3rd MEDREG-IMME SeminarReform and Opening of Maghreb Electricity Markets

Tunis, 11-12 September 2013

Energy cooperation for the introduction of support schemes for distributed renewable energy production in the Northern African Region:

analysis of MEDREC experienceSalvatore Moretta

Italian Ministry for Environment Land and SeaMediterranean Centre for Renewable Energies, Tunis

3rd MEDREG-IMME Seminar

The Mediterranean Renewable Energy Centre (MEDREC) is a regional centre for training, information, dissemination, networking and development of pilot projects in the Mediterranean Region in the fields of renewable energies and energy efficiency, established in Tunis in 2004 and founded by Italian Ministry for Environment Land and Sea (IMELS)

The MEDREC is the focal point for Mediterranean Renewable Energy Program (MEDREP) activities in North Africa

The Mediterranean Renewable Energies Centre

3rd MEDREG-IMME Seminar

The Mediterranean Renewable Energy Program (MEDREP), is an initiative promoted by IMELS in partnership with the United Nations Environment Programme (UNEP) aiming at developing a sustainable renewable energy market system in Mediterranean and Balkan regions, removing project, policy and trade barriers and strengthening the market system, thus contributing to climate change mitigation.The IMELS has already provided a financial contribution amounting to 10 million USD to test different options to increase available financing for renewable energy and energy efficiency systems in Morocco, Egypt, Tunisia, Macedonia and Montenegro

The Financial Instrument: MEDREP finance

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• Support the demonstration, deployment and diffusion of renewable energy technologies

• Support renewable energy markets, defining appropriate policies and financial instruments for supporting investments

• Strengthen the institutional framework towards a common Mediterranean Energy Policy

MEDREP finance: Main objectives

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• In Egypt, EGYSOL targets the hotel sector to install SWH systems through a combination of subsidies, awareness raising and training workshops, and by establishing quality standards for SWH suppliers

• In Montenegro, MONTESOL is allowing local banks to finance SWH end-users through preferential terms such as low-interest loans.

• In Morocco, – MEDREP is helping to transform the market for energy efficient lighting, paving the way for phasing

out incandescent lighting– IMELS is negotiating with local authority a first net metering pilot mechanism for tertiary sector for

grid injection of the electricity produced in the framework of Casablanca Solar Hospital project (PV + SWH + Solar Cooling)

• In Tunisia: The “PROSOL family”– PROSOL (SWH in residential sector - 2004->2008)– PROSOL Tertiary (SWH in hotel sector - 2009-> ...)– PROSOL Industry (SPH – 2009 -> ... )– PROSOL Elec (PV in residential sector – 2010 -> 2012)

MEDREP finance: Ongoing Projects

Despite having set very ambitious renewables targets for domestic markets, most MENA countries are still lacking a comprehensive renewable energy strategy, which would address support for renewable energy in the long-term. Apart from public tendering for large-scale wind and solar power projects, there is no effective support scheme that would provide a strong incentive for investments in small-scale projects.

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Oil subsidies: a barrier to ss RE production deployment

Lacking support schemes, fossil fuel subsidies distort the economic of REEE technologies determining sometimes insurmountable upfront cost barriers.Keeping the price of fossil-based energy products low, makes renewable and efficiency investments less competitive. And it is regressive, with the wealthy benefitting the most. A recent IMF study of fossil fuel subsidies globally determined that the wealthiest 20 percent of the population gets a disproportionate 43 percent of the benefit from fossil fuel subsidies, while the poorest 20 percent gets only 7 percent. In fact, the poorest 60 percent of the population still doesn't get as much benefit as the wealthiest quintile.(Sources WB,IMF)

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The Prosol Program launched in Tunisia in 2005 to support Solar Water Heater market represents a successful example of how the inability to directly phase out fuel subsidies can be addressed indirectly by shifting demand preferences.

Prosol, in fact, prompted the Government to mandate by law, for the first time in Tunisia, a counterbalancing subsidy for REs, leading to a partial revision of the country’s energy subsidization system.

A success case: PROSOL

The introduction of a support mechanism tailored taking into account specific local conditions with regard to the institutional, legal and market framework was crucial to the growth of a self-sustainable SWH market

1985-96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0100002000030000400005000060000700008000090000

SWH Market Growth in Tunisia (m2 installed)

other projects

PROSOL

Before PROSOL (2002)

During PROSOL (2006)

After PROSOL (2010)

0200400600800

100012001400

100283

1200

Number of qualified installers

Before PROSOL (2002)

During PROSOL (2006)

After PROSOL (2010)

0

10

20

30

40

50

60

8 10

50Number of sale companies

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Despite increasing the overall State influence in the energy economics, this intervention actually reduced the total public fund disbursement. Considering only the installations carried out in the first 5 years of the program, expected savings achievable in 20 years (2005-2025) amount to 101 million US$, with a ROI of around 6 years for Tunisian Government.

Public finance returns under the BAU scenario and fossil fuel “phasing out” scenario(Source: Climate Policy Initiative, San Giorgio Group Case Study: Prosol Tunisia, June 2012)

Prosol: Integration of Stakeholders InvolvementINTERNATIONAL AID

POLICY

BANKS

TECHNOLOGY END USERS

MEDREC IMELS UNEP-DTIE

ANMEGoT STEG

SUPPLIERS INSTALLERS HOUSEHOLDERS

$ SAVINGS

$ SAVINGS

ENERGY SAVINGS

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MED-DESIREMEDiterranean DEvelopment of Support schemes for

solar Initiatives and Renewable Energies

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Duration36 months (January 2013 - December 2015)Budget• Total budget: € 4.655.007• Programme contribution: € 4.191.306 (90%)• Project co-financing: € 463.701 (10%)

Target groups• 5 central and 30 local administrations, institutions and agencies dealing with energy andenvironment• 2.000 SMEs, energy technicians and professionals• 10 financial institutions• At least 10 business support organisations, industrial districts and entrepreneurial associations

Main activities• Benchmarking of national/regional policies and programmes focused on solar energy and energy efficiency• Analysis of current certification procedures for solar energy technologies in MPC and EU regions• Elaboration of recommendations and action plans for improving legislative and regulatoryframeworks• Capacity building initiatives for solar energy technicians and professionals to ensure the qualityof components and installations• Training sessions for policy-makers in charge of solar energy regulation• Elaboration of innovative financial and market stimulus instruments

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MED-DESIREMEDiterranean DEvelopment of Support schemes for

solar Initiatives and Renewable EnergiesPartnership

• Puglia Region - Research and Competitiveness Service, Industrial Research and Technological

• Innovation Office (Italy, Puglia)

• Italian Ministry for the Environment, Land and Sea (Italy, Lazio)

• Italian National Agency for New Technologies, Energy and Sustainable Economic.

• Development (Italy, Lazio)

• Andalusian Energy Agency (Spain, Andalucía)

• Andalusian Institute of Technology (Spain, Andalucía)

• CIEMA - Solar Plataform of Almeria (Spain, Andalucía)

• The National Agency for Energy Conservation (Tunisia, Tunis)

• Lebanese Center for Energy Conservation (Lebanon)

• New and Renewable Energy Authority (Egypt)

IMELS will lead the WP6 of the project, aimed to the implementation of good practices in legal, regulatory, and economic issues including the promotion of new financing mechanisms to facilitate the take up of solar technologies in Egypt, Lebanon and Tunisia.

First deliverables will be available in early 2014

3rd MEDREG-IMME Seminar

MED-DESIREMEDiterranean DEvelopment of Support schemes for

solar Initiatives and Renewable Energies

MED DESIRE: WP6 Tasks Breakdown

WP6 Innovative financial schemes and market stimulation tools

to spread energy efficiency and distributed solar energy technologies

6.1

Innovative financial schemes

6.2

Create the legislative, social and technical framework for

introducing pilot solar ordinances in Mediterranean regions

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A key factor for the successful deployment of REEE technologies at competitive cost-benefit ratios is the declared political commitment to systematically turn this technology into a major element of energy system. Governments need to adopt, in agreements with relevant stakeholders, strategies, policy targets, and support schemes that are visible, feasible, and effective, that create both sufficiently expansive markets to drive down costs by scaling up deployment, and sufficiently attractive business perspectives for industrialists.MEDREC is working to assist Mediterranean Governments to address perverse subsidy on fossil fuels to REEE promotion to improve energy security and reduce GHG emissions through simplified and effective support schemes tailored on local conditions.

The role of Political Committment 3rd MEDREG-IMME Seminar

Energy cooperation for the sustainable development of the Northern African Region

Thanks for your attention!