Conditions in Jordan are perfect for rapid growth in
commercial and industrial solar.
The country recently abolished a limit on the nameplate
capacity of renewable energy plants connected to the grid that can benefit from
net metering.
Net metering permits a consumer of electricity generated by
a renewable energy plant to feed any excess generation to the national grid in
return for credits on future utility bills.
In the short-to-medium term, this means that new
projects are likely to remain limited in grid-constrained areas such
as the south of the country, but the removal of the nameplate capacity cap will
create significant opportunities elsewhere.
Subject to approval by the transmission or relevant
distribution company, there is no cap on the amount of electricity that the
renewable energy plant may feed into the grid. However, the distribution and
transmission companies are only required to pay an annual amount of up to 10
percent of the electricity consumed by the electricity consumer, at a kWh rate
of 120 Jordanian fils (roughly US$0.17) for solar, 95 Jordanian fils (US$0.13)
for hybrid resources and 85 Jordanian fils (US$0.12) for other renewable energy
sources.
The government commits to pay a 15 percent tariff uplift if
the renewable energy plant is of Jordanian origin. There is no official
guidance on the meaning of Jordanian origin; however, in practice, very few
renewable energy developers have benefited from these types of incentives.
As an extension to net metering, Jordan also permits
electricity wheeling. In exchange for a capped fee, this allows electricity
generated by a renewable energy system at an electricity consumer’s site to be
transported, via the grid, to another site owned or leased by the same consumer
(i.e., the same legal entity) and be either consumed or net metered at the
alternative site.
The combination of the nameplate capacity cap removal, the
relatively attractive electricity tariff paid by the transmission and
distribution companies and the ability to wheel electricity is likely to give
rise to larger-scale and more numerous projects than have been witnessed to
date in the increasingly active commercial and industrial market segment.
Perfect Storm
Electricity that is produced at or near the point where it
is used is referred to as distributed generation. Over the past few years,
Jordan has witnessed a rapid expansion of renewable energy distributed
generation, and solar PV distributed generation in particular.
The combination of high solar yields, plummeting solar PV
plant costs and high electricity prices has created a perfect storm for solar
PV distributed generation.
The German development agency, Deutsche Gesellschaft für
Internationale Zusammenarbeit, says that in many of Jordan’s regions the solar
yield — the electricity output achieved by a solar PV panel under full solar
radiation — stands at around 1,800 kWh per kilowatt peak. This is far more, for
example, than the 900 to 950 kWh per kilowatt peak recorded by research
institute Fraunhofer ISE for solar output in Germany, the leading international
solar distributed generation market.
The levelized cost of electricity of solar PV fell by 58
percent between 2010 and 2015, driven in large part by dramatic reductions in
solar PV panel prices, according to the International Renewable Energy Agency
(IRENA).
IRENA estimates that by 2025, the global weighted average
levelized cost of electricity of solar PV could fall by as much as another 59
percent, most likely driven by efficiencies in balance of system costs, like
inverters, racking and mounting systems, and civil works, technology
innovations, operations and maintenance costs and quality project management.
Jordan has little oil and gas. Thus, the country has had
historically to import almost all of its energy needs — 97 percent in 2014,
according to the latest published annual report of the sole transmission
company, the National Electric Power Company.
These energy imports have often been unreliable. Since 2011,
the country has had to run its conventional gas-fired power generation plants
on oil at high cost due to gas pipeline sabotage between Egypt and Jordan.
Electricity generation and distribution costs in Jordan are
cripplingly high: around 157 Jordanian fils (US$0.22) per kWh in 2014,
according to NEPCO. Because many small electricity consumers benefit from
subsidized electricity rates, the rates charged to commercial and industrial
consumers are particularly high. For instance, one kWh of electricity supplied
by NEPCO or any distribution company currently costs a bank 285 Jordanian fils
(US$0.40), and a high-consuming telecommunications company 300 Jordanian fils
(US$0.42).
To put things into perspective, in May 2015, the Jordanian
government announced the bid tariffs of its second round tender to procure four
50-MW solar PV projects, and the winning tariffs were 43.441 Jordanian fils
(US$0.0613), 45.9784 Jordanian fils (US$0.0649), 48.949 Jordanian fils
($0.0691) and 54.3 Jordanian fils (US$0.0767).
While a number of market participants questioned the
sustainability of the round two tariffs, it remains startling that the lowest
bidder’s tariff is 72 percent less than NEPCO’s generation and distribution
cost.
More importantly, it is incredible that a solar PV developer
is able to provide electricity to NEPCO at a rate that is 85 percent lower than
what NEPCO would charge a high-consuming telecommunications company.
In Jordan, like in many other emerging markets, the pendulum
has swung far beyond grid parity, and the business case for commercial and
industrial electricity consumers to adopt distributed solar, and renewable
energy more widely, has become extremely compelling.
With the publication of the new net metering directive,
Jordan creates even better conditions for the continued development of
distributed solar and other renewable energy projects. The race for developers
to secure deals with the most bankable and highest paying electricity consumers
is well and truly on.
No comments:
Post a Comment