind, biomass, and geothermal energy sources could easily cover all the continent’s current energy needs. Some African countries already cover a substantial share of their energy balance from renewable energy, such as Kenya (81%) and Senegal (40%)1. Several African counties, such as South Africa, Egypt, Morocco, Kenya, Madagascar, Rwanda, Cap Verde and Mali have adopted national targets for renewable energy, and feed-in tariffs for renewable energy electricity have been introduced e.g. in South Africa and Kenya. Also at the continental level, Africa has made several political commitments to increase the utilization of renewable energy.

The accomplishment of a substantial growth in RE and EE in Africa needs the development, adoption and

implementation of policies, action plans, strategies and regulation that enable increased investments in

renewable energy in Africa. Regulation plays a key role in stimulating an increased use of renewable energy

in Africa. It will necessarily rely on a stronger capacity in African energy agencies, regulators and other

institutions to implement renewable energy objectives. National and regional regulations should encourage

investment in renewable energy e.g. via targets setting, regulation of grid access and distributed generation,

enabling feed-in tariffs and improved IPP options. In such specific sector the joint effort and cooperation with

European and Transnational Agencies, like the EU, the World Bank and the IFC, could boost the

implementation of energy regulatory systems suitable for the growth of RE and EE.

This Chapter highlights the current situation of a legal framework for RE and EE in the target countries,

Tunisia, Morocco and Egypt. The document is affected by the difficulties in getting access to the specific

documentation on the sector regulation and the availability of up to date information, particularly for Egypt.

1 Renewables 2007 Global Status Report. REN 21. P. 40, table R7: Share of primary energy from renewable.

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Tunisia

1. The Tunisian Legal System

Tunisia was declared a republic in March 1956, when France granted full independence, and in June 1959,

with President Bourguiba, Tunisia adopted a Constitution modeled on the French system.

The President of Tunisia is the head of state of the Republic of Tunisia.

The President promulgates constitutional, organic, or ordinary laws and ensures their publication in the

Official Journal of the Tunisian Republic within a maximum period of fifteen days counting from the

transmission by the President of the National Parliament. During this period, the President of the Republic

may return the bill to the National Parliament for a second reading. If the bill is adopted by the National

Parliament with a majority of two-thirds of its members, the law is promulgated and published within a

second period of fifteen days.

He watches over the execution of the laws. He exercises the general regulatory power and may delegate all

or part of it to the Prime Minister.

The Prime Minister, nominated by the president, directs and co-ordinates the work of the government. He

substitutes, as necessary, for the President in presiding over the Council of Ministers or any other Council.

Bills are deliberated in the Council of Ministers. Decrees of a regulatory character are countersigned by the

Prime Minister and the interested member of the Government.

The Ministers puts into effect the general policy of the nation, in conformity with the orientations and options

defined by the President of the Republic.

The legislative power is exercised by the National Parliament, composed by the Chamber of Deputies and

the Chamber of Advisors.

The right to introduce a bill is possessed equally by the President and by the deputies. However, priority is

given to bills presented by the President of the Republic.

The parliament may authorize the President to issue decree-laws within a fixed time limit and for a specific

purpose which must be submitted for ratification to the parliament upon expiration of that time limit.

Organic and ordinary laws are passed by the Parliament by absolute majority. A draft organic law may not be

submitted for deliberation by the Parliament until after the expiration of a period of fifteen days from its filing.

The Parliament votes on bills concerning financial laws and the regulation of the budget under the conditions

stipulated in the organic law of the budget. The budget must be voted on by December 31. If by that date the

National Parliament has not made a decision, the provisions of the financial bill may be implemented by

decree, in three month renewable installments.

Once the bill has been passed by the parliament, it must be countersigned by the President. For the law to

take effect, the president needs to assent and promulgate the law.

1.1 The Institutional Framework of Tunisia Energy Policy

Energy efficiency improvements have led to a significant decline of the Tunisian energy intensity since the

early nineties. On average, energy intensity was reduced by 2% per year until 2007 with energy demand

successively being decoupled from economic growth.

The institutional framework for the support of renewable energies and energy efficiency in Tunisia is well

developed. Renewable energy is part of the responsibility of the Ministry of Industry, Energy and Small and

Medium Enterprises. It is supported by the National Agency for Energy Conservation (ANME), which plays

an important role in fostering research and development as well as designing and implementing policies and

strategies. In the years 2004 and 2005 some important steps were taken, for example the establishment of

the National Energy Conservation Fund.

As regards public institutions, the major actors are:

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• The Ministry of Industry and Energy which undertakes the implementation of the country's energy policy,

and this through the General Directorate for Energy (DGE);

• The Tunisian Electricity and Gas Company (STEG) which has monopoly on the conveyance and

distribution of electricity and which is, therefore, the sole buyer of this energy;

• The Ministry Environment, together with several institutions that belong under its authority, such as the

National Environment Protection Agency (ANPE), the National Sanitation Board (ONAS) and the Tunis

International Centre for Environmental Technologies (CITET);

• The Ministry of Higher Education, Scientific Research and Technology whose missions cover the

research & development related aspects in this field, via several institutions, of which the National

Institute of Scientific and Technical Research (INRST), the various schools of engineers (ENIT, ENIM,

ENIS, ENIG) and certain Faculties, especially the Sciences Faculties;

• The Ministry of Equipment, Housing and land Use Planning;

• The Ministry of Communication Technologies.

2. Energy Efficiency: practices and institutional framework

This section attempts to evaluate the present status of energy efficiency in Tunisia and implemented public

policies to correct market failures. In the case of energy efficiency the most common failures are: distorted

energy prices, external costs, poor access to technical information, agent-principal problems, budgetary

constraints and excessive risk aversion, poor skills of investment appraisal. The most common policy

instruments intended to correct or compensate for these distortions are:

• Corrective Measures:

o Price Reform,

o Institutional and legal reform;

o Labelling;

o Dissemination of information;

o Research, development and demonstration;

o Financial incentives;

o Support for energy service companies (ESCOs);

• Compensating Measures:

o Standards:

o Mandatory measures (e.g. compulsory audits and management obligations);

o Corporate agreements;

o Efficiency obligations:

o Transport and spatial planning.

Tunisia already had a significant policy in place to manage energy demand. Financial incentives had been in

place since 1994 and an agency for energy conservation had been created in 1985. The effort was

accelerated in 2004 with a new three year programme managed by the National Agency for Energy

Conservation (Agence National pour la Maitrise de l’Energie - ANME). An analysis of the impacts of this

programme over the period 2005 – 2007 indicated that it had been both successful and very beneficial to the

public finances. The evaluation estimated that it had saved 800 ktoe over the period and that the

investments put in place would eventually save 2,800 ktoe during the time life of the measures. The cost of

these savings were estimated at around 67 US$/toe which is some 10% of the equivalent cost of supply. The

contribution to the state to each toe saved was estimated at 7 US$, which is well below the average subsidy

level (124 US$/toe) given to energy products and therefore positive for the state budget. The perceived

success of the programme to that date and the supply demand and price conjuncture noted earlier were

important influences on the formulation of a more ambitious subsequent programme.

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The present strategy for energy efficiency is contained within the quadrennial plan for energy efficiency and

renewable energy running from 2008 to 2011. The quadrennial plan follows the instructions of the 11th

Development Plan (2007-2011) that sets the broad directions of national economic policy. In the energy

sector it requires a gradual reduction in energy subsidies and calls for a scaling-up of investment in energy

efficiency and renewable energy. The policy measures both for energy efficiency and for renewable energy

were conceived against a long-term strategy document extending up to 2020 -2030 (La maîtrise de l'énergie

en Tunisie à l'horizon 2030).

The quadrennial plan was adopted by the Council of Ministers on January 15, 2008 and presented to the

public in a National Conference on Energy Management in February. The overall objective is to reduce the

energy intensity of the economy by 3% each year over the period from 2008 – 2011. Combined with the

impact of the three year programme from 2005-2007 this decrease will accumulate to a 20% reduction in

energy use in 2011 as compared to the level which would have been expected if energy intensity had

remained at the level recorded in 2004. The decrease is made up of approximately 8% from 2004 to 2007

and a further 12% to 2011. In volumetric terms this is equivalent to a national saving of 2 million toe / year,

The Plan also contains an objective to increase the share of renewable energy to 4% of primary energy

supply. The estimated investment costs are 820 million US$ of which the state will contribute 108 million

US$.

New outline targets have recently been announced for 2014. The intention is:

• To reduce energy intensity to 275 kgoe/ 1 000TD;

• To reach a capacity of 550 MW electrical generation from cogeneration and renewable energies, made

up of 310 MW of wind, 60 MW of hydro, 10 MW of biogas, 50 MW of CSP and 120 MW of cogeneration;

• To create 340.000 square meters of additional solar panels by 2014, thus raising the overall surface of

solar panels to 740.000 square meter.

Hereinafter is give an account of the main existing Tunisian practices in energy efficiency field

2.1 The legal framework and its reform

The proper implementation of energy efficiency requires an energy efficiency law that justifies the purpose of

the activity, establishes a clear focus in government, assigns the responsibilities of actors, and makes

provision for an agency and specific instruments.

Energy efficiency in Tunisia is governed by a complex series of laws and decrees of which the following are

significant:

• The Law 93-120 of (December 1993), regarding financial incentives;

• Decree 94-537 (March 1994), that sets the criteria for financial incentives for energy efficiency and

renewable projects;

• The Decree 2000-1124 (May 2000), that establishes the administrative and financial organisation of the

National Agency for Renewable Energies (ANER);

• The Decree n°2002-3232 (December 2002), that creates support for the development of the

cogeneration in Tunisia;

• The Decree 2004-795 (March 2004), that modifies the administrative and financial organisation of the

National Agency for Renewable Energies (ANER);

• The Law 2004-72 (August 2004), that establishes energy efficiency as a national concern, establishes

priorities and creates a new agency; some provisions were subsequently modified by the Law 2009-7;

• The Decree 2004-2145 concerning the labelling of household electrical appliances;

• The Law 2005-82 (August 2005), that creates the possibility to fund energy efficiency actions by means

of revenues from taxes on the first registration of cars and the import or manufacture of air conditioners;

• The Decree 2004-2144 (September 2004), that establishes the details of the mandatory audits; it fixes

the frequency, indicates the scope and determines the thresholds;

• Law 2006-106 (December 2005), that implements Law 2005-82 by creating the Energy Efficiency Fund

(FNME);

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• Decree 2005-2234 (August 2005), that fixes the incentive structure to investment in energy efficiency as

well as the modalities governing eligibility and procedures;

• The Law 2009-7 (February 2009), that modifies and extends Law 2004-72; in particular it lowers the

threshold for mandatory energy audits in industry, sets norms and standards for buildings, make urban

transport plans mandatory and sets rules for access to network and buy back of excess power from

cogeneration units and self-generation from renewable;

• The Decree 2009-362 (February 2009), that modifies the incentive structure to investment in energy

efficiency originally established in Decree 2005-2234;

• The Decree 2009-362 (February 2009) modifies the incentive structure to investment in energy efficiency originally established in Decree 2005-2234;

• The Decree 2009-2773 (September 2009) determining the conditions for transport of electricity produced from renewable energy and the sale of excess to STEG;

• The Decree 2009-3377 (November 2009) modifying and completing the Decree 2002-3232 relating to cogeneration.

Key provisions of these laws are identified in the specific following paragraphs.

The Law 2004-72 marked a critical turning point because it established energy efficiency as a national

priority because of its contribution to sustainable development and the vigour of the national economy; it

defined priorities and reinforces the position of the National Energy Conservation Agency (ANME). Some

specific provisions were later modified by the Law 2009-7. The Law outlines what actions are to be

considered as constituting energy efficiency and places especial emphasis on:

• Obligatory periodical audits;

• Initial consultation over large energy consuming projects;

• The use of energy service companies (ESCOs);

• Cogeneration;

• Labelling of materials, household appliances and equipment to indicate their energy consumption;

• Regulation of the thermal performance of buildings;

• Use of renewable energy in public lighting;

• Testing of car motors;

• Transport planning in large agglomerations;

• Promotion of renewable energy;

• Energy substitution.

Detailed penalties for infringement of the various regulations are set out in the Law.

2.2 The pricing system

All energy prices in Tunisia are subsidised, but unevenly. The total value of subsidies for petroleum products

is estimated at 1,2 billion US$ in 2007, or around 124 US$/toe on average. It was certainly more in 2008.

The main subsidies are directed to Liquefied Petroleum Gas (LPG) and kerosene that are fuels used in large

part by poor communities in rural areas for cooking and water heating. Electricity is also subsidised, but it is

hard to assess how much. The subsidies to LPG and to electricity are an obstacle to the penetration of solar

water heating as they are competing services.

Subsidies to electricity are both direct and indirect. The Société Tunisienne de l'Electricité Energétique

(STEG) receives two supplies of gas. One is from Algeria that is paid in kind as a transit fee; this is assigned

to the company by the government at a nominal price of 64 US$/toe. This is an indirect subsidy to electricity

that is not detectable in the state budget. The second supply comes from the Tunisian fields in the South

operated by British Gas and this is purchased through an arm’s length commercial contract indexed on the

price of heavy fuel oil, with take or pay clauses. STEG also receives direct subsidies for its investments and

its operating budget. Because of the close integration of the budget of STEG with that of the state, it is hard

to asses how big those subsidies are.

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Tariffs for the low voltage sales of electricity are complex and differentiated by use, for example special tariffs

for water heating and air-conditioning. The smallest residential customers with a consumption less than 50

kWh/month pay a monthly charge of 0,14 US$/kW and a unit charge of 0,052 US$. A consumer with a

supply of 1 kW taking 50 kWh would then pay 2,8 US$ or an average of 0,055 US$/kWh.

The normal tariff for residential sales from 1 to 300 kWh per month has a fixed charge of 0,14 US$/kW and a

unit charge of 0,093 US$ per kWh. For a consumer with a 3 kW supply taking 200 kWh/month this comes out

at 0,095 US$/kWh. The highest residential tariff is about one third more.

The high voltage industrial tariffs depends on circumstances, but are generally from 7 – 9 US$cent/kWh.

There is an intention to move to cost-reflective pricing by the end of the present Development Plan, 2011,

but this intention does not seem to extend to kerosene and LPG that are the main fuels used by the poor and

it is unlikely to be achieved for electricity.

2.3 Governmental and independent authorities

Many countries have found it useful to establish a specialised institution to prepare initiatives, draft

regulations, monitor progress, ensure compliance, administer funds and perform other administrative

activities.

An Agency for Energy Conservation (AME) was created in 1985, then renamed in 2000 as National Agency

for Renewable Energy (ANER) and passed under the control of the Ministry of Environment. Then, it has

been again renamed and its responsibilities and powers extended in 2004 under the Law 2004-72. Article 16

of this Law provides for the creation of a financially autonomous legal entity to be known as the Agence

Nationale pour la Maitrise de l’Energie (ANME) to be placed under the supervision of the Ministry of Energy.

Article 17 assigns certain responsibilities to the ANME, including the obligations:

• To manage the programme of mandatory audits,

• To support the developers subject to the mandatory energy impact analysis;

• To propose financial incentives and other interventions that could help promote energy efficiency;

• To confirm the conformity of equipment for energy efficiency or renewable energy to any specification

contained in a regulation that allows benefits to be given;

• To promote techniques and technologies that have superior performance;

• Develop and monitor demonstration projects for energy efficiency;

• Promote training in energy efficiency in conjunction with appropriate institutions;

• Promote programmes of education, sensitisation and information about energy efficiency;

• To contribute to scientific research programmes in the realm of energy efficiency;

• To evaluate the impact of projects of energy efficiency on the emissions of greenhouse gases;

• To develop an inventory of GHG from the energy sector and indicators of energy efficiency

ANME plays a key role in both energy efficiency and renewable energy. It implements the quadrennial plan,

manages the National Energy Fund and it is the main counterpart of technical cooperation in the field.

2.4 Technical regulations and enforcement system: standards and /or labels

The obligation on manufacturers and importers of equipment to label goods or to meet specified standards is

a policy measure introduced to overcome the market failure caused by asymmetric information.

Article 8 of Law 2004-72 obliges manufacturers, importers and retailers of household appliances to conform

to the requirements of energy labelling according to the modalities specified in a separate Decree of the

Minister of Energy. Article 9 forbids the marketing of devices that infringe a minimum performance to be

specified by Decree. On this basis a system of labelling and standards has been put in place and steadily

tightened.

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Refrigeration is estimated to account for 40% of the domestic use of electricity; in 2007 it was assessed at

12% of the total national electricity supply. With the assistance of Global Environment Fund (GEF), ANME

has implemented a programme of labelling of refrigerators since 2001. The basis of the programme is a label

that divides appliances into 8 categories according to their performance, with 1 being the best and 8 the

worst. Norms were based on European standards adapted to Tunisian circumstances by the work of a

committee of experts. Test-beds were installed at the National Institute for Standardisation and Industrial

Property (INNORPI). ANME is responsible for managing the logistics of checking regulatory compliance.

When new models are introduced a sample must be submitted for testing and the model may only be put on

the market after the approval of the Minister of Commerce.

The labelling programme is claimed to have radically transformed the market in Tunisia. After the initial

introduction of the labels, the categories 7 and 8 were forbidden on the market. Subsequently the categories

5 and 6 were also forbidden, leaving only categories 1 to 4. The labelling scheme will be supplemented by a

programme aiming to replace 400.000 less efficient refrigerators and to replace them by class 1 and 2

appliances. An incentive will be offered for the scrapping of the old refrigerator.

In April 2009 a similar scheme was launched for air conditioners. Classes 7, 8 and 9 will soon be excluded

from the market. Similar arrangements are in preparation for washing machines and other devices. The

limiting factor is the provision of testing laboratories, without which compliance with the regulations cannot be

assured.

Also regulations and standards for buildings are an important special case because buildings constitute the

third largest energy consuming sector in Tunisia. Residential buildings represent 17% of final energy

consumption. The Quadrennial programme has identified large savings (400.000 toe/year by 2011) to be

achieved by better lighting, better thermal performance and standards for appliances.

Work on standards in the building sector received significant support from a project of UNDP and the French

government executed by ANME with total funds of 10,6 million US$. The programme succeeded in realising

46 demonstration projects on the basis of which ANME was able to develop seven sectoral guides for

professional people in the field. Focus was directed to low cost interventions that would not add more than

10% to the cost of the building. A label indicating comfort and energy performance of buildings was

developed and an extensive communication and awareness programme was launched with television, radio

and newspaper advertisements; a dedicated web-site was created for all levels of interest.

Four practical guides were elaborated to help practitioners implement the regulation. They deal with:

• Energy efficient buildings;

• The climate zones of Tunisia;

• Basic climatic information for sizing heating a and air conditioning;

• A guide to the regulations concerning thermal insulation in new buildings.

In terms of the legal framework, Article 10 of the Law 2004-72 (modified by the Law 2009-7) makes provision

that new buildings and extensions to old buildings should meet a minimum performance standard in energy

efficiency as established jointly by the Ministries of Energy and Habitat. The implementing regulations are

now in preparation.

Thermal insulation has been obligatory in new buildings in the public sector according to the Decision of the

Council of Ministers of the 28th April 2005. For other sectors labels will be produced to record performance

running from levels 1 to 8. Four categories of building will be recognised in the labelling scheme. The first

two regulatory texts have been issued for offices and multi-occupancy apartments; they have entered into

force in January 2010. Subsequently there will be similar programmes for community buildings (such as

schools and hospitals) and for workshops.

The market for thermal insulation is expected to develop rapidly under the joint influence of this legislation

and the promotional programme PROMO-ISOL. This programme aims to insulate 20,000 homes and 1,500

buildings in the tertiary sector by 2011.

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Testing laboratories have been created at the “Centre technique des matériaux de construction de la

céramique et du verre (CTMCCV)” to ensure that materials meet specified norms. The sale of material not

conforming to the norms will be prohibited.

2.5 Financial incentives for energy efficiency

Financial incentives have been in place since 1994, but the present structure and scope of incentives is

defined by the Decree 2005-2234 and the Decree 2009-362. The later Decree modifies the incentive

structure to investment in energy efficiency originally established in Decree 2005-2234. The main provisions

pertinent to energy efficiency are the following:

• For energy audits and preliminary consultancy a grant of 70% of the cost is available with a ceiling of

21.330 US$;

• For demonstration projects a grant of 50% of the total cost is available with a ceiling of 71.100 US$;

• Investments in energy efficiency benefit from a range of interventions that are available only in the

framework of a contract between the organisation and the ANME (contract-programme) and only after

the investment has been made.

o A grant of 70% of the preliminary studies of feasibility with a platform of 49.770 US$;

o A grant of 20% of the material investment cost with a ceiling that varies according to the size of the

consumer. The ceiling is 71.100 US$ for establishments consuming less than 4.000 toe/year,

142.197 US$ for a threshold of 4.000 toe/year, 142.200 US$ for still larger consumers.;

• For fishing boats and cars there are provisions to improve engine efficiency of which the most significant

is an investment grant of 20%, with a ceiling of 4.266 US$, for the installation of testing stations for

motor vehicles;

• The substitution of natural gas in industry and the tertiary sector benefits from a grant of 20% to the

necessary physical installations within the organisation up to a ceiling of 284.394 US$. The grant is only

payable after the project has been installed and is operating. In the residential sector there are also

capital subsidies available amounting to 100 US$ for each individual house and 14 US$ for each

apartment within a multi-occupancy building. These grants are given only within the framework of an

agreement between the ANME and the STEG;

• Cogeneration facilities can benefit from a subsidy of 20% with a ceiling of 355.492 US$.

The award of these grants is monitored by an interministerial committee (commission technique

con-sultative) presided by the Director General of the ANME.

Incentives are financed by the National Fund for Energy (FNME). The basic legal structure comprises two

laws. The Law 2005-82 of the15 August 2005 provides the means to raise finance for investment subsidies

for energy efficiency and renewable projects. The scope of the permitted interventions was later extended to

feasibility studies, cogeneration and solar water heating. The resources are obtained by taxes specified by

law on the first registration of private cars, at a rate depending on the engine, and an import duty or local

production duty on air-conditioning equipments.

The finance law 2005-106 of the 19 December 2005 ratified the law 2005-82 and created a National Fund for

Energy (FNME). The law extended the range of possible funding options to allow other resources such as

grants from international donors and other possibilities. The resources of this fund are insufficient to finance

all the energy efficiency and renewable energy projects that are envisaged under the Tunisian strategy. To

help fill this gap, two concessionary lines of credit have been provided by international banks.

A credit line of 54 million US$ was approved by the French Agency for Development (Agence Francaise de

Development - AFD) in 2006 in favour of three commercial banks with the biggest industrial portfolios to

finance energy conservation and environmental projects. A technical assistance component is joined to this

line in order to facilitate the identification, the instruction and the implementation of such projects; this

component is funded by a subsidy of 1,7 million US$ given by the AFD. The technical assistance program is

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placed under the responsibility of ANME for the energy conservation projects and the National Agency for

Environmental Protection (Agence Nationale de Protection de l’Environnement – ANPE) for the

environmental projects. The credit line is intended to finance investments that would reduce emissions of

GHG and in particular is aimed at improving energy efficiency in industry and stimulating the use of

renewable energy. There seems to have been little use of this line.

In July 2009, Tunisia and the World Bank signed an agreement concerning a 55 million US $ Energy

Efficiency Project, to be implemented over four years. The objective is to contribute to the quadrennial plan

through the scale up of industrial energy efficiency and cogeneration investments. Under this arrangement a

line of credit from the International Bank for Reconstruction and Development (IBRD - Worldbank) will be

made available to three commercial banks, with a guarantee from the Republic of Tunisia. The banks are

responsible for loan repayment and assume all financial risk. The banks concerned are Amen Bank, Banque

de l’Habitat and Banque pour le Financement des Petites et Moyennes Entreprises.

The project concept was designed to provide an integrated technical and financial analysis of end-use

projects to be financed by Participating Financial Intermediaries (PFIs). To avoid lengthy and cumbersome

application processes for projects that commercial banks will not be interested in financing, ANME will work

closely with PFIs to pre-screen projects for financing. This arrangement will also allow a coherent allocation

of grants from the Energy Conservation Fund (FNME) and other grants and loans from different sources in

the financing plan of each project. This is intended to prevent projects failing because of gaps in the

financing plan. The terms of the loan are somewhat less attractive than the AFD line and it remains to be

seen how successful it will be.

There are clear legal provisions for cogeneration. Article 7 of Law 2004-72 (modified in Law 2009-7) assigns

to any establishment or group of establishments equipped with cogeneration, a right to export surplus power

to the national network within limits fixed by Decree. The technical conditions pertaining to these exports are

fixed by a standard contact approved by the Ministry of Energy.

The Decree 2002-3232 (December 2002) defines the incentive framework for cogeneration. It establishes

the technical conditions under which an installation can be authorised. The Decree requires that the overall

efficiency of the installation must exceed 60% and that the ratio of recovered heat should be greater than

50%. STEG is obliged to purchase surplus electricity up to a defined limit. For installations above 3 MW the

purchase obligation is limited to 30% of production; for smaller installations it can be 50%. The purchase

tariff is linked to the industrial price of gas.

2.6 Energy audit process and regulation

Tunisia has adopted a mandatory audit scheme for large consumers. The Laws 2004-72 and 2009-7 makes

specific provision for the mandatory audit of large consumers according to limits on energy use to be issued

in an accompanying Decree. The Laws also requires that new projects consuming large volumes of energy

as well as large extensions of existing projects should be submitted to the ANME for an opinion on the extent

to which they observe proper standards of energy efficiency.

The Decree 2004-2144 (September 2004) established the details of the mandatory audits; it fixes the

frequency, indicates the scope and determines the original thresholds. The thresholds have been steadily

reduced; it is now 800 toe/year for industry and for other sectors it is 500 toe/ ear. The procedures for

calculating energy consumption are set out in the Decree.

Audits must be performed every five years and have to be done by an auditor accredited by ANME. The

scope of the audit must cover:

• A description of the establishment and its principle characteristics that pertain to energy use;

• An evaluation of the energy performance;

• An evaluation of the management system for energy efficiency;

• Recommendations to improve performance, accompanied by economic evaluation;

• An action programme.

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Once approved by ANME the audit report serves as a basis for the allocation of benefits foreseen under the

incentive framework. Access to the incentives is only permitted if the company signs a “contrat-programme”

with ANME committing to the actions and investments for which the incentives are sought.

Somewhat similar conditions apply to the requirement for a preliminary authorisation for new developments

with a high energy use. Such a preliminary authorisation is needed for consumers for whom the consumption

is greater than 800 toe/year or has an installed electrical capacity greater than 1 MW. For such consumers

ANME can issue the preliminary authorisation. For consumers above 7000 toe/year it must come from the

Minister in charge of energy.

Article 6 of the Law 2004-72 permits energy consuming companies to sign contractual agreements with

energy service companies to achieve savings in energy use. The Law defines energy service companies that

engage with energy users to make feasibility studies, manage, monitor and finance projects within the

facilities of the user and to guarantee performance. The service companies must be approved by the Ministry

of Energy.

Many companies have developed skills in energy auditing and in feasibility studies for investment in energy

efficiency. There is very little activity in the classic ESCO mode whereby the ESCO supplies funds and the

profits are shared through an energy performance contract. The main limiting factor is the capital base of the

companies involved. They are mainly small companies and cannot raise the capital to make large

investments. Credit lines, whether concessional or not, do help much because collateral is bound up in

existing credits.

ESCO development in Tunisia was the main objective of a substantial grant (31.8 million US$) from the

World Bank / GEF for an activity called the Energy Efficiency Program and Industrial Sector Project. The

intention was to overcome institutional and capacity-related barriers to the development of a sustainable

market for energy efficiency products and to establish energy services companies (ESCOs) as the main

vehicle to guarantee a sustainable energy efficiency market.

The project comprised three main components:

• A targeted Global Environment Facility (GEF) pilot phase project for energy efficiency investments;

• A GEF Partial Guarantee Fund, aimed at enabling the establishment of ESCOs;

• Technical assistance for building the capacity of ESCO candidates, and financial institutions, and, for

testing newly introduced energy efficiency products.

The project closes in December 2009 and seems so far to have left little immediate impact.

2.7 Dissemination of Information

For all interventions, ANME has prepared and disseminated carefully targeted materials to all relevant

groups including final users, equipment suppliers and intermediaries. This can be seen for example in the

policies for appliance labelling and for building standards as well as for the mandatory audits and financial

incentives.

3. Renewable Energy: practices and institutional framework

This section attempts to evaluate the present status of renewable energy policy in Tunisia.

Public policy intervenes to correct market failures. In the case of renewable energy, the most common

failures are somewhat similar to those identified for energy efficiency, but with a different emphasis. Distorted

energy prices, unrecognised external costs, poor access to technical information all play a part. There is

however a significant difference. Many measures of energy efficiency are cost effective, but prevented by

distortions of the conventional market. This is also true of some renewable options, such as solar water

heating. Many technologies are not cost-effective even if the distortions of the conventional market are

11

removed. They are justified by the external costs that they avoid, especially the external costs of GHG

emissions. This means that they must be subsidised and financial incentives are critical to renewable policy.

In addition to these general market failures there can be specific market failures for electricity generated from

renewable energy that is fed into the national grid as electricity. Excessive and unjustified costs of

connection to the grid, inability to connect, disputes over responsibility for payment, all these factors can

impede renewable deployment. Policy instruments are intended to correct or compensate for these various

distortions.

Tunisia has a clearly stated strategy for renewable energy contained within the quadrennial plan running

from 2008 to 2011. The targets of the programme are to increase the share of renewable energy in primary

energy consumption (excluding biomass and hydroelectricity) to 4% by 2011; if biomass and hydroelectricity

are included then the proportion of total primary energy supply would be 13%. The target is the equivalent of

10% of installed electricity capacity.

For Solar Water Heater (SWH) the intention is to install 480.000 m2 of solar collectors over the period from

2008-2011 in order to achieve by the end of the period a total installed capacity of 740.000 m2 and an annual

installation rate of 155.000 m2 per year.

For solar buildings the aim is to provide a total of 3MWp of photovoltaic systems feeding into the national

network. Of this total 2 MWp will be in the residential sector and 1 MWp in the public sector, for example

administrative buildings, hospitals, schools and universities.

A considerable effort is foreseen to develop applications of renewable energy in agriculture and in rural

areas. The following specific targets have been set:

• Installation of 63 stations for water pumping and desalination;

• Installation of 200 stations for water pumping for irrigation with hybrid systems;

• Off-grid rural electrification;

o Electrification of 1.000 rural homes with hybrid systems;

o Electrification of 1.700 rural homes with photovoltaic systems;

o Electrification of 100 farms and tourist centres with hybrid systems;

• Equipment of 200 farms with biogas units for domestic use;

• Installation of two industrial grid-connected units for the cogeneration of heat and power from biogas;

In order to reinforce the national effort in renewable energy policy beyond the end of the quadrennial plan in

2011 Tunisia has established a Tunisian Solar Plan that integrates the range of renewable technologies with

energy efficiency in a single concept that is conceived in the perspective of the Mediterranean solar Plan.

The Tunisian solar plan runs from 2010-2016; it comprises 40 individual projects clustered into 5 chapters.

The estimated cost of the programme is 2,4 billion US$, which it is planned to finance from a mixture of

private and public sources.

The impact of the programme on the energy sector when the entire set of projects has been put in operation

will be to reduce fossil fuel consumption by 660 ktoe per year equal to 22% reduction in the national

consumption of energy in 2016.

The impact on the environment will be to reduce the emissions of GHG by 1,3 million tCO2 per year. The

revenues from the sale of associated CERs are estimated at 13 million US$ per year (on the fairly modest

assumption of a price for carbon of 10 US$/tonne). Over 10 years this would amount to about 185 million

US$ equal to about 7 – 8 % of the investment budget.

Reflecting the important proportion of funds that will come from the private sector, the main project

developers will also be private. The plan envisages that of the 40 projects:

• 5 projects will be realised by the public sector (of which 3 by STEG);

• 29 projects will be realised by the private sector;

• 5 projects supporting the implementation of the plan will be financed by technical cooperation;

• 1 project will comprise the creation of a new institution called “STEG Renewable Energies”;

12

The 40 projects will be divided in the different sector as follow

• Solar (which is subdivided into thermal and electric applications) – 17 projects;

• Wind – 3 projects;

• Energy efficiency – 7 projects;

• Other projects – 7 projects;

• Implementation actions – 6 projects.

Hereinafter is given an account of the main existing Tunisian practices in Renewable Energy field.


Article 14 of Law 2004-72 defines the content of the national programme for renewable energy, specifying in

particular that it should comprise:

• The development of wind energy for electricity production;

• The encouragement of solar energy for water heating;

• The exploitation of solar energy in rural electrification;

• Incentives for the recovery of energy from waste, the use of geothermal and small hydro.

A critical aspect of the development of grid-connected renewable power is the nature of the terms and

conditions under which private developers can connect plant to the grid and sell electricity. The Law 96-27,

dated April 1st 1996, permits the establishment of Independent Power Producers (IPPs) in Tunisia. The Law

authorises the State to grant electricity production licences to independent producers with a view to its

exclusive sale to the Tunisian Electricity and Gas Company (STEG) which has a monopoly on the

transmission and distribution of electricity. The conditions and modes of granting the licence are stipulated in

Decree n° 96-1125, dated 20 June 1996.

Although the principle of IPP has been established, it has not been adapted to the development of renewable

energy. STEG has attempted to keep the development of wind power in house and has resisted attempts to

develop wind as an IPP project. At present, Tunisia only has one small wind farm at Sidi Daoud near El

Haouaria in the north east of the country. By the end of 2010, Tunisia plans an additional 120 MW of wind

power from new plants at Metline and Kchabta near Bizerte. Gamesa is supplying STEG with 91 turbines for

Bizerte. The Spanish Development Aid Fund will finance the project; the plants will all be owned by STEG.

The Article 14(2) of the Law 2009-7 (February 2009) creates the possibility for any establishment or group of

establishments to produce electricity for its own consumption without any limit on installed capacity. It also

confers the right to use the national electricity network to move power from the point of generation to the

consumers’ premises. Finally, it imposes on STEG the obligation to buy surplus electricity from the producer

according to a standard contract to be approved by the Minister. The detailed conditions are to be

established by Decree.


In Tunisia there is a long-established Centre for the Development of Renewable Energy (CDER), which was

created in 1982 under the supervision of the Ministry of Energy. Its principal functions at the time were the

research and promotion of renewable energy. As noted earlier, its responsibilities have since been extended

to energy efficiency and it is now in the process of reorganisation as the Agency for the Development of

Renewable Energy and Energy Efficiency (ADEREE).

The Agence Nationale pour la Maitrise de ‘l’Energie (ANME) has responsibility for renewable energy. Details

of its establishment are given in the above section on energy efficiency (cap. “2.3 An Agency”) Specific

responsibilities for renewable energy under the law include:

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• To propose incentives and procedures to develop energy efficiency or renewable energy;

• To confirm the conformity of equipment for energy efficiency or renewable energy to any specification

contained in a regulation that allows benefits to be given;

• To encourage better technological practice;

• Develop demonstration projects;

• Promote training,

• Prepare and execute national programmes of awareness raising,

• Contribute to scientific research,

• Furnish expertise in the field of energy efficiency or renewable energy.

3.4 Financial incentives for renewable energy

The development of solar water heating in Tunisia has been supported by financial incentives. Solar

photovoltaic systems have mainly developed in Tunisia as a part of rural electrification financed by the state

budget, but are now being promoted with financial incentives. Large grid connected schemes are in the main

the prerogative of STEG and are financed by state funds and concessional finance from donors; there is

some legal provision for renewable generation by private plants, but it is quite constrained.

The promotion of solar water heating in Tunisia has a long history. The first efforts to promote the technology

date back to 1985 when a public company was formed to manufacture and install systems. A small fiscal

incentive was offered, the installations were exempted from value added tax, and low interest loans were

made available through STEG. There was no grant element. The programme initially had some impact, but

quickly petered out.

By 1995 a programme was launched using GEF funding to re-establish the image of the technology. The

programme offered grants of 35% of the investment cost and trained and supported six selected private

suppliers. Very strict quality control was exercised by ANME over the equipment and installation. The market

developed well under these arrangements until 2001, when the budget available for subsidies was

exhausted and the programme had to be stopped. In that year the installation rate had reached 17.000 m2

per year. Without the investment support the market fell away and by 2005 had more than halved to 7.500

m2 per year.

In 2005, the government launched the PROSOL mechanism under which arrangement the investment

benefitted from a 20% subsidy plus a credit line from STEG over five years repaid through the electricity bill.

A small administrative cost was permitted to STEG on the arrangement. The rate of repayments and the

extent of the credit were calculated so that the repayments were less than the observed savings from

alternative heating fuels. This had a very good impact on the market; by 2007 the annual installation rate

was 63.000 m2 per year; in 2008 it had reached 63.000 m

2 per year and in 2009 it will probably touch 85.000

m2 per year. The arrangement had many benefits. The default rate among the customers of STEG is very

low so the repayments were almost guaranteed and this reduced the per-ceived risk for suppliers and

installers. The credit facilities for customers meant that they profited from the outset. The benefits to the state

in terms of avoided subsidies were large.

Accompanying policies were implemented by ANME to strengthen the programme. A quality system was

introduced to ensure that all equipment installed under the programme reached an acceptable quality and

performance level. The programme makes good use of private industry to bring prices down through

competition and to ensure high standards of service. Thirty two suppliers are now accredited under the

programme.

ANME also accompanied the programme with good publicity campaigns to support the marketing efforts of

the industry.

The PROSOL programme is generally agreed to have been very successful and will be followed by

programmes with similar structure in photovoltaic (PROMOVOLT) and insulation (PROMOISOL).

Tunisia is now seeking to register PROSOL under the CDM as a programme of activities; it is apparently

meeting with some technical and administrative difficulties.

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The programme for support solar water heating now in application covers financial incentives, quality and

performance of equipment and market development and is expected to achieve the specified aims of

installation of 480.000 m2 of solar collectors over the period from 2008-2011 and an annual installation rate

of 155.000 m2 per year in 2011. The incentive framework is specified in the Decree 2009-362 of 9th February

2009:

For the residential sector and small businesses the Decree provides for a grant of 142 US$ for SWH

installations with a surface area exceeding 1 m2 and less than 3 m

2.

For larger installations with a collector surface greater than 3 m2, but less that 7 m

2 the grant is 284 US$.

In the industrial and tertiary sector the grant is set at 30% of the investment cost with a ceiling of 107 US$

per m2.

The grants are paid to the supplier of the equipment after it has been installed. Both the supplier and the

equipment have to be approved according to conditions established by the Minister responsible for the

energy sector.

Solar photovoltaic systems have mainly developed in Tunisia as a part of rural electrification originally paid

for by public funds; 12.500 rural houses and 200 schools have been provided with electricity using

photovoltaic kits; 200 solar powered water pumping units have been installed; a tourist station has been

equipped with a desalination unit using solar power and there are many other sundry applications in remote

army installations, frontier posts and communications.

Decree 2009-262 offers incentives to a variety of options for introducing renewable energy into rural and

agricultural settings. The grants are paid to the supplier of the equipment after it has been installed:

• For the production of electricity in agriculture there is a grant of 40% of the investment cost with a ceiling

of 14.220 US$ for projects providing lighting and water pumping in rural areas through the use of solar

and /or wind energy;

• Financial support to biogas is offered through:

o A grant of 40% of the investment cost with a ceiling of 14.220 US$ for the production of biogas in

farms;

o A grant of 20% of the investment cost with a ceiling of 71.100 US$ for the cogeneration of heat and

power from industrial biogas units:

• For solar buildings there is a grant of 30% of the investment with a ceiling of 2.133 US$ pour one

kilowatt peak and 10.665 US$ for a solar building.

The wind regime in Tunisia is good, but development is rather slow. Good wind conditions with average

speeds above 7 metres per second at 60 m elevation can be found:

• on the North and North East coast around Bizerte and Nabeul,

• In the central part of the country in the vicinity of Kasserine;

• In the South at Tataouine, Medenine and Gabes.

Within these areas the best sites reach average speeds of 8 metres per second.

Other resources with wind speeds above 6.5 metres per second, but below 7 metres per second at 60m are

to be found:

• In the East around Tozeur and Kebili;

• On the East coast of Medenine;

• In the area of Monasir.

Wind power development has been largely the prerogative of STEG using state funds, concessional finance

and to some extent the CDM. The Sidi Daoud Wind Farm project is the first large wind plant in Tunisia and

the first to be connected to the national grid. The project sponsor is STEG; the equipment is financed by

concessional funds from the Spanish Government and the remaining project costs, related mainly to civil

works, will be financed from STEG’s own resources.

15

Sidi Daoud is approximately 100 km North-East of Tunis; the location was chosen based on a feasibility

study by US Power of the national wind power potential. The station will comprise 26 wind turbines of 1,32

MW each and a substation. A newly built 22,6 km high voltage transmission line will connect to the national

electricity grid. The project is expected to generate 95.000 MWh per year (equivalent to a capacity factor of

32%). CERs from the project will be bought by the World Bank on behalf of the Spanish Carbon Fund.

STEG is now launching a new mechanism to promote photovoltaic systems on roofs. It has initiated the

programme with a pilot project of 3 MW. Recently it launched a bid to procure materials and installation

services with a one year guarantee. The installations are to be operated by the supplier for one year and

subsequently transferred to STEG. They also requires the supplier to provide finance. The intention is that

the financial conditions will be very concessional, for example a 40 year loan with a 20 year grace period and

0,5% interest. The private recipient of the installation will pay 1.422 US$ per kW, 30% of the remainder will

come from the FNME and the remainder from STEGs own resources.

3.5 Feed-in tariffs and obligations

Tunisia has introduced a scheme to support investment in renewable energy by industry and large

commercial consumers that has some aspects of a feed-in tariff. The Article 14(2) of the Law 2009-7 creates

the possibility for an establishment or group of establishments to produce electricity for its own consumption

without any limit on installed capacity. The national electricity network is obliged to move power from the

point of generation to the consumers’ premises and to buy surplus electricity from the producer according to

a standard contract. The detailed conditions are to be established by Decree.

We understand that the present arrangements foresee that STEG will receive 0.35 US$/MWh for trans-port,

will purchase up to 30% of the power produced and will pay the equivalent of the HV tariff. The developer

has the right to the CERs generated by the project.

This arrangement has some of the features of a feed-in tariff in that it offers a clear, fixed regulatory

framework that does not have to be negotiated on a case-by-case basis. It does not however offer any real

financial incentive. The impact of this provision of the Law has yet to be seen. One project of 20 MW has

been established and a portfolio of some 70MW is under consideration by the Ministry. All developments

have to be approved by the Ministry after the opinion of a consultative technical committee.

For grid-connected solar systems, the same law makes provision for all entities producing electrical energy

from renewable energy to sell the excess to the network at prices fixed by Decree. Sales are measured by a

second meter. At present the prices appear to be the same as the purchase price, so the effect is of reverse

metering.

3.6 Carbon finance and renewable development

The Clean Development Mechanism offers operating support to projects through the provision of a market

for the certificates of Carbon Emission Reduction. This is a complex project cycle, but can be useful for large

projects.

Tunisia ratified the United Nations Framework Convention on Climate Change in July 1993. In October 2001

it submitted its initial national communication, and is currently preparing its second communication. The

Tunisian DNA was established by Ministerial Decision in 2004 and registered at UNFCCC in early 2005. It is

located in the Directorate General for the Environment and Quality of Life at the Tunisian Ministry of

Environment and Sustainable Development (MEDD). The decision-making body comprises 15 members

including ANME, nine Ministries and other important state bodies, including the Central Bank and the state

companies for chemistry, petroleum and electricity and gas. So far the institutional status of the DNA is

based only on an administrative act and lacks the legitimacy that would be conferred by a ministerial decree

or a vote of parliament. A GTZ unit in Ministry of Environment and Sustainable Development (MEDD) that is

supporting the process within the MEDD has proposed a regulation to give the DNA a proper legal status

and sufficient authority to determine the methods of implementing the CDM and in particular the distribution

of CERs in projects involving state enterprises. This appears not yet to have been promulgated. The

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underlying problem appears to be a difficulty in demarcating the responsibilities of the Ministries of Energy

and the Environment.

Tunisia is perceived to offer a good investment climate for the CDM, but despite this it has been rather

unsuccessful in developing projects. Two projects done in collaboration with the World Bank have been

registered. These are the Djebel Chekir Landfill Gas Recovery and Flaring Project and another landfill gas

recovery and flaring project for nine bundled landfills. The executing agency of the two projects is the

National Waste Management Agency under MEDD. The World Bank as a trustee for the Spanish and Italian

Carbon Funds has purchased the certified emission reductions (CERs).

The World Bank is now also proceeding with a project to construct a wind farm with an installed capacity of

34,32 MW at Sidi Daoud; the wind farm is expected to generate about 50.000 tCO2eq emission reductions

annually. The CERs will be bought by the Spanish Carbon Fund of which the World Bank is the trustee and

will contribute to the greenhouse gas emissions reduction’s obligation of Spain under the Kyoto Protocol.

This will be the first wind power CDM project in Tunisia.

As said before, the PROSOL programme is in the process of registration and is now being validated by TUV.

This project is being developed as a Programme of Activity and has met with some difficulties as it appears

that the procedures for validation of PoAs are not entirely clear and seem to lay heavy contingent liabilities

on the validating entity.

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Egypt 4. The Egyptian Legal System

Decision making proceeds through the general processes available in the executive and legislative branches

of government. Issuing legislation in Egypt follows defined processes; it is motivated by needs as it is mostly

the case in energy related issues.

The highest legislation level in Egypt is the Constitution, followed by laws, then Presidential, Prime Minister

and Ministerial decrees. A draft for legislation is usually prepared by one or more stakeholders (government

or non government entities); one of them, usually a governmental entity, is the formal umbrella for that draft

legislation. Depending on the target of the proposed legislation and its scope the required level of legislation

is determined to be either a law or a Presidential, Prime Minister or Ministerial decree.

Egypt needs to resort to renewable energies and energy efficiency (2020 target: 13500 MW - current 3000

MW – and 8,3% energy consumption reduction), among a number of other resources, as a first priority, to

fulfil country's energy needs over the next 15 years (according to an Energy Strategy Paper, prepared by

the energy committee within the ruling party - National Democratic Party – in November 2007). To do so,

Egypt needs a specific Energy and Environment related Legislation.

In Egypt the decision-making structure for energy policy has been strengthened by the revitalisation of the

Supreme Council of Energy. The Council was established in 1979, but was never convened. It has recently

been revived and will take over the strategic functions of energy policy. The members include all

Departments with substantial interests in the energy sector.

Egypt does not possess a stable structure for accumulating a reliable basis of evidence, analysis and

foresight on which to base policy and upon which to test a range of policy instruments. This function was

originally to be performed by the Organisation for Energy Planning (OEP) which was intended to service the

Supreme Council. As the Council never functioned the OEP was left without a role; it was passed around

among Ministries and eventually disbanded. Much good work is carried out within particular agencies and

institutions at the regulatory and operating levels, but a coordinating view at policy level appears to be

lacking.

The Supreme Council will now be supported by a small secretariat in the Cabinet Office known as the

National Council for Energy Efficiency. There could be a case for strengthening this body and making it the

analytical centre for energy policy. The access to all relevant Ministries and to a forum for inter-Ministerial

conflict resolution offers a unique opportunity for developing cohesive and sustainable policy.

In Egypt there is a gap regarding the institutional capacities for renewable energy and energy efficiency

policies. Whereas capacities for renewable energies are well developed, there is a lack of sufficient

administrative structures for energy efficiency policies.

The New & Renewable Energy Authority (NREA) was already established in 1986. NREA's mission is to

promote renewable energies and to assist in the development of a national plan for renewables.

With its 996 staff (data according to NREA annual report 2007/2008) it is well equipped. NREA will be a key

player for the implementation of the ambitious government target of 20 % of electricity from renewable

energy by 2020 including 12% grid-connected wind power (7200 MW). NREA will also develop its own

projects. Until 2020, it is anticipated that about 400 MW per year will be undertaken by the private sector and

NREA will carry out about 200 MW per year.

NREA has done a very good job in setting renewable energies on the political agenda in Egypt, raising

awareness and implementing first projects. It is also a developer; it owns and operates all existing wind

farms in Egypt and is planning several more. It is also effectively a regulator; it establishes rules and

procedures for allocating land for wind farms to developers and it acts as a national planning agency for

renewable. There are conflicts of interest in the discharge of these various functions.

With its testing certification activities NREA is also of importance for energy efficiency and improved

efficiency of energy use in Egypt. NREA operates the testing laboratories for refrigerators, washing

18

machines, air conditioners and electric water heaters’ efficiency standards. But NREA is not responsible for

developing policies for energy efficiency and carrying out projects to contribute to fulfil the 8,3 % reduction

target of the predicted energy consumption for 2020.

There is no energy efficiency agency in Egypt. Previously the Organisation for Energy Planning had some

functions in the sector and was involved in the early work on appliance standards, but it has been disbanded.

Government appears to favour the concept of a disbursed responsibility for energy efficiency within relevant

Departments guided by the Supreme Council of Energy supported by the National Council for Energy

Efficiency.

Besides the above mentioned Egyptian energy related activities, over the last three decades other activities

were put in place to foster the use of renewable energy and energy efficency:

• Carrying on a number of energy efficiency demonstration projects, leading to recommended energy

strategies;

• Proposed energy efficiency law;

• Issuing few energy efficiency related codes;

• Formulating a number of Ad Hoc Energy committees at ministerial levels as well as at NGO levels. An

example of that is the formation of:

o The energy committee at the Federation of Egyptian Industries;

o The Egyptian Energy Saving Council for Industry;

• Formulation of a national energy committee:

• Freeze and unfreeze energy prices;

• Studies by national and international entities on Energy pricing and subsidies.

All the mentioned activities have been stakeholders activities that lead to the issuance of a legislative

document/action related to energy.

Most recently two distinct major activities evolved as follows:

• The formulation of an energy efficiency unit at the cabinet of ministers with the aim of coordinating

national energy efficiency activities towards fulfilling the 8.3% reduction in energy use by year 2022.

That might evolve into the energy efficiency law and/or the establishment of an energy efficiency

agency;

• Issuance of the proposed electricity law (currently almost in front of the cabinet of ministers), which

addresses a number of electricity related issues among which are efficient use of energy and renewable

energies.


Public policy operate to correct market failures and, in the case of energy efficiency, the most common

failures are: distorted energy prices, external costs, poor access to technical information, agent principal

problems, budgetary constraints and excessive risk aversion, poor skills of investment appraisal. Policy

instruments are intended to correct or compensate for these distortions. The most common among these

instruments are:

• Corrective Measures:

o Price Reform,

o Institutional and legal reform;

o Labelling;

o Dissemination of information;

o Research, development and demonstration;

o Financial incentives;

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o Support for energy service companies (ESCOs);

• Compensating Measures:

o Standards:

o Mandatory measures (e.g. compulsory audits and management obligations);

o Corporate agreements;

o Efficiency obligations:

o Transport and spatial planning.

Hereinafter is given an account of the main existing Egyptian practices in energy efficiency field


The proper implementation of energy efficiency requires an energy efficiency law that justifies the purpose of

the activity, establishes a clear focus in government, assigns the responsibilities to actors, and makes

provision for an agency and specific instruments.

There is no Energy Efficiency Law in Egypt at present. The UNDP / GEF (United Nation Development

Program / Global Environment Fund) project has proposed a draft law, but it does not appear to have gained

acceptance.

The draft Electricity Law contains a Chapter on Renewable Energy and Energy Utilization Efficiency

Improvement with some significant Articles that address cogeneration, Demand Side Management (DSM)

options including an obligation on network licensees, standards and labelling.

The draft Electricity Law in Article 55 makes provision for the holders of transmission and distribution

networks to implement energy efficiency as a condition of their licence. The draft law requires owners of

transmission and distribution licenses to prepare and conform to an annual plan, which has been approved

by the regulator, to carry out projects or programmes in energy efficiency, especially in:

• Management of demand for electric power;

• Improvement of the electric power utilization efficiency;

• Promotion of equipment used for renewable energy;

• Raising consumer awareness with respect to power utilization efficiency-

Under the law, the Regulatory Agency shall ascertain to what extent the above have been achieved upon

renewal of the licence.


It is well established that energy demand is price sensitive, especially demand for electricity. The most

reliable results come from industrialised countries. A review of data from 20 OECD countries concluded that

the long-run electricity price elasticity was between -0.9 and -1.0, (Verbruggen & Couder, 2003). So, price

reform will save large quantities of energy, especially in the long-run and can make a substantial reduction in

GHG emissions from countries with distorted prices.

Where distorted prices exist, revision of prices to reflect economic costs of supply is firmly in the interests of

national economies. Subsidies put a large strain on public accounts and weaken foreign trade balances.

They also tend to devastate the state-owned enterprises that are normally a victim of the practice.

Subsidies in Egypt are very large. They are made up of two main components:

• one is a direct budgetary subsidy made to compensate state-owned enterprises for forced sales at low

prices;

• the other is the practice of rolling up the low cost own production with the high cost supplies from foreign

joint venture partners to sell all at low prices in the domestic market.

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The government sells its part of domestic production at below market prices to domestic consumers and

purchases some of the share of the joint venture partner at a much higher price specified in the production

sharing contract price, again to sell at artificially low prices in the domestic market. Only the second

transaction appears in the budget and this is the only recorded subsidy. The opportunity cost of the

government's share in the Production Sharing Agreement (PSA) is an implicit subsidy that is not recorded.

Direct budgetary transfers for subsidies were 11,7 billion US$ in the 2007-2008 budget, up from 9,2 billion

US$ in the previous year. In 2008-2009 the total fell to some 7,3 billion US$, because of the fall in

international prices. Indirect subsidies are probably comparable.

For several years, the government has planned to phase out energy subsidies, starting in 2004, when

electricity tariffs were increased for the first time since 1992. A number of Prime Ministerial Decrees that

have been issued between 2004 and February 2009 gradually increased energy prices for all types of end

users in an attempt to reach energy cost effective values. In February 2009 further increases were frozen as

an attempt to face the international economical crises, but it is expected that by early 2010 the energy price

increases will be resumed.

Petroleum product prices were also increased, including a 30-40 percent rise for high-octane gasoline and a

46 percent rise for kerosene and diesel. To help compensate energy subsidies to transport, the vehicle

license fee was increased from a flat fee of US$ 90 to 2 percent of the value of the vehicle. The reforms were

badly received by industry, and prompted concerns that the poor would be most affected and that inflation

would grow beyond the 14.4 percent mark recorded in 2008.

In February 2009, this decision was largely reversed by Presidential Decree No. 446 on energy prices.


Many countries have found it useful to establish a specialised institution to prepare initiatives, draft

regulations, monitor progress, ensure compliance, administer funds and perform other administrative

activities.

There is no energy efficiency agency in Egypt. Previously the Organisation for Energy Planning (OEP) had

some umbrella functions in the sector and was involved in the early work on appliance standards, but it has

been disbanded.

Government appears to favour the concept of a disbursed responsibility for energy efficiency within relevant

Departments guided by the Supreme Council of Energy supported by a small secretariat in the Cabinet

Office known as the National Council for Energy Efficiency. The Supreme Energy Council was established in

1979, but was hardly ever convened. It has recently been revived and will take over the strategic functions of

energy policy. The members include all Departments with substantial interests in the energy sector.

This procedure reflects a common approach within the Egyptian administration to start with a small activity

and then subsequently to build up and strengthen the legal basis as experience is gained. A somewhat

similar process was adopted with the Regulatory Agency and with the New and Renewable Energy Agency.

It is possible, but by no means certain, that the National Council for Energy Efficiency will evolve into a

substantial agency with strong legal powers.

The Ministry of Industry has established by Decree a Committee on Energy Efficiency in Industry that will

exist for two years with the duty to assess the potential for energy efficiency and to review mechanisms to

realise that potential. The committee includes members from industry, academia and officials, which

composition is rather novel in Egypt. This work will also inform the National Council.


The obligation on manufacturers and importers of equipment to label goods or to meet specified standards is

a policy measure introduced to overcome the market failure caused by asymmetric information.

Standards for refrigerators, washing machines, air-conditioners and water heaters have been developed by

OEP under the UNDP / GEF projects and labels have been designed to indicate to which class any

appliance belongs.

Testing laboratories for these appliances and for efficient lighting equipment CFLs and electronic ballasts

have been built with the support of the UNDP Energy Thematic Trust Fund. A Ministerial Decree has been

21

promulgated to implement the standards and labels. The ownership of the testing laboratories, the testing of

appliances and the issue of labels to models according to their performance has now been assigned to

NREA. Compliance at present is voluntary; there is no systematic procedure to ensure compliance with

labels and to detect fraud, but this will be necessary when the scheme is made mandatory.

Article 55 of the draft electricity law obliges the competent Ministry to design policies aimed at expanding the

application of efficiency equipment and replacing low-efficiency appliance and equipment. Article 56 of the

draft electricity law also addresses this matter. It does not appear to add new regulation, but simply confirms

the application of the Ministerial Decree.

Also standards for buildings are very important because buildings are large consumers of energy, they last

for decades and large improvements in the energy efficiency of buildings can be achieved at low cost.

In Egypt, the Housing and Building Research Centre (HBRC) of the Ministry of Housing has developed

energy efficiency building codes for residential and commercial buildings, in part with the assistance of

UNDP / GEF. It has also developed an energy efficiency building code for the administrative buildings to

improve energy efficiency in Egyptian governmental buildings.

The residential energy code specifies the minimum requirements to improve both thermal and visual comfort

in non-conditioned buildings as well as minimum energy efficiency requirements in conditioned buildings.

The codes specify separately the minimum energy performance standards for energy using equipment and

for the envelope.

The Residential Building Energy Efficiency Code is implemented by a Ministerial Decree issued in 2006 by

the Minister of Housing. The final draft of the Commercial and Administrative Buildings has been presented

for public review in 2008 and awaits implementation.

It is not clear whether the capacity of the Ministry to achieve regulatory compliance is sufficient and this may

be an area where further support is required.


Financial incentives can be separated into economic and fiscal incentives. Economic incentives are aimed at

encouraging investment in efficient equipments and processes by reducing the investment cost directly while

fiscal incentives are those actions that reduce the cost indirectly through the taxation system.

It does not appear to be any specific fund for energy efficiency in Egypt. The Committee on Energy

Efficiency in Industry has proposed the establishment of a Fund to provide financial incentives to investment

in energy efficiency. But no decision has been taken so far. Such a fund could be an effective help to the

industry in making investments that could not be self-sustained unless prices are set at least at cost’s levels.

The state would also gain from such investments because it would reduce the volumes of energy that it has

to purchase at higher prices in the international market to meet the demand for fuel at subsidised prices. If a

portion of the benefits to the state from each investment were returned to the Fund it could maintain activities

and even expand them.

The World Bank Group has recently created the Clean Technology Fund (CTF); this seeks to promote

scaled-up financing for demonstration, deployment and transfer of low carbon programs and projects with a

significant potential to reduce Green House Gas (GHGs) emissions. Egypt was an early applicant to this

fund and secured 300 million US$ of financing (CTF Trust Fund Committee, 2009). None of this seems to be

allocated to energy efficiency, but to renewable energy and transport.

The draft electricity law provides that holders of transmission and distribution licenses shall purchase or pay

the value of the surplus power from third-party cogeneration units and power from units running on

recovered fuel energy with a capacity of less than 50 MW. The price to be paid for this power is to be

established by the Egyptian Electric Utility and Consumer Protection Regulatory Agency (EEUCPRA)

established under the law.

5.6 Energy audit process and regulation

Another approach, which may be combined with incentives, is to oblige companies to undertake energy

efficiency by mandatory measures.

22

Developing these measures is the responsibility of the Energy Efficiency Committee of the Ministry of

Industry but up to date there is no evidence that such measures have been implemented.

The original idea of an Energy Service Company or ESCO is that an entity other than the energy supplier

should identify, design, finance, supervise and commission energy efficiency projects for a client, to be

compensated by a share of the energy savings achieved over a defined period.

Both United States Agency for International Development (USAID) and UNDP in their energy efficiency

projects have tried to promote ESCOs in Egypt. The aim in both projects was to establish and demonstrate a

business model where ESCOs helped clients secure financing from commercial banks and eventually to

create a self-sustaining market for ESCO activity. The results were a little disappointing. Some ESCOs were

established and a national association for ESCOs was formed. Most of the ESCOs were small and under-

resourced.

The prevailing large subsidies to energy reduce the benefits from investment and make it hard to find

projects that are attractive to both the ESCO and the client. Banks generally lend to companies on the

strength of their balance sheet not on a project basis and they have better connections with companies than

do the ESCOs. The privatization of the industry could encourage more interest in energy efficiency because

managers would be more strongly incentivised to improve the efficiency of the production process and

minimize the cost of production than they would be under public ownership.

5.7 Dissemination of Information

Access to knowledge is costly and may impede an individual or a company from undertaking activities in

energy efficiency. It is a legitimate role of government to generate and disseminate knowledge as a public

good. We interpret the term knowledge in this context very widely to include data, technical guidance,

research and demonstration.

Sporadic efforts have been made in the past along these lines, but have not been sustained. The energy

efficiency project implemented by USAID in the 1980s and 90s produced many useful case studies and a

wealth of excellent technical guidance notes, which seem no longer to be widely available. This may be a

consequence of the rather fluid nature of the institutional responsibilities for energy efficiency in Egypt that

have not allowed a single permanent centre of competence to emerge, to accumulate knowledge and to

deploy it effectively and in a sustained manner.

There are not research and demonstration projects in energy efficiency that have been publically funded.

The Committee on Energy Efficiency in Industry plans to develop a data base on industrial energy use

including estimates of potential savings. The location of this data base is uncertain, but the preference is for

the Industrial Development Agency. The choice of the IDA is determined by the fact that it has an existing

interface with industry and can start rapidly. This is a sensible measure that should be encouraged.

6. Renewable Energy: practices and institutional framework

Public policy intervenes to correct market failures. In the case of renewable energy, the most common

failures are somewhat similar to those identified for energy efficiency, but with a different emphasis. Distorted

energy prices, unrecognised external costs, poor access to technical information all play a part. There is

however a significant difference. Many measures of energy efficiency are cost effective, but prevented by

distortions in the conventional market. This is also true of some renewable options, such as solar water

heating. Many technologies are not cost-effective even if the distortions in the conventional market are

removed. They are justified by the external costs that they avoid, especially the external costs of GHG

emissions. This means that they must be subsidised and financial incentives are critical to renewable policy.

In addition to these general market failures there can be specific market failures for electricity generated from

renewable energy that is fed into a national grid as electricity. Excessive and unjustified costs of connection

to the grid, inability to connect, disputes over responsibility for payment, all these factors can impede

23

renewable deployment. Policy instruments are intended to correct or compensate for these various

distortions.

Hereinafter is given an account of the main existing Egyptian practices in Renewable Energy field.


There is no renewable energy law for Egypt as such, but there are some important provisions in the draft of

the electricity law that will determine how the next phase of renewable development proceeds. The Law sets

out the procedures for the construction of grid-connected renewable generators and the compensation of

Egyptian Electricity Transmission Company (EETC) for the purchase of power at higher prices than

alternatives.

Article 45 of the Law sets out the process for the procurement of electricity generation plants using

renewable energies. It provides for several options combining a competitive bidding system and a feed-in

tariff. Under the competitive bidding system NREA may call for tenders for the construction and operation of

plant to sell electric power to the Egyptian Electricity Transmission at a rate proposed by the regulatory

Agency and approved by the cabinet. Alternatively EETC, in coordination with NREA can call for public

tenders to build, own and operate plant under which arrangement the successful tenderer will sign a power

purchase agreement with EETC. It is intended, but not specified in the Law, that the domestic content will be

a part of the criteria for selection. It is also foreseen that investors may, of their own initiative, build plants

and sell the electricity to EETC on the basis of a standard PPA of a take-or-pay character valid for 15 years,

approved and announced by the Cabinet. Article 46 requires the holders of licences for transmission and

distribution to connect renewable generators to their own network and to cover the corresponding investment

needed for strengthening their networks.

Articles 47-50 provide for a fund, to be named the "Fund for Development of Power Generation from

Renewable Energies", established by and affiliated to the cabinet of ministers. The purpose of the Fund is to

compensate EETC for the purchase of electric power from the renewable generators. The Fund will be

financed mainly from allocations of the public budget of the State. The Fund's statutes and governance are

to be set by Decree.


Subsidized prices for fossil fuels obviously discourage investment in renewable energy. As noted during the

discussion of energy efficiency, subsidies in Egypt are very high and this is a distinct disincentive to

renewable energy.


The Government of Egypt was quick to establish a specialised agency for renewable energy and this has

certainly helped in the creation of strong interest in a commercial development. The New and Renewable

Energy Authority (NREA) was founded in 1986 with the mission to lead research and development of

renewable sources of energy. Subsequently it has also acquired some responsibilities for energy efficiency.

Research on renewable energy has mainly been directed at wind and solar power. NREA also acts as a

developer; it owns and operates all existing wind farms in Egypt and is planning several more. NREA is also

effectively a regulator; it establishes rules and procedures for allocating land for wind farms to developers

and it acts as a national planning agency for renewable.

Clearly there are conflicts of interest in the discharge of these various functions. There are advantages of

having everything under one roof in the early days of development, but now, given the expected rapid rate of

commercialisation, it is no longer effective.

6.4 Standards and /or Labels

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Standards would be inappropriate for large developments in renewable energy. Commercial developers are

well equipped to decide for themselves on efficient and effective specifications. There is a good case for

standards for small appliances such as solar heaters. At the moment there’s no evidence of such regulations

in Egypt, or any intention to produce them. The principles governing such instruments are exactly the same

as for similar standards in energy efficiency.


Many financial incentives have been used in different countries to promote renewable energy. Support can

either be offered to investment or to operation. Investment support for renewables is general delivered

through the same type of instruments that are used to support investment in energy efficiency (e.g. capital

grants, tax exemptions, soft loans and loan guarantees.) In the case of grid connected renewables it is

possible also to offer support to operation either by allowing the electricity to be sold at inflated tariffs or by

obliging certain parties to purchase specified volumes.

Existing wind projects in Egypt were financed with grants and low cost loans. Funds and technical assistance

were provided by Denmark (60 MW, 2001-3); Germany (80 MW, 2001-4); Spain (85 MW, 2006) and Japan

(80 MW, 2007). The German, Spanish and Japanese developments have all applied for accreditation under

the CDM, using methodology ACM2 (grid-connected electricity generation).

6.6 Feed-in tariffs and obligations

Grid connected renewable energy is rarely cost-effective in its own right. It must be subsidised if it is to be

developed by private industry. There are two main ways of delivering the subsidy:

• offering higher prices than those available commercially;

• creating a second valuable good that represents the value of the fact that the energy is generated from

renewables. This second scheme is operated by issuing certificates that certify the renewable origin and

then obliging an identified group (normally suppliers) to buy them. This creates a market and therefore a

price.

In Egypt the intention at present is initially to use competitive bidding for large resources on land owned by

the state. This will help support and develop the national wind industry. The competitive bidding should also

help reveal prices that developers will accept and form the feed-in tariff that will be proposed later for smaller

projects.

6.7 Dissemination of information

The wind resource in Egypt has been well studied. NREA has compiled a wind atlas for Egypt with the

support of the Risoe National Laboratory. A Wind Atlas for the Gulf of Suez was published in 1996 and

updated in 2003. A Wind Atlas for the whole country was complied in 2005. Developers would probably wish

to make their own measurements before committing capital and it is in the interests of NREA that they should

do this in order to ensure that the technical risk in this respect lies with the developer. The Atlas though

represents an excellent source of basic information for potential investors.

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Morocco

7. The Moroccan Legal System

Morocco is a constitutional and democratic monarchy. The King is the Supreme Representative of the Nation and the Symbol of the unity thereof. As Defender of the Faith, He ensures the respect for the Constitution. He is the Protector of the rights and liberties of the citizens, social groups and organizations. The Government is composed of the Prime Minister and Ministers. The Government is answerable to the King and the Parliament. After the appointment of the Cabinet members by the King, the Prime Minister submit the program (about the national activity, namely in economic, social, cultural and foreign affairs) to each one of the two Houses of Parliament. The House of Representatives will validate the program by vote . Under the Prime Minister's responsibility, the Government ensures the execution of the laws. All public facilities are placed at the Government's disposal. The Prime Minister has the right to introduce bills, exercise the administrative powers and delegate some of his powers to the Ministers. The Prime Minister is responsible for the coordination of ministerial activities. The Parliament is composed of the House of Representatives and the House of Counselors. The King presides over the opening of Parliament’s session.

7.1 The Institutional Framework of Morocco Energy Policy

The institutional framework in the field of renewable energies is well developed in Morocco. However, this is not yet the case for energy efficiency, which was neglected in former years. This will change with the creation of the Agency for the Development of Renewable Energy and Energy Efficiency (Agence pour le développement des énergies renouvelables et l’efficacité énergétique – ADEREE), the agency that will substitute the Centre for the Development of Renewable Energy (CDER) and that will be responsible for renewable as well as efficiency. With a strong agency it seems possible to realize the ambitious plans for sustainable energy system development. The private sector was actively involved in the development of the power generation capacity from 1997 and as a result, the private sector plays a key role in the electricity sector in Morocco, with over 50% of the power generating capacity in the hands of IPPs (Independent Power Producer - Producteur d'Electricité Indépendant) (contributing to over 70% of generation) and 55% of electricity distribution done by private operators. Although private sector financing in Morocco has been deemed a success story, interest has tapered off recently. Revival in active private sector participation is expected once a clear and stable regulatory framework is established. The main actors operating in the Moroccan energy sector are: • Ministry of Energy, Mines, Water and the Environment;

• Ministry of Equipment;

• Ministry of the Interior;

• Ministry of Economic and General Affairs;

• National Electricity Authority (ONE);

• Renewable Energies Development Centre (CDER);

• National Mines and Hydrocarbons Authority (ONAREP);

• Mining Research and Participation Bureau (BPRM);

The Ministry of Energy, Mines, Water and the Environment plays a central role in the implementation and coordination of the energy policy. It’s role was strengthened and clarified by a government decree of February 2005 (No. 2-04-504). The Ministry supervises all energy activities related to electricity production (including renewable energy), oil products production and distribution, and energy demand. The Department of Electricity and Renewable Energy shall ensure the country's electricity supply in the best conditions of safety and quality. The department cooperates with relevant agencies to preparation and implementation of legislation and regulations. The Ministry of Energy, Mines, Water and the Environment is also responsible for the technical supervision of ONE. The Ministry of Finance has the financial supervision of ONE and of the electricity distributors (“regies”).

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The Ministry of Economic and General Affairs studies and proposes all tariffs. ONE plans the production and transmission system, and proposes tariffs changes, regulatory and legal texts required to achieve its missions. Private corporations: • Moroccan Refining Company (SAMIR);

• Maghreb-Europe Gas Pipeline Management Company (METRAGAZ);

• Jorf Lasfar Energy Company (JLEC);

• Tahaddart Electricity Company (EET);

• Detroit Wind Energy Company (CED);

• Afrisol.


This section attempts to evaluate the present status of energy efficiency in Morocco and implemented public policies to correct market failures. Energy supply in Morocco is dominated by imported fossil fuels. As a consequence of this strong dependence, Morocco was deeply affected by the rapid increase in prices in 2008. The difficulties of managing these large price excursions prompted the Government of Morocco to prepare an ambitious and comprehensive energy strategy within which both renewable energy and energy efficiency are prominent. The strategy sets targets for energy efficiency at a 12% reduction in energy use by 2020 and at a 15% reduction by 2030. These percentages are related to the expected energy demand at those dates in the absence of any energy efficiency initiatives. Demand for primary energy is expected to increase by a 5% annual rate to 2030 and, within that, total electricity demand will grow by an 8% annual rate. The high rates of growth are attributed to the rapid economic development of the country, the modernization of agriculture and the expansion of the tourist industry. On the supply side the program is mainly focused on the construction and reinforcement of the electricity grid, but strong emphasis is given to coal, and also ambitious targets are set for renewable energy. The expected share of total Moroccan energy saving potential will be 48% for industry sector , 23% for transport, 19% for residential and 10% for tertiary. The strategy covers supply and demand for energy and includes both short-term actions up to 2012 and long-term activities beyond that date. In due course the technical strategy will be complemented by a strategy for institutional reform, particularly for the liberalization and restructuring of the electricity industry, even if this reform is controversial and the publication of the details has been delayed. The implementation of the strategy is accompanied by several important legal initiatives and the deployment of a considerable fund to strengthen the energy sector. The priorities for the short-term are contained within the National Plan of Priority Actions (Plan Nationale des Actions Prioritaires - PNAP). The measures contained in the PNAP are to be implemented in the period up to 2012. It is a comprehensive effort of government to improve energy efficiency that involves ten Ministries and many national agencies. The lead Ministry is the Ministry of Energy, Mines, Water and Environment (MEMEE); among the other Ministries are those responsible for transport, agriculture, industry and commerce. The implementation of the Plan is supervised by a steering committee chaired by the Prime Minister; MEMEE chairs the committee charged with monitoring the execution of the Plan and eight working groups cover different topics of the Plan. 8.1 The legal framework and its reform

The proper implementation of energy efficiency requires an energy efficiency law that justifies the purpose of the activity, establishes a clear focus in government, assigns the responsibilities of actors, and makes provision for an agency and specific instruments. There are two routes to legal innovation in Morocco. The first is by Royal Decree, which is not debated in Parliament. The second is by a parliamentary procedure wherein draft laws are prepared by the responsible Ministry, approved by the government and then by the Council of Ministers presided by the King and finally voted by Parliament. The Ministry of Mines and Energy defines and implements national policy for energy in general and supervises the activities of the electricity producer (Office national de l’Electricité - ONE) and the

27

agency that will shortly be responsible for operations in energy efficiency (ADEREE). The Ministry of the Interior is responsible for the technical supervision of the distribution companies; The Ministry of Finance is also jointly responsible for the supervision of ONE and the distribution companies of electricity (regies). A law on energy efficiency is in preparation. It is expected to contain provisions for; • Mandatory energy performance standards for buildings;

• Obligatory audits for industries above a certain threshold to be established by decree;

• A requirement for a energy impact analysis of all new large projects, including the possibility to use

renewable energy

The final draft has been delayed by resistance from industrial interests opposed to mandatory audits. 8.2 The pricing system

Controlled prices for goods and services are proposed by the Ministry of Economic Affairs and decided by the inter-ministerial committee on prices. For electricity all structural modifications to tariffs are suggested in the first place by ONE. The prices of basic consumer goods like petroleum products, sugar and wheat are subsidized through a Compensation Fund (Caisse de Compensation). The original aim was to reduce fluctuations in prices, but it has become a permanent subsidy. The Fund is very large; the 2010 budget has allocated to it 1,8 billion US$. The Fund is widely criticized for its low efficiency in targeting the poorest and the government has announced its intentions to reform the Fund better to target those in need. Electricity prices are subsidized both directly with transfers to cover operating costs and indirectly with low prices for fuel oil. The retail prices though are still relatively high by regional standards. The rates are set by ministerial decree. Rural consumers are charged through a prepaid meter system. The customer can purchase the desired amounts via rechargeable cards. Business customers can choose from different tariff structures. For High Voltage customers there is a choice between a tariff based on a subscribed capacity plus time-of-day unit charges or a tariff comprising three price options calculated according to the annual duration of power usage. 8.3 Governmental and independent authorities

A draft law 16-09 has been adopted by the Council of Ministers that extends the mandate of CDER to include energy efficiency. This law would replace the law 26-80 that created CDER. The new entity would be called the Agency for the Development of Renewable Energy and Energy Efficiency (Agence pour le développement des énergies renouvelables et l’efficacité énergétique – ADEREE). This law not only creates an agency with a clear mandate for energy efficiency, but transforms CDER from a research institution into a body with defined operational responsibilities. Under the new Law, ADEREE will be responsible to promote both renewable energy and energy efficiency. The responsibilities for energy efficiency include: • Prepare a national plan for renewable energy and energy efficiency and submit it to the government;

• Conceive and implement action plans in the domains of renewable energy and energy efficiency as well

as environmental programs linked to its activities in the sector,

• Coordinate the program of energy audits and ensure its success;

• Propose to the government modifications of the incentive framework for renewable energy and the more

efficient use of energy,

• Propose and put in place norms and standards for materials and equipment that consume energy;

• Conceive and implement pilot projects to demonstrate the viability of new solutions for renewable

energy and energy efficiency or help their adoption.


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There are no standards or labels for appliances in Morocco. The ADEREE is charged with proposing and putting in place norms and standards for materials and equipment that consume energy. A UNDP/GEF project is being developed to support this work. The CDER is now working together with the Ministry of Habitat and professional organizations to develop a guide for construction that will differentiate according to the various climatic regions of the country and will offer to developers and architects reliable guidance. The publication of the guidelines will be accompanied by training of professional staff and by a program of financial incentives. Demonstration buildings will be constructed according to these specifications and the guidelines will be revised according to experience. The results of the work are expected in 2012 by this time a mandatory code should be developed. The activity will be supported by UNDP/GEF and the Italian government. Funding will be supplied from several Ministries. The whole has been assembled into a single GEF project (Energy Efficiency Codes in Residential Buildings and Energy Efficiency Improvement in Commercial and Hospital Buildings in Morocco) to be managed jointly by ADEREE and the Ministry of Housing and Urban Development; UNDP contribution is about 3,5 million US$ and co-financing from the Moroccan side is around 15 million US$. The main components of the project are: • Establishment of a National Building Code Unit and reinforcement of municipal compliance

• Sizing of the energy efficiency market

• Implementation of the Building Code

• Dissemination of standards and guidelines

• Energy efficiency investments in the public and private sector


A large fund, known as the Fund for Energy Development (Fonds de Développement Energétique - FDE), has been established to support the energy sector. It arose out of proposals by Saudi Arabia and the United Arab Emirates to finance a part of the purchases of oil required by Morocco during the time of very high prices in 2008. The government chose instead to use the money to establish a fund for the long-term strengthening of the energy sector. The value of this fund is 1 billion US$ made of grants for 500 million US$ from Saudi Arabia, 300 million US$ from the United Arab Emirates and a 200 million US$ national contribution from the Fund of Hassan II. The legal basis for the FDE and its operational priorities are set out in the Finance Law 2009. The contributions from the Fund of Hassan II are constrained by the requirements that they must generate profits that can be returned to further investment in new developments. The available funds of the FDE will be used in two different ways. A first part (possibly one third) will be used to provide financial support and low interest loans for activities that the government judges would not be profitable without this support. Specific applications include the rehabilitation of assets of ONE, subsidies for energy efficiency and studies for technical assistance. Many of the supporting activities will be aimed at improving energy efficiency; much of the PNAP will be supported by this resource. The rest of the FDE will be invested in revenue generating activities. For this purpose the government intends to create an investment company, known as the Société pour l’Investissement en Energie, SIE. This company will be responsible for investing in viable energy projects that may cover both renewable and fossil technologies. Both wind parks and new coal-fired plant are likely investments. It is possible that similar investments may be made in energy efficiency, but up to date no specific studies of this eventuality have been made. The Government of Morocco is seeking substantially to enlarge the FDE with money from the Clean Technology Program (150 million US$) and from International Financial Institutions (IFI) such as the International Bank for Reconstruction and Development (IBRD) and the African Development Bank. The general idea is that each of the IFIs could extend lines of credit between 200 and 400 million US$ and perhaps direct grants to selected projects. Arrangements are in place to support auto-production of electricity by large consumers. Developers are permitted to establish private generation and to sell to industrial consumers. The arrangements between

29

consumers and producers are contractually specific and normally confidential. In most of the cases the consumer and the producer are the same entity and located on the same site. It is legally possible that the producer is a separate company and located elsewhere; in this case the electricity can be “wheeled” between the two sites at a nominal rate specified in the legislation. Any power produced that is surplus to the needs of the consumers can be purchased by the grid at 50% of the high tension tariff prevailing at that time of the day. There has been little experience of industrial audits in Morocco and no government policy to support or to oblige them. The law on energy efficiency now in preparation is expected to contain provisions for mandatory audits. 8.6 Dissemination of Information

Little has been done in this respect, although it is already an element in the Memoranda of Understanding agreed with line Ministries. 9. Renewable Energy: practices and institutional framework

This section attempts to evaluate the present status of renewable energy policy in Morocco. Morocco enjoys important national resources in the form of wind, hydro and solar which are so far scarcely exploited. The development of these resources would contribute to the realization of the national objectives to secure supply and reduction of GHG emissions. This potential is clearly recognized in the comprehensive strategy for the energy sector that was published in March 2008 and which contains quite specific targets for renewable energy. It is intended that renewable energy will account for 8% of primary energy supply by 2012 and 18% of the supply of electricity. An indicative list of priority renewable energy projects has been established, including 1.000 MW of generating capacity from wind. The plants will be mainly IPPs. The PNAP also includes measures aimed at rehabilitating the assets of ONE and optimizing production for the hydro plant. The activities are to be funded by the FDE, described earlier, and the application to the Clean Technology Program. In November 2009 the government announced a most ambitious program for renewable energy, known as the Integrated Solar Energy Generation Project. Under this plan, the part of installed capacity of renewable energy in the power system will represent 42% of total installed capacity by 2020. The essence of the project is a proposal to generate electricity from installations working on the basis of concentrated solar power (CSP). A dedicated agency, known as Moroccan Agency for Solar Energy, has been created for the implementation of this plan. The tasks of the agency will be to manage the overall project (including design, choice of operators and implementation) and to coordinate and supervise all the other activities related to this program. The first request for proposals is to be issued in September 2010. Finance for the venture is expected from: • The Moroccan State;

• The Hassan II Fund For Economic & Social Development;

• Energy investment companies;

• Office National de l’Electricité (ONE).


The main legal elements in a policy to promote renewable technologies are a clear targeted strategy or road map, a specialized agency to implement public activities and a support system specifically aimed at allocating the extra costs of the technology. Over the last few years the Government of Morocco has made a substantial effort to strengthen the legal and regulatory framework with the aim of facilitating the development of renewable energy and in particular with the intent to encourage a participation in this endeavor from the public sector.

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In its application to the Clean Technology Program the government identifies several non-financial obstacles to progress with renewable energy, including inadequate institutional structures, insufficient coherence and cooperation between Ministries, insufficient strategic guidance, insufficient information made available to investors, a lack of experience in the administration and a lack of financial incentives. Five significant legal reforms have been made to help overcome the obstacles cited and to improve the environment for the development of renewable energy: • The Decree 2-94-503 of 1994, that allows ONE to issue requests for proposals for electrical supply from

private investors with a capacity greater than 10 MW; this supply is to be contracted exclusively to ONE;

• The Decree 1-06-15 of 2006, that obliges public institutions to employ competitive calls for tender in the

award of projects. The law applies for example to municipalities that may wish to contract with wind

farms or other sources of electricity from renewable energy;

• The Law 16-08, voted in 2008, that raised the ceiling for self-generation by industrial sites from 10 MW

to 50 MW. The law was conceived principally to support wind power, but applies equally to other

technologies. This Law rescinds the Decree from 1963 which attributes to ONE a monopoly of

production above 10 MW and that prevented the sale to ONE of any electricity surplus to the

requirements of the industry;

• Law 13-09 on renewable energy, that modifies the existing Decree of 1968 establishing ONE, by

authorising the production of electricity from renewable sources by persons other than ONE;

• Royal Decree n° 1-10-16 of 11 February 2010 that promulgates law 13-09 on renewable energy.

• Law, 16-09, that extend the mandate of CDER to include energy efficiency. It replaces the law 26-80

that created CDER. The new entity is the ADEREE.

• Royal Decree n° 1-10-17 of 11 February 2010 that promulgates law 16-06;

• Law 57-09, that establishes the Moroccan Agency for Solar Energy.


A specialized institution to make research, prepare initiatives, draft regulations, monitor progress, ensure compliance, administer funds and perform other administrative activities can be useful in promoting renewable technologies. In Morocco there is a long-established Centre for the Development of Renewable Energy (CDER), which was created in 1982 under the supervision of the Ministry of Energy. Its principal functions at the time were the research and promotion of renewable energy. As noted earlier, its responsibilities have since been extended to energy efficiency and it is now in the process of reorganization as the Agency for the Development of Renewable Energy and Energy Efficiency (ADEREE). In its original form the functions of CDER were to: • Evaluate the potential of renewable energy in Morocco;

• Publish an atlas of the resource;

• Mange the off-grid rural electrification program and the promotion of SWH through the program

Promasol;

• Implement information campaigns of renewable energy;

• Elaborate plans for the development of renewable energy in collaboration with the municipalities,

• Prepare agreements on renewable energy with other Ministries concerned.

Under the new Law 16-09 the new agency ADEREE will be responsible for the promotion of both renewable energy and energy efficiency. The responsibilities for renewable energy will include: • Prepare a national plan for renewable energy and energy efficiency and submit it to the government;

• Conceive and implement action plans in the domains of renewable energy and energy efficiency as well

as environmental programs linked to its activities in the sector,

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• Identify and map sites for renewable energy and prepare evaluations of the national potential for energy

efficiency;

• Propose possible areas for the construction of wind farms;

• Coordinate the program of energy audits and ensure its success;

• Propose to the government modifications of the incentive framework for renewable energy and he more

efficient use of energy;

• Conceive and implement pilot projects to demonstrate the viability of new solutions for renewable

energy and energy efficiency or help their adoption


Standards for solar water heaters have been produced based on European norms, namely: • NM 14.5.002-2003 – Specifications for individual solar water heaters; • NM 14.5.003-2003 – Test for solar water heaters; • NM 14.5.004-2003 – Test for solar collectors with circulating liquid. Test beds for solar collectors and solar systems have been installed in two laboratories and protocols for certification and labeling have been developed. The impact of this testing procedure has been questioned, because 80% of SWH installed in 2000 were already certified by foreign manufacturers.


A good example of financial incentive in Morocco is the electrification of rural areas that offered an important opportunity to extend the use of renewable energies. Morocco has a large and growing rural population: 13 million people (45% of the population) live in rural areas. In 1996, the government of Moroccan together with ONE undertook an ambitious program greatly to extend the access to electricity in rural areas. The Programme d’Electrification Rurale Globale (PERG) was designed to extend access to the entire Kingdom by 2010. The program was successful in its objective; the electrification rate was between 15 and 20% at the beginning of the program and is now estimated at 98%. The program attributed 10% of the available funds to photovoltaic home solar systems. The houses in the remote mountainous areas are much dispersed and technically this was deemed a sensible solution. At the end of the program ONE originally estimated that 7% of houses (i.e. 250.000 houses) will have access using photovoltaic equipment. So far around 60.000 systems have been installed with a total capacity of some 4 MW, which is somewhat below the original target. Much of the finance for the program came from overseas donors including the European Investment Bank (EIB), the Japan Bank for International Cooperation (JBIC), the Islamic Development Bank (IDB), the Kuwaiti fund and the Agence Française de Développement (AFD). To encourage citizens to adopt photovoltaic solar homes ONE offered a choice of three purchase options: • Direct action: in this option, ONE purchases and installs the PV kits with the assistance of the CDER

and provides maintenance and after-sales service;

• Provision of a service: in this case ONE commissions a private company close to the beneficiaries to

install the PV systems and to provide after-sales service and debt collection;

• Partnership action: ONE provides PV panels and batteries to corporations selected by competitive

tendering, which are then responsible for installing the equipment and fittings at their own expense and

also for equipment’s guarantees, maintenance and after-sales service.

The consumer typically pays a service charge of 3,6 - 6 US$/month depending on the size of the installation. There is a 20 or 30% subsidy from ONE and about 40% from the local authority. ONE also experimented within this program with pilot wind farms. The 60 MW plant at Bel Mogdol Essaouira was constructed as a part of this program; it was commissioned in April 2007 and was constructed by GAMESA using 850 kW turbines. The plant was built under an IPP arrangement.

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For the most part, ONE has been responsible for the procurement and management of wind plant; it publishes calls for tender and presides over the attribution of contracts. It supervises and manages the plant on behalf of Ministry of Energy, Mines, Water and Environment (MEMEE). Existing wind parks have been built without any direct subsidy from the Moroccan government. The solar regime in Morocco is very good with on average 3,000 hours per year of sun and 5,5 kWh/m

2/day.

Support to the adoption of solar water heating has been offered through the program PROMASOL that includes, among other instruments, capital subsidies. The program was carried out in cooperation with the UNDP and was originally designed to start in 2000 with the overall aim of installing 100.000 m² of collectors over a period of four years. At the time the total installed capacity across the country was some 50.000 m

2. It

was expected that the program would also lead to improvements in the quality of equipment, a reduction of cost, better availability and a better supporting environment. As a consequence of various delays the program actually began in 2002; implementation was slower than expected and the program was eventually extended to 2008; it was managed by CDER. The achievement of the objectives was envisaged to be obtained through complementary direct and indirect actions. Direct actions included: • Agreements with public sector actors in health, education, sport to implement SWH; these agreements

could foresee financial assistance;

• Contractual agreements with the private sector (hotels and other commercial buildings) which included

the possibility of financial support;

• Promotional activities including the procurement of 1.000 SWH of 150 litres/2m² and sold on to the

residential market, the purchaser then needing only to pay the tax-free cost of the system plus the

installation charges.

Indirect actions were: • Partnerships with commercial actors intended to augment the capacity for distribution and

commercialization through technical and financial assistance to private sector manufacturers, importers

and installers to develop commercial and marketing strategies for their goods and services;

• Communication and dissemination of information to the wider public and to professionals (architects,

consultants);

• Industrial support to manufacturers with the intent to provide technical support and financial support for

the investments in production facilities.

A key element of the strategy was the Guarantee Fund for Energy Efficiency and Renewable Energy (FOGEER), that was intended to cover the risks associated with collective systems in institutions and conceivably in residential buildings hotels and industry. It permits a guarantee of 70% of the investment with a direct subsidy of 10% of the total cost and a reduction by 1,5% of the applicable interest rates. In fact it took a long time to establish and has been little used. The area of solar collectors in Morocco installed from 2002 to 2008 was about 140.000 m

2, so the overall

target was attained, albeit over a longer period than initially foreseen. The figures though are still disappointing. The total installed capacity in the country is only 200.000 m

2 and the rate of installation is

around 40,000 m2. These are both low compared to other countries in the region with similar solar regimes. A possible reason for the low penetration is the high subsidy provided to LPG. Bottled gas is subsidized as part of a program to prevent deforestation by low income people using fuel-wood for cooking. It also means that gas water heating is economically attractive and competes strongly with SWH. New targets have been set for SWH of 1.7 million m

2 by 2020. To achieve this PROMOSOL II will:

• introduce a new regime of incentives;

• continue to strengthen the quality of equipment and servicing;

• introduce a promotional exercise for public buildings and the tertiary sector;

• continue with sensitization and communication;

• increase the supply and availability of equipment.

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A gas/solar hybrid plant is under construction in the East of the country; it is a 472 MW plant owned by ONE of which the solar share is 20 MW. The solar component is a pilot project essentially funded by a grant from the World Bank. The FDE is available for renewable energy projects; although no firm decision has been reached on the allocation of the Fund. It is believed that some 100 million US$ may be reserved for investment support to projects in renewable energy. The application for the Clean Technology Development Program also foresees allocation of funds to renewable projects. 9.5 Feed-in tariffs and obligations

The Ministry of Finance is opposed to a feed-in tariff as it sees no reason to subsidize an industry that cannot compete directly. There is however an interesting scheme operated by ONE that has almost the same effect as a feed-in tariff. The EnergiPro project supports auto-production by large consumers. It was launched in September 2006 as an instrument to promote conventional auto-generation from fossil fuels and to lighten the burden of investment on ONE by encouraging private industry to invest. The offer by ONE comprises two elements: • An agreement to transmit all energy produced from a site of self-generation to any other point of

consumption on the High Voltage Grid of ONE. The transit tariff is of a “postage stamp” character and

the level is fixed at 0.0073 US$/kWh for all plants put into service before 2011, and at 0.0097 US$/kWh

for plants commissioned beyond that date.

• An agreement to purchase by ONE any surplus generation according to a fixed tariff structure. The

tariffs are based on a 20% uplift with respect to the normal tariffs of ONE at peak, normal and off-peak

hours. The effect is of a weighted average of 0.05 US$/kWh.

The developers are also entitled to the certificates of emission reductions (CERs). It is the CERs that appear to tip the balance on the cost-benefit analysis. The consequence of this arrangement is that developers face a known, clear regulatory framework in which to plan their investments. 9.6 Carbon finance and renewable energy development

The Clean Development Mechanism offers operating support to projects through the provision of a market for the certificates of Carbon Emission Reduction. Morocco has been successful to attract investment using this mechanism and now it has a portfolio of 61 projects of which 5 are registered: • “Wind park at Essaouira (60 MW)”, Office National de l’Electricité, 156,00 kt CO2(e)/year;

• “Collection and flaring of biogas in the landfill at Oulja”, Agence d’Aménagement de la Vallée de

Bouregreg,

• 32,48 kt CO2(e)/year;

• “Use of bagasse at SURAC”, SURAC, 31,65 kt CO2(e)/year;

• “Production electricity with photovoltaic kits”, Office National de l’Electricité, 39,53 kt CO2(e)/year;

• “Wind park at Tétouan (10 MW)”, LAFARGE, 28,60 kt CO2(e)/year.

Another five projects are in the course of validation. 9.7 Industrial policy: an opportunity for local development

AMISOLE is an industrial association for renewable energy in Morocco that has been active for the last 22 years promoting the interests of industry and professional persons working in renewable energy. Despite this

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longstanding interest, there are relatively few Moroccan companies that are actively involved in commercial projects. Generally there is still no specific industrial policy to support renewable energy. There are some general provisions to support inward investment, but nothing particular for RE.

Legal Framework Analysis for RE and EE Porjects

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