Energy transition and national security

All over the world, the combination of volatility of prices in the fossil oil & gas markets and the protection imperative of the environment and reduction of greenhouse gas emissions would require us to review and revise all our energy procurement strategies. Development of Renewable Energy in Algeria would, like elsewhere, mean going on to urgently review on the one hand all current mode of energy consumption and on the other, try and optimally exploit all forms of energy and in particular those under the label of renewable energy, that at the end of the day would remain an essential alternative for meeting at least all domestic energy needs.   

The world will know an energy transfer in 2017/2030

The weight of fossil (coal, oil & gas would remain at a crushing weight (78.3%), while nuclear power would play only a marginal role on a global scale (2.5%). The renewables share is growing in electricity production (23.7% by end of 2015 against 22.8% end of 2014), but it remains minor in transportation, heating and cooling facilities.

This high proportion of fossil fuels is basically due to imbalances between States subsidies of these as compared to those allocated to all renewable energy: e.g.: $490 billion for the first in 2015, compared to $135 billion, or nearly four times less, for the seconds. This situation did not however prevent the sector now to total 8.1 million direct and indirect jobs worldwide (+5% in one year), including 2.8 million in the photovoltaic industry: 59 Gigawatts in 2005, 198 in 2010, 279 in 2011, 283 in 2012, 318 in 2013, 370 in 2014 and 433 in 2015 including solar Gigawatts with 227 against 73 in 2005.

Investment in billions of Dollars is increased from 73 in 2005, to 239 in 2010, 279 in 2011, 257 in 2012, 234 in 2013, 273 in 2014 and 286 in 2015. Subject to long-term investments, the fact that currently the development of the technology costs and investments in production equipment (turbines wind turbines, solar modules, biomass boilers, etc.) that determinably weigh on the cost of renewables, the future renewables would presumably become source of cheaper energy and at stable prices.

Regarding cost reduction, the IEA notes that the price of PV systems got divided by two and sometimes more in five years (2008-2012). Today, joining hydroelectricity production costs, as some renewable energy technologies have practically reached parity with conventional costs of electricity from other energy sources taking into account subsidies allocated to the latter.

Renewable energy has essential assets to enable it to take an important place in the energy mixes of all countries, these bring the production sites closer to the centers of consumption, reduce the dependence of these countries on fossil fuels, contribute to the security of supply and energy independence, allow long-term control over energy prices, constitute the most appropriate vectors of development of decentralized energy production by offering considerable potential for industrial development resulting in new growth and contribute to limit the impact of energy on the environment: thus reduction in emissions of greenhouse gases, reduction of effects on air, water and soil, no production of waste, the production of renewable energy facilities very little affect the environment, biodiversity and the climate.

According to a report by Bloomberg New Energy Finance (BNEF), it will be a matter of investing approximately $2,100 billion by 2040 to cover world energy demand in fossil fuels, as opposed to $7,800 billion invested in renewables. Thus, renewable energy could provide by then a quarter of the world’s electricity against 20% today. And, in order to ensure a perennial energy transition, significant investment will be needed for their adaptation and integration into the grid systems in order to absorb and redistribute a larger proportion of power produced by renewables. As for energy storage and management of flexible electricity production units would be centred on the importance of decentralizing energy production in order to bring them closer to “communication points”.

So the world is moving towards a major energy shift based on a certain Mix and investments are already pouring into the visible alternative energy production units.   According to the above mentioned Bloomberg report, it is expected a reversal of energy consumption by 2025: a fall in the demand for fossil fuels and a significant increase in the demand for alternative energy. This trend should be analysed whilst taking into account the exponential advances in Information and Communications Technology (ICT) and the Internet of Things (IoT) that will be more and more electric power dependent, whether in the case of the developed economies, as well as in that of the no less important world still living without lighting, ITC nor IoTs.

The conclusions of the report of the Intergovernmental Panel on Climate Change (IPCC) published in January 2015 and the report by Rachel Kyte, Vice President of the World Bank for sustainable development shows an increase that is more and more visible around the world of extreme climatic events (droughts, heat waves, torrential rain, floods, hurricanes, typhoons, etc…), with heavy human losses (2 and a half million people over the last 30 years), the number of climate refugees (more than 20 million according to the Norwegian Council for refugees) and the financial costs of natural disasters rising (up to $200 billion a year over the last decade, or 4 times more than in the 1980s.

Energy transition and national security

Algeria in this month of April 2017 is not going through a financial crisis but rather through a governance one. The risk would be if no alternatives to the current political, economic and particularly industrial policies are found, is to go straight to the IMF at horizon 2018/2019 at which time financial and governance would then be coexisting. So the main challenge of Algeria between 2017/2020/2030 will be the control of time. It is within this framework that the national program of development of renewable energy in Algeria must be implemented. This is based on a production by 2030 of 22,000 megawatts (MW) of electricity from renewable sources, for the domestic market, in addition to 10,000 MW to export.

Hassi R’Mel Solar power plant / 150 MW by Siemens

The goal is to reduce more than 9% of consumption of fossil energy by 2030 and save 240 billion m³ of natural gas, or $63 billion over 20 years. But to date about 400 MW are renewable through the hybrid power plant in Hassi R’mel (100 MW) and the solar pilot of Ghardaia (1.1 MW), in addition to 22 solar power stations with a capacity of 343 MW through 14 governorates, including 270 MW, which are already in service. A national and international tender is planned for the production of 4,000 MW (4GW) of electricity from renewable sources with a specification requiring investors to produce and ensure local assembly of industrial equipment for production and distribution of energy, including photovoltaic panels.

In the immediate future, SONATRACH, the Algerian State owned and controlled oil & gas company will launch a notice of tender where thirty-four companies will be invited to price for the realization of a Solar Park of 10 MW in Bir Rebaa North, Algeria. However, it is necessary in order to carry out this program that will generate 300,000 direct jobs, to make investments of more of $100 billion by 2030. And because of SONATRACH’s new policy on prices, it will probably not be able to sustain such an important investment on its own, it is therefore necessary to set up a national industry as based on a public partnership/private of national/international concerns.

This must include all elements of the renewable value chain, including engineering, equipment and construction in order to increase the implementation pace, studies on the connection of these sites to power grids must be undertaken. These are strategic choices to ensure energy security of the country and the energy transition, which will be gradually carried out because there is no doubt that the fossiliferous deposits of the country beginning to dry up coupled with that national energy consumption is significant growth and will continue to be.

Indeed, Algeria through its widespread and poorly targeted subsidy system has one of the most the more fuel-inefficient models in Africa and the Mediterranean basin, with a growth rate that has reached or even exceeded the 14% per year for electricity. The CREG, the Algerian Electricity and Gas Regulation Commission, a public service organisation, forecasted domestic needs of between 42 (minimum) and 55 (maximum) billion m³ of natural gas in 2019 and SONELGAZ plans, on the other hand, for 75 billion m³ by 2030. As per to the energy balance in 2015, published by the sector, the distribution of consumption of primary energy is as follows, total production: 155 million ton of equivalent of oil, including 63% exported and 37% consumed on the domestic market (including for electric generation).

As for the consumption of households, etc. it would have reached 16.5%; whereas for consumption of transport, 13% and the consumption of the industry & construction is 7.5%. In Algeria, residential consumption (rich and poor) paradoxically pay the same rate; Ditto for fuel and water that represents 60% against 30% in Europe and the consumption of the industrial sector, 10% against 45% in Europe showing the decline of the industrial fabric, or less than 5% of the Gross Domestic Product. Coordinated action should also be implemented as part of a strategic vision of development taking into account the new global changes.

At the same time, it will be to improve energy efficiency by a new policy of pricing instead of the present sale price of gas on the domestic market that at about a tenth of the world price that were temporarily frozen for social reasons causing wastage. This is the largest reserve for Algeria involving review policies of habitat, transport and an awareness of the population to review the pricing policy would be recommended. A transitional period must be used not to penalise the poorest, politics of the Algerian Waters, the public water utility organisation, would be interesting to review. For this purpose, thought needs to be committed to the creation of a national compensation, that any grants must have the endorsement of the Parliament for greater transparency; leaving room to achieve a system of equalization, both at socio-professional, inter-regional, segmenting activities to encourage the structuring sectors and taking into account the income by social strata, hence involving a new wage policy.

In summary, like for the passing from the era of coal to the era of hydrocarbons, it was not because there was no more coal, and tomorrow other energy sources, it is due to technology change that brought greater economies of scale, thus influencing the reshaping of global economic at a local and global levels. For Algeria, the issue of energy security is raised together with the urgency of a reasonable and controlled energy transition within the overall framework of a passage from a rentier economy to an economy off oil.

This would require a broad national debate on the future model of energy consumption and together with the lifting of all bureaucratic blockages that hamper any expansion of the value added creation enterprise and its foundation that is the knowledge economy.