Jordan: Nuclear Energy Tops the Government Agenda, Renewables Options Left on the Back-burner
The Jordanian government recently settled on Qusair Amra in the Eastern Badia region as a location for its future nuclear reactors that are are expected to yield 1000 megawatts of electricity, inching closer to its 2020 target of securing and diversifying its energy resources. Russian state-owned “Rosatom” has been chosen to construct the two nuclear power plants by 2022.
Greenpeace, an international environmental NGO, launched a campaign against Jordan’s nuclear project and said two weeks after JAEC’s official announcement of selecting Rosatom that it’s collected 8,157 signatures for a petition rejecting the government’s ambition of generating nuclear energy. Environmentalists say Jordan should heed the experiences of Japan and its Fukushima nuclear disasters.
This month, tribes from areas located near the planned nuclear reactors staged protests denouncing the government’s plans, which they believe will have adverse effects on their environment. Tribal leaders threatened to organise sit-ins at the Qusayr Amra site and in front of the Russian embassy.
Jordan set a strategy for the energy sector in 2007 with hopes of boosting the country’s self-sufficiency by exploring alternative energy options. The strategy aims at boosting stakes of oil shale and renewables in the country’s 2020 energy mix, while it sets a target of 14 percent for oil shale, and 10 percent for renewable energy. On the other hand, the strategy gave the nuclear energy sector a meagre six percent.
JAEC was quickly set up the following year, spearheading the country’s nuclear program amid mounting criticisms.
But it was only after a gas crises caused by the repeated targeting of the Egypt-Jordan gas pipeline by Egyptian militants that the country found itself compelled to work towards setting up the groundwork for its renewable energy sector. The renewable energy and energy efficiency law was drafted last year, five years after Jordan’s energy strategy was officially launched. The law introduced a legal framework for investors and circumvented what ex-energy minister Malek Kabariti describes as the “government red-tape.”
The regulation allows investors to submit direct-proposals for their projects and use feed-in tariffs to sell surplus electricity generated from a renewable source to the national grid and distribution companies. The government set the rate of 12 piasters per Kw/hour for solar energy, 95 piasters per Kw/hour for electricity generated from hybrid sources, and 85 piasters Kw/hour for all other types of renewable energy. The cost of generating electricity from fuel is 19 piasters per kW/hour.
Economist and former CEO of Jordan Investment Board Yousuf Mansur says that the strategy has “no muscle and no money to back it up.”
But a Gulf Corporation Council (GCC) USD5 billion grant to Jordan offers a glimmer of hope for the energy sector. Kuwait, Saudi Arabia, Abu Dhabi and Qatar each contributed $1.25 billion to support the Jordanian economy and various development projects over a five-year period.
In an interview with Venture magazine, former minister of planning and international cooperation Jafar Hassan, said that $300 million were allocated for renewable energy projects in solar and wind sectors.
With a 97% reliance on imported energy, stoppages in Egyptian gas delivered a huge blow to Jordan’s economy. Last year, the National Electricity Company NEPCO, recorded about JD2.4 billion in losses, after having to resort to more costly diesel and heavy fuel to substitute for the non-delivered gas. The electricity tariffs were not adjusted at the time to reflect the more expensive fuel mix.
Losses of the publicly owned company increased to 4.9 percent of GDP in 2011 from 0.8 percent of GDP in 2010.
The International Monetary Fund IMF, which gave Jordan a USD2 billion loan in 2012 to support its economy, said that the government ability to reduce the deficits of the central government and the loss-making NEPCO, will hinge on the success of Jordan’s strategy to diversify its energy sources and move electricity generation back to cost-recovery levels by 2017.
The government staved off raising tariffs on households this year, resorting instead to raising electricity prices on other sectors such as banks, hotels, hospitals and telecom companies by as high as 16.7 percent. Households consuming more than 600 Kw/hour per month should be looking at a 7.5-10 percent increase next year.
The IMF predicted in it’s most recent report, released in May, that government financing of NEPCO’s losses will reach JD1,036 by end of 2013, compared to JD1,159 in 2012. Most recently, energy minister Mohammed Hamed, said that he expects this year’s electricity subsidies to reach JD1.2 billion. Moreover the IMF expects the combined central government primary deficit and NEPCO’s operating losses to be slightly below 9.8 percent of GDP in 2013, down from 21.9 percent of GDP in 2012.
Egyptian authorities recorded 16 explosions targeting gas pipelines in the Sinai Peninsula since the onset of the revolution in 2011. The Jordan Times reported last month that just prior to the latest explosion in July, Jordan received 80 million cubic feet per day, well below the contractual 240 million cubic meters per day.
Jordan’s almost complete reliance on Egyptian gas meant that NEPCO’s losses can be very volatile, soaring up from approximately JD 200 million to more than a billion when levels drop to 50 cubic meters per day.
NEPCO is currently selling electricity to consumers 60% less than its 18 piasters per kilowatt hour generation cost.
Tenders have been announced to build a Liquified Natural Gas (LNG) terminal in Aqaba. Construction is expected to take around two years, with an estimated investment of $100 million. Availability of LNG from international sources would decrease NEPCO costs by around 20 percent in the medium term. There is also potential to expand gas extraction from Jordan’s own field at Risha.
The gas crises acted as a stimulus to renewable energy in Jordan, which Kabariti believes needs a bigger push and could meet up to 20-30 percent of the country’s energy needs.
Four areas have been allocated for renewable energy projects by the government, in Ma’an, Al Quweira, Fujeij and Al Azraq. Fifteen companies qualified for implementing a 65 megawatt solar energy project in Al Quweira in Aqaba.
The government also introduced wheeling charges, which allows any subscriber to set up a generation plant on private land for consumption purposes, and connect to the grid by paying a certain tariff for the transport of electricity. But a source in the electricity sector says that this concept is new to Jordan, and the government is afraid of approaching such projects in “a complex manner.”
The 2020 target for boosting the contribution of renewable energy to 1800 megawatts might be thwarted by the network’s limited capacity. Indeed, the ministry has previously stated that the network won’t be able to receive more than 700 megawatts until 2015. The ministry expects to upgrade the network by 2017.
The Jordan Hotels Association (JHA), recently submitted a proposal to build a two megawatt solar power plant in southern Jordan that would supply a network of hotels across Jordan. But according to Michael Nazzal, head of the JHA, their proposal to specifically use the newly introduced wheeling charges to feed a network of hotels was met with refusal. The JHA is currently negotiating with the government on a different implementation scheme..
Hotels are witnessing the highest increase in tariffs, with a 15 percent hike, compared to 5 percent for telecom companies and banks.
“If we punish the tourism sector from the start, then we are thwarting our only hope to develop the economy,” said Nazzal.
A source in the electricity industry says that such a project is difficult to execute because there are three companies running the country’s distribution networks, each with a certain concession area, rendering it difficult to treat a group of hotels, scattered across Jordan, as one consumer with one electricity bill.
“From an organisational aspect, it is not viable or possible at this stage to open up the market for a group of subscribers to set up one power plant that would feed different entities across the kingdom,” he said.
According to another source in the private electricity sector, the government is putting many limitations that are discouraging investors.OO One such limitation is the geographical areas assigned for direct bidding, which are “very remote, dusty, and steep.” Moreover, the source says that the distribution networks need to be upgraded in order to accommodate the in-flow of electricity from renewable energy plants. The government expects this to happen by 2016.
He adds that there are many loopholes in the agreements that affect the costs of generating electricity from renewable sources, such as the change of laws, force majuer clauses, and insurance.
The law sets the maximum capacity for the total renewable energy systems connected to distribution networks at 2.5% of the load of each distribution network. But so far, only 1.8 megawatts are connected and operating according to the net-metering application, a fraction of the allowed 68 megawatts.
Earlier this year, South Korea’s state-run power company Korea Electric Power Corporation won a $187 million agreement to build a 90 megawatt power plant in Fujeij. The company is expected to complete the construction of the wind farm by 2015. The project is the first of a series to take place in Jordan, which seeks to build wind turbines generating up to 1,800 megawatts of electricity by 2020.
Also this year, the government announced plans for establishing a 10 megawatt solar plant in Mafraq, and a 117 megawatt wind farm on the outskirts of Tafileh.
In October, the government granted 12 companies an initial approval to build solar power plants, with a total capacity of 200 megawatts.
The government will continue receiving (concentrated solar power) CSP and wind energy proposals until mid-2014.
The instructions regulating net-metering schemes limit the amount of electricity generated from renewable sources, allowing only a capacity that does not exceed the user’s average monthly consumption of the previous year.
Jordan is also tapping into its abundant oil shale deposits, estimated at 40 to 70 billion tonnes.
Many international and multi-national companies have shown interest in exploring the country’s oil shale.
Among them is the Jordan Oil Shale Company (JOSCO), a subsidiary of Royal Dutch Shell, which has just finished the first phase of evaluating oil shale deposits and entered its second evaluation phase. JOSCO signed a concession agreement with the Jordanian government in 2009 covering a quarter of Jordan’s landscape. The company will make a decision by the late 2020′s on whether to proceed with a commercial project that could produce roughly 38,000 barrels of oil shale per day.
Moreover the oil shale production plant, JOSECO, is expected to produce roughly 38,000 barrels of oil per day.
On the other hand, a consortium of companies, including the world’s largest oil shale energy company, Enefit, signed a development agreement with the Jordanian government to construct both an oil-shale fuel power plant and an oil shale production plant, Oil Shale Energy of Jordan. Malaysian power generation company YTL Power International Berhad owns 30% of the projects, while the Jordanian investment firm, Near East Group owns 5%.
Enefit will develop, design, construct and operate a 500 MW oil shale fuelled power station, the Attarat Power Company, in Jordan. The company is expected to start operating the power plant by late 2017, and will be drawing on its experience in Estonia, a northern European country that generates 90% of its power from oil shale.
Jordan has signed concession agreements with many companies for exploration programs across the country, namely companies like the Canadian Global Oil Shale Holdings, Karak Oil International, among others.
Kabariti believes that Jordan’s laws and by-laws delay investment in the field.
“There is no environmental law that could act as an umbrella over such project and that covers the use of such technology,” said Kabariti. “We worked on it with the legislation bureau, but unfortunately, things don’t go as fast as they should.”
Ex-energy minister Alaa Batayneh believes there is a glimmer of hope in the future for solving Jordan’s long term energy crisis.
“There are a lot of unknowns but we have real solutions that could definitely help us control our energy bill and stop the drain of about USD2 billion per year on the budget as a deficit,” said another ex-energy minister, Alaa Batayneh.
Ultimately, the success of the renewables energy projects and other ‘real’ energy solutions in Jordan depend on the ability of the kingdom to set up both the infrastructural and legislative groundwork to achieve its goals.
“This story was produced as part of the Governance project, a reporting program in Jordan organised by the Thomson Reuters Foundation in partnership with the Arab Reporters for Investigative Journalism “ARIJ”.