Jordan's alternative energy schemes struggle

05 December 2011

Jordan’s vulnerability, due to its lack of natural energy resources, has been exposed in recent years, but the country’s renewable power projects have been slow to move forward

Key fact

In 2008, some 61 per cent of Jordan’s energy needs was met by imported oil and oil products

Source: Energy and Mineral Resources Ministry

Jordan is a huge net importer of energy. The country does not produce oil and consumed an average of 110,000 barrels a day (b/d) of crude and refined products in 2010, according to the US’ Energy Information Administration (EIA). The EIA estimates that the country’s total gas output in the same year was about 9 billion cubic feet a day (cf/d), compared with overall consumption of 109 billion cf/d.

I am not sure how much of a priority the current renewables projects are, compared to oil shale and nuclear

Executive at UAE-based renewable energy firm

Until now, Jordan has managed to get by with attractive deals signed with Saddam Hussein’s Iraq, which sold oil to the government at subsidised prices, while most of its gas needs are met by cheap imports from Egypt through the $700m Arab Gas pipeline.

However, the US-led invasion of Iraq in 2003 and the 2011 Arab uprisings, which both resulted in oil and gas supplies being cut off, have made the country’s acute lack of energy security all too apparent. Jordan was hit by fuel shortages and high prices in 2003, and the explosions that put the Arab Gas line out of action this year led to widespread power cuts.

Becoming self-sufficient

Clearly, Jordan needs to find a way of becoming more self-sufficient and the government has been planning a three-tiered programme to start producing more oil, gas and electricity since the mid-1990s. However, progress has been poor, say sources close to Amman.

An issue within Jordan’s regulatory framework is the lack of subsidies for energy produced by renewable sources

In 2010, the country’s Energy and Mineral Resources Ministry released figures showing that two years earlier, 96 per cent of all energy used in Jordan was imported, with just 4 per cent produced locally. Of the energy demand, 61 per cent was met by imported oil and oil products; 36 per cent was met by natural gas (most of it imported); 2 per cent was produced through domestic renewable energy schemes; and 1 per cent was met by directly importing electricity from neighbouring countries.

If Amman is successful in its plans, these figures will be totally changed by 2020. Although imported oil will still account for 40 per cent of all domestic energy needs, 14 per cent will be met by domestically produced oil shale and another 10 per cent will be produced by renewable energy projects. The ministry also projects that 6 per cent of Jordan’s energy consumption will be provided through nuclear power.

So far, however, none of these plans has reached a particularly advanced stage. The plan to develop the country’s renewable energy resources has been far too slow to meet the growing energy demand, says Mohammad Hassan al-Zoubi, a professor at Yarmok University in Jordan and an expert on the energy sector.

Jordan energy portfolio by 2020
Oil/oil products4
Natural gas29
Oil shale14
Imported electricity1
Source: Rnergy and Mineral Resources Ministry

“I don’t think it will happen as planned, to be frank,” he says. “In the 1990s, when I was working at the ministry, they were talking about 5 per cent energy from renewables by 2000, then it was 5 per cent by 2010. Now, we produce maybe 2-2.5 per cent from renewables. The big projects that are planned are only at the early stages. We won’t have them ready by 2014 or even 2015.”

Alternative energy projects in Jordan

According to regional projects tracker MEED Projects, five major renewable energy projects are planned in Jordan. They could add a total of 770MW of energy to the national grid, which currently has a total installed capacity of 2,700MW. Peak demand is forecast to grow by more than 7 per cent a year over the next decade, to 5,500MW by 2020. If all of the planned projects were to go ahead, they would account for 14 per cent of demand in eight years’ time, but sources with experience of the country’s energy industry say that the chances of all the planned projects going ahead are slim.

“There are a lot of projects being planned in Jordan, but there is a lack of money to support them and the regulatory framework isn’t really there yet,” says an executive at one UAE-based renewable energy development firm, which has looked at the possibility of working in Jordan. “So the potential is high, but not a lot is happening and I am not sure how much of a priority the current projects are, compared to oil shale and nuclear.”

This last point is borne out by the ministry’s current spending plans. In 2010, it projected spending of $1.4bn-2.1bn on renewable energy projects, compared with $1.4bn-3.8bn it plans to spend on shale oil development and $6bn, which the Jordan Atomic Energy Commission believes Amman’s planned 1,100MW nuclear power plant will cost.

Meanwhile, Al-Zoubi says that although Jordan has huge potential as a producer of solar power, with 300-320 days a year of full sunshine and areas like Aqaba capable of producing 12 kilowatt hours a cubic metre, so far the focus has been on the production of electricity through wind. Average wind speeds in some parts of the country are more than 7.5 metres a second, above the 7m a second generally seen as being needed to make wind power commercially viable.

Cost-effective renewable energy

The government plans to build 600MW of wind power capacity by 2015 and as much as 1,200MW by 2020. The 2020 target for solar energy is 600MW and there is a great deal of scepticism among analysts about the likelihood of this target being met, although these figures do not include the estimated 1MW of solar panels already installed in Jordan and the solar water heaters that serve as much as 15 per cent of households.

“The cost of solar energy is still high and many people in Jordan think that investing in it would require a long payback period,” says Al-Zoubi. “Wind power is much cheaper to install and repays itself more quickly.”

Jordan’s first large-scale wind power project will be a 90MW scheme being developed by the Energy and Minerals Ministry at Fujeij in the west of the country. Four international engineering firms submitted bids to build the plant as an independent power plant in July and the ministry plans to award the deal by the end of the year. However, a source at one contractor that bid on the plant says that he is unsure why there has been such a delay in awarding the scheme, suggesting that there are concerns over the financial viability of the project.

Back in March 2009, the build-own-operate contract to develop a 30-40MW wind power plant at Al-Kamshah was awarded to a joint venture of Greece’s Terna Energy and Vector Aeolian, along with the local Enara Energy Investments. But the project has not moved ahead and is currently on hold, with the ministry and the joint venture partners still negotiating the exact terms of the contract into late 2010 and the scheme facing further delays in 2011 because of concerns over the planned site for the project.

The ministry plans to launch tenders for three more wind plants in 2012, at Al-Harir, Wadi Araa and Maan, which will have a combined capacity of 400MW and could cost as much as $400m to build. However, Al-Zoubi remains unconvinced as to how attractive these projects are and whether they will move ahead in the projected time frame.

“The plants at Fujeij and elsewhere are still at an early stage,” he says. “We probably won’t have them by 2014 or 2015. There are still a lot of barriers to investors coming in. They have talked about trying to encourage foreign companies to come and build in the country, but they have had problems, like those with the owners of the land.”

Jordan’s solar projects are at an even less advanced stage. In 2010, the US’ AES Corporation asked the ministry for approval to build a new solar plant near Amman. Although approval was given, AES has not yet awarded construction contracts on the scheme. Another development, the Joan 1 concentrating solar plant, is under study and the project developer, Germany’s Mena Cleantech, hopes to complete financing talks on the project by early 2012.

A clear issue within the country’s regulatory framework is the lack of subsidies for energy produced by renewable sources. The state-run National Electric Power Company is committed to buy privately produced renewable electricity, but has yet to offer a premium over power produced by traditional oil or gas-fed plants. “We are asking the government for subsidies on renewable energy, but it hasn’t happened yet,” says Al-Zoubi.

While current high energy prices should provide an incentive for Jordan to develop renewable energy schemes, they also make the development of a nuclear power plant and shale oil increasingly attractive. “They need a lot more fuel fast and for it to be cost effective,” says the engineering executive. “With oil prices this high, shale and nuclear look more attractive.”

Oil shale development in Jordan

The Energy and Minerals Ministry has signed agreements to develop its oil shale with international oil companies from Finland, the UK, Saudi Arabia and the Netherlands. A $450m project led by UK/Dutch Shell Group is the most advanced, with exploration starting in 2009.

Meanwhile, technical and financial bids for a nuclear power plant from three developers, Russia’s Atomstroyexport, Canada’s AECL and France’s Areva with Japan’s Mitsubishi Heavy Industries, are currently being assessed by the Jordan Atomic Energy Commission. An award is expected by the end of 2011.

“I feel that the government isn’t going down the right path,” says Al-Zoubi. “Renewables and energy are essentially opposites, but the government is trying to say that the two are compatible. And at $100 a barrel, oil shale is commercially profitable.”

Jordan seems unlikely to meet its ambitious renewable energy targets. The trouble is, if the nuclear and shale developments also hit hurdles, Amman’s hopes of energy self-sufficiency will be dashed.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications