By Taylor Luck

AMMAN – The government has said that it remains committed to renewable energy, with senior officials studying various financing plans to utilise alternative energy resources in the Kingdom.

Despite facing a budget deficit of over JD1 billion, the government has made renewable energy projects a priority to secure the country’s energy independence, according to Minister of Planning and International Cooperation Jafar Hassan.

During a meeting with The Jordan Times last week, Hassan stressed that although initial investment costs may be “high”, the adoption of renewable energy sources is vital to the country’s long-term economic growth.

“Although the price tag may be high at first, electricity generated by renewable energy will cost less in the long-run and it has been a commitment of the government,” he said, highlighting that one of the first acts of the Cabinet helmed by Prime Minister Samir Rifai was to endorse the Renewable Energy and Energy Efficiency Law, which aims to streamline investment in the sector.

A ministerial committee was formed by the Cabinet earlier this month to examine various ways to make renewable energy affordable.

The committee, chaired by Minister of Energy and Mineral Resources Khalid Irani and comprising the secretaries general of the energy, finance, and environment ministries and the chairman of the National Electric Power Company, among other officials, seeks to ensure the country meets the National Energy Strategy, which calls for renewable energy to account for 10 per cent of the energy mix within a decade.

To assist the committee, consultants financed by the World Bank-funded Global Environment Facility will recommend regulatory and institutional frameworks, renewable energy pricing and subsidy schemes.

“Teams will be working with consultants on ways to reach the 10 per cent goal on time and will examine the different scenarios in terms of costs either through subsidy or a mixture of a subsidy and treasury funds,” Irani told The Jordan Times in a phone interview on Sunday. He added the technical consultants, expected to be selected “very soon”, will have four to six months to present their recommendations.

Some of the main options to boost investment in the sector include a feed-in tariff, under which the government would subsidise the price difference between electricity produced from renewable and conventional sources, and the allocation of land for projects on favourable terms and tax credits for developers.

“The key is financing. How we will finance will dictate which projects we will prioritise and which projects we will enter for direct negotiations,” Irani added.

In its first preliminary meeting earlier this month, the committee looked at the long-term impacts of various financing schemes, exploring the effect on projects as well as the cost passed on to consumers and the state budget.

“We don’t want to start a project that will lead to a long-term commitment of the treasury without having a clear picture,” Irani stressed.

Among the proposals being considered is introducing a package of incentives and gradually phasing them out once electricity produced by renewable energy becomes more competitive with electricity generated by fossil fuels.

Another area the committee will study is the use of soft loans, which, according to Irani, would “dramatically reduce” the cost of introducing renewable energy.

Government guarantees for renewable energy projects and direct integration into the national grid, passing along a part of the cost to the end-user, are other options, he added.

Irani pointed out that a number of donors and financing institutions have credit facilities available to finance renewable and clean energy projects at very preferential terms.

Hassan underlined that in parallel, the government is also exploring a large-scale partnership with European countries under which the EU would provide financial and technical assistance to the Kingdom’s renewable energy and energy efficiency programme.

The National Energy Strategy calls for 7 per cent of the Kingdom’s energy mix to come from renewable energy sources by 2015, and 10 per cent by 2020. According to various estimates, meeting the strategy’s goals requires billions of dollars in investments over the next decade.

Renewable energy is seen as essential to reducing the Kingdom’s reliance on energy imports, which account for 96 per cent of energy consumed in the country and costs around 13 per cent of gross domestic product.