Jordan Bins Solar Round
The cancellation due to infrastructure constraints could be good news
Jordan’s recent cancellation of its third round of photovoltaic (PV) projects may be for the best, some industry observers believe.
The country’s Ministry of Energy and Mineral Resources (MEMR) caused some consternation late in July when it confirmed that it had shelved plans for the round, launched only in February, for solar projects of up to 100 megawatts after failing to secure the finance needed to expand the national power grid to accommodate them.
“We could not secure the funds to expand the capacity of the national grid to absorb the load of these four projects,” Energy Minister Mohammad Hamed told the Jordan Times.”We were in talks with Gulf Cooperation Council states to allocate part of the $5 billion grant they decided to extend to Jordan for these projects but we did not get their approval.”
Earlier this year Jordan also extended the deadline for its second renewables round by three months to 31 December 2014. The round includes both photovoltaic projects of up to 50 megawatts and wind power projects of between 50 and 100 megawatts.
The launch of the second and third round prior to the completion of the first round surprised the market, but showed the sense of urgency in Jordan to cut back on expensive imports, Chadbourne and Parke wrote in a recent report.
Vahid Fotuhi, president of the Middle East Solar Industry Association (Mesia) believes the cancellation of the third round will allow the country to focus on implementing the first phases of its renewable development plans.
“Whilst the third round of solar PV projects have been cancelled, the first and second round of projects remain intact,” Fotuhi told Utilities Middle East.
“This is simply due to resource constraints, both human and technical. As the solar know-how and grid capacity, notably the “Green Corridor” expands in Jordan we will see more solar projects emerge.”
He added: “In the meantime, shelving the third round is probably good news for everyone. It means that the government will be able to focus more on bringing the first round of projects to financial close while moving forward with the RFP phase of round two (100MW).”
Jordan issued the third round of requests for proposals from renewable energy developers in February while it continued to collect proposals from the second round and negotiate with developers whose projects were accepted in the first round.
The first round appears well on track with power purchase agreements (PPA) in place for the first phase involving 200MW of solar power.In doing so, Jordan became the first country in the Middle East to successfully launch and complete a solar procurement program.
Jordan’s push into the renewable energy sector was driven by the fact that, unlike many of its neighbours, the country is not blessed with significant oil and gas resources. It has been heavily dependent on natural gas imports from Egypt via the Arab gas pipeline, but political unrest there and attacks on the pipeline led to severe disruption to those supplies.
This forced Jordan to turn to the international oil markets for expensive crude and fuel oil, which burdened the country’s utility with a deficit of over $1 billion per annum and pushed up levelised power costs to over $0.20/kWh, among the highest in the world.
The 12 companies that signed the PPAs for the first round are now in talks with lenders to bring these projects to
financial close while some 30 companies pre-qualified for round 2 of the direct proposal process.
The 117 megawatt Tafila wind farm was the first of the round 1 projects accepted by the government and agreements were signed in November 2013. The sponsors are Abu Dhabi-based Masdar, Cyprus-based developer EP Global Energy and InfraMed Investments.
Financing for the project is arranged by the International Finance Corporation (IFC), with participation from the European Investment Bank (EIB), the Export Credit Agency of Denmark (EKF), the OPEC Fund for International Development (OFID), the Dutch Development Bank (FMO) and Capital Bank of Jordan.
Jordan has set its sighrs on generating 7% of its electricity needs from renewables by 2015, and 10% in 2020. While most of the focus has been on wind and solar projects, the country is also encouraging other souces of renewable energy, such as geothermal, waste-to-energy and bio-gas projects.
In addition, importing LNG, exploring for oil and gas, implementing an energy efficiency program, importing electricity from neighbouring countries and diversifying the types of fuel it uses for power generation, are some of the other measures the country is exploring in its bid for energy security.