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In two recent articles on the topic of sustainable development and solar energy in Tunisia, Nawaat made reference to the Desertec Industrial Initiative, also known as Dii EUMENA. The pursuit of information pertaining to Dii and renewable energies in Tunisia is a veritable jumping down the rabbit hole as the network of local and foreign institutions, initiatives, and developments is suprisingly dynamic, vast, and growing. What becomes apparent is the extent to which Dii—a German limited liability (GmbH) company, and GIZ, which operates under the German Federal Ministry for Economic Cooperation and Development, are invested in the development of Tunisia’s renewable energies, not only in terms of their involvement in production projects (which have gained a fair amount of public visibility in the media), but also in advocating for the revision of legal frameworks governing the production of solar and wind energies and the nature of associated foreign investment and partnerships.

I Desertec Industrial Initiative – Dii EUMENA

Dii’s mission is to pave the way for a market for solar and wind power from the deserts for local consumption in North Africa and the Middle East (MENA) and, eventually, for export to Europe. The aim is to reach an energy mix of highest security of delivery, mainly based on lowest cost renewable electricity throughout the interconnected markets in Europe, the Middle East and North Africa (EUMENA). Dii acts as a market and project enabler that builds partnerships throughout this region. As an expert, facilitator and catalyst, the industrial initiative gives guidance on the integration of desert power into the common market e.g. by highlighting the required political, regulatory, financial, (socio-)economic and technological conditions. Dii is not an investor itself, nor will it develop projects itself. Rather it helps the market to recognize and develop feasible projects. Our Mission, Dii Mission & Vision webpage

On November 15, 2011, Dii announced Dii and STEG Energies Renouvelables Sign Memorandum of Understanding for a Joint Pre-feasibility Study of Renewable Energy Projects in Tunisia. Signed on the occasion of the International Conference on the Tunisian Solar Plan, the agreement promoted large-scale solar and wind power projects for domestic consumption and export to Europe; To this end, Dii and the Tunisian Company of Electricity and Gas, or STEG, committed to elaborate a legal framework for a «first reference project» and to develop market capacity for enhanced energy production.

Amidst evidence of impressive large-scale project developments indicated by Desertec and Nur Energie in the TuNur Ltd. project, Dii’s recent publication of a Regulatory Overview for Tunisia would seem a fitting and timely report on the «legal framework applicable to renewable energy projects» in measure with the Memorandum of Understanding. The concise ten-page study includes six charts—Regulatory Assessment, Regulatory Improvements, Renewable Energy Policy, Business Models, Transmission and Access to the Grid, Foreign Investment Protection—that offer a succinct but thorough outline of the Regulation and Policy (page 10 of the report) reviewed by the author.

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Anticipating certain provisions in the new renewable energies draft law (reviewed and passed in Parliament after the publication of the Regulatory Overview) Bardolet’s study sets a context for Desertec’s endorsement of theTuNur solar energy project in Tunisia. We can see, for example, where the TuNur company falls within the scope of authorized energy projects:
business-models-renewable-energy-projects

As alluded to in the Desertec press release issued last month and reiterated in Nur Energie’s answers to Nawaat’s questions (link included above), the Dii report points out that under the current «self-production regime» of Décret 2009-2773, renewable energy projects such as the TuNur undertaking are not authorized to produce energy for domestic consumption; According to Bardolet, a provision in the new draft law will unlock grid access for foreign/private companies to produce energy for domestic use, and open the market to produce energy for export to Europe specifically:

STEG is the sole purchaser of the power produced under a Power Purchase Agreement (PPA). Therefore RE projects are not allowed to sell the electricity directly to large consumers. Export projects may be an exception. Under the new law, RE export projects will be allowed to sell the electricity directly to neighboring markets. Nevertheless, currently Tunisia does not yet have an interconnection with the E.U. Miriam Bardolet, Regulatory Overview – Tunisia

II Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

The Deutsche Gesellschaft für Internationale Zusammenarbait, or GIZ, is a German federally-owned enterprise that provides «international cooperation services for sustainable development.» According to its webpage for Tunisia, GIZ—sponsored by the German Ministry for Economic Cooperation and Development (BMZ), the Ministry of Environment, Nature Conservation, Building and Nuclear Safety (BMUB), the Foreign Office (AA), the Ministry of Economics and Technology, (BMWi)— has carried out projects in Tunisia since 1975. Its present focus on rural regional development is divided into (1) sustainable economic development and employment, (2) protection of natural resources, and (3) regional development, local governance, and democracy.

It is in the vein of projects and programs for natural resources, environment, and climate change that GIZ produced, in June this year, a meticulous Analysis of the Regulatory Framework Governing Network Access for Producers of Electricity from Renewable Energy Sources in Tunisia, endorsed by the Ministry for the Environment, Nature Conservation, Building and Nuclear Safety. The 68-page document features six chapters and a number of sub-chapters that cover (1) a brief background of energy in Tunisia, (2) the regulatory framework governing network access, (3) private sector involvement in electricity generation, (4) avenues for developing private investment in renewable energy projects (5) a conclusion, and (6) annexes. The study is designed «to provide legal pre-feasibility analysis of the development of legal instruments for use by foreign private operators in the renewable energy and, more particularly, the solar energy sector in Tunisia.»

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…we find ourselves faced with a “multi-layered regulatory framework,” which will by a sort of domino effect require amendments to other legislation not yet clearly identified at this stage. Cécile Belet Cessac, Analysis of the Regulatory Framework

Cessac identifies a number of provisions and factors that render the present system self-contained and fairly unresponsive to «non-resident (or foreign) private investors.» In the chapter on private sector involvement in electricity generation, Cessac rates three electricity production schemes according to «the needs of investors developing business and plants producing electricity from renewable energy sources»:

IPP-sheme

net-metering-sheme

autoporduction-sheme

Based on the features determined to impede private and/or foreign involvement in Tunisia’s renewable energies sector, the author suggests that strategic developments entail an institutional and regulatory framework reform that reflects:

legislative security «All investors need stability for project development and financing… it is clear that there is an urgent need to clarify the terms of access to the private sector for investors through the draft Investment Code. This legislation could prove an excellent means of accelerating foreign private project investment in particular and make an immediate impact on financing options»
transparency «the ANME sums up this principle as the ‘truth about the price of electricity.’ This issue relates to the need to have an understanding of exactly how the price of electricity is calculated and its actual cost»

as well as a system of financial aid focused on, among other initiatives,
– autoproduction2
– liberalization of the Independent Power Producer (IPP)2 program,
– bank guarantees and for leasing agreements and financing through specialist banks (such as the German Bank for Reconstruction, KfW) at low rates,
– tax incentives via the Investments Incentive Code.

III Complementary Assessments

…the monopolistic character of the sector together with a high perceived difficulty of obtaining the required permits make it difficult for foreign investors to engage in RE investments. Miriam Bardolet, Regulatory Overview – Tunisia

STEG currently still holds a monopoly in various areas of the electricity sector including transmission, distribution, marketing and the purchase and sale of electricity. In terms of electricity generation, on the other hand, the regulatory and institutional framework governing electricity
production has been opened up to the private sector. Cécile Belet Cessac, Analysis of the Regulatory Framework

The two recent reports—Bardolet’s May 2014 overview for Dii and Cessat’s June 2014 analysis for GIZ—evaluate the present framework that governs renewable energies in Tunisia and recommend reforms conducive to opening the sector to foreign investment and collaborations. Owing to the quality of resources–Dii’s direct contact with STEG and GIZ’s annex of official documents–and the complimentarity of their format and content, conjunctively the reports provide an excellent presentation of Tunisia’s policies pertaining to energy production, an especially valuable and unique contribution to public information in light of the common lack of transparency on the part of Tunisian institutions. Both studies conclude that current regulatory measures pertaining to—particularly STEG’s—energy management are rigid, restrictive, exclusive and elusive, and that the imminent incorporation of provisions for «business models» as Bardolet discusses, or «foreign private operators» in the words of Cessat, of renewable energy projects is advisable.

IV STEG and the Draft Law Concerning Renewable Energies

In response to Nawaat’s questions3 regarding the extent of Dii’s cooperations with Tunisian institutions for research and to prepare an assessment of the country’s legal framework for renewable energies, Bardolet explained that,

Dii has had an excellent experience in working with stakeholders in Tunisia. Dii has an MoU with STEG ER under which we have developed together a country study in 2012, including a regulatory chapter. We have worked together with STEG in several topics, particularly regarding grid studies and we have attended several workshops with ANME. Additionally we have regular contact with industrial players in the field of renewables.

Whatever the nature and extent of their impact upon the draft law concerning renewable energies, Dii and GIZ–both interested in broadening Tunisia’s grid and market capacity for increased solar and wind energy generation–appear to promote reforms that threaten STEG’s present role in the domain of energy production and distribution. Recent reports4 in Tunisian media indicate that STEG has resisted the new draft law since it first appeared for Parliamentary review in July. Following the publication of these two regulatory assessments, the Commission on Energy and Productive Sectors within the National Constituent Assembly (ANC) passed the draft law concerning renewable energies, with one abstention—from representatives of STEG and the Ministry of Industry, Energy and Mines. Tunisian General Labor Union (UGTT) spokesman Sami Tehri referred on Shems FM last week to STEG-UGTT discussions around the adopted draft law that «aims to privatize the energy sector and put an end to various STEG activities for the benefit of private companies.»

Annex

Questions and Answers Regarding Dii Regulatory Overview

1 Regarding the point, «RE priority development zones are to be developed under the new law. The access regime is still unclear» under the «Land Access» section of «Foreign Investment Protection»: Can you elaborate on «RE priority development zones»? How are these areas determined? By whom are these areas evaluated for development potential? Based on what factors are they qualified as priority development zones?

Please note that this statement is based on information available regarding a draft Renewable Energy Law that is thus subject to changes. According to this information the futureTunisian RE plan, to be elaborated by the Ministry of Energy, will include priority areas for the development of RE projects.

In Dii’s opinion, priority development zones can be a very useful tool to facilitate land access. Today land access is one of the major barriers to renewable energy investments in many countries of the MENA region and also in Tunisia. It goes without saying that securing land is basic for the economic viability of renewable energy projects which rely on having access to the best natural resources. Land access in non-urban areas, where most projects are located, is difficult due to among others, the scarce coverage of the land registry and unclear ownership rights. Therefore a pre-approval of zones for the development of projects could facilitate investments, particularly if these zones identify the owners of the land.

The availability of natural resources as well as other aspects such as grid access, town planning and environmental protection should be taken into consideration for defining these zones. Dii recommends the inclusion of a large number of stakeholders in the process, in particular civil society. A large stakeholder consultation is key to ensure consensus and avoid conflicts in the future.

In Dii’s view, these areas should be “priority zones”, as opposed to “exclusivity zones”. Project developers should be allowed to construct projects outside these areas provided that they comply with the relevant legal requirements, e.g. environmental and town planning regulation. This would foster competition among project developers and thus allow to achieve the lowest possible solar electricity prices.

2 Based on the list provided under «Reviewed Regulation and Studies,» it is clear that this report reflects a great deal of research into the laws and policies pertaining to energy, electricity, concessions, etc.. In light of how difficult it can be for many researchers and journalists to communicate with Tunisian institutions to obtain information, I am curious to know if, and to what extent, you were able to correspond with officials and/or representatives of Parliament, STEG, STEG ER, ANME, and other related institutions in order to carry out this study? Aside from the laws cited, what other resources were available/necessary in order to prepare this report?

In order to gain a good understanding of the regulatory and legal framework it is crucial to contrast the results of the desktop research (laws, regulation, studies etc..) with the experience of local agents who are active in this field both from the public and private sector.

Our activities in the Maghreb region are coordinated from Rabat through a Dii representative. Our presence has helped us in building a strong network in the region.

Dii has had an excellent experience in working with stakeholders in Tunisia. Dii has an MoU with STEG ER under which we have developed together a country study in 2012, including a regulatory chapter. We have worked together with STEG in several topics, particularly regarding grid studies and we have attended several workshops with ANME. Additionally we have regular contact with industrial players in the field of renewables.

The ongoing discussion and exchange of ideas with local stakeholders has been very valuable to gain a better understanding of the practical application of the regulatory framework in Tunisia. Nevertheless to perform this overview I have only relied on publicly available information, namely the legal texts mentioned in the Annex.

3 Concerning the Free Trade Agreement with EU mentioned under «Foreign Investment Protection» and the comment that «This is a good opportunity to provide a regime tailored to RE investment» – In light of the fact that Dii and STEG ER are collaborating in the development of RE production in Tunisia, do Tunisian authorities take into account Dii’s recommendations in the elaboration of an associated legal framework? In other words, to what extent does Dii’s advice/expertise inform laws governing Tunisia’s RE sector beyond the Dii-STEG ER partnership?

Dii does not advise governments. Dii generally engages in the public debate by sharing the experience from other countries and providing reliable information that is publically available. In this regard we elaborate studies and papers, such as these regulatory overviews, that are available to the public. In some of our publications we include recommendations that in our view could facilitate the development of renewable energy projects thereby leading to a more secure, sustainable and affordable energy system.

Therefore Dii’s activities do not have any direct effect on the laws of Tunisia or any other country.

Notes

1– The autoproduction regime is governed by Law n°2009-7 of 9 February 2009 and Law n°2004-72 stating that «any entity or group of entities operating in the industrial, agricultural, or tertiary sector and which produces electricity from renewable energy sources for its own consumption shall be entitled to transmit the electricity so produced via the natiional electricity network to its points of consumption and to sell any surplus exclusively to STEG … Projects involving the production of electricity from renewable energies and connected to the national electricity network…shall be approved by decision of the Minister of Energy on the basis of an opinion issued by technical consultative committee»
2– Law n°96-27 of 1 April 1996 granted Independent Power Producers (IPPs) electricity production licences permitting them to sell the electricity generated exclusively to STEG
3– Read Nawaat’s questions for Dii and Regulatory Overview author Miriam Bardolet’s responses; see the Annex above.
4– See, for example, Adoption of Draft Law Concerning the Production of Electricity from Renewable Energy published 21 July 2014 on DirectInfo, and STEG Examines Ways to Raise the Tone published 27 August 2014 on Shems FM

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