NAJIB SAAB 27/3/2019
“A victim of its own success? Jordan re-evaluates its power generation strategy,” was the title of an article in The National Law Review, following the Jordanian government’s decision to withhold licenses for new renewable energy projects. The sudden move came at a time when the Jordanian renewable energy sector had reached advanced levels and gained global acclaim as a remarkable success story. This resonated a similar decision one year ago, when Jordan revoked the tax incentives extended to encourage electric and hybrid cars, at a time when their share of new imported vehicles surpassed any other country in the world, exceeding 50 percent in 2017. This success in promoting cleaner cars made Jordan a model in the region and inspired similar regulations in other countries.
Is there any justification for this successive regression, and why would a country undermine its own success?
Jordan’s advanced renewable energy policies, formalized and adopted in 2012, led to rapid progress in the sector, with electricity generation from the sun and wind reaching 1,000 megawatts. If the sector continued to grow at the same pace, it was expected that the share of renewable electricity production would reach 25 percent by 2020 and 50 percent by 2030. Sun and wind represent the only low-cost domestic source of energy in Jordan, which lacks oil, gas and coal. The success in harnessing renewable energies brought a ray of hope for the Jordanian economy, which depends on the import of oil and gas for its power needs. This becomes even more appealing when we realize that the cost of producing electricity from the sun and wind in Jordan is currently lower than any other source.
The main argument promoted by the Jordanian government in defending its decision was that the current network does not absorb more electricity supplies. This, however, raises the legitimate question of why production from conventional fuel-fired plants, including oil and gas, continues, whereas the logical solution is reducing their production capacity to be gradually replaced by cleaner and cheaper electricity produced from solar and wind.
It sounds as if the intent is to protect costly, conventional and polluting power plants, at the expense of modern, cheaper and cleaner renewable energy.
Between 2004 and 2011, Jordan received most of the gas it needed to generate electricity from Egypt, at competitive prices. However, pumping of gas stopped in 2011 due to repeated sabotage bombings of the pipeline in Sinai, and the subsequent hike in prices, as well as other Egyptian commitments that delayed supplies afterward. During that period, Jordan had to pay much higher prices for the import of liquefied gas and oil from other sources. This was a blessing in disguise, as it led to a rapid shift to renewable energies. Preceded by the development of modern regulatory frameworks, this attracted large investments from international companies and was supported by regional and international development funds, and brought the cost to lower levels compared to oil and gas. By the time, generating electricity from nuclear power was shelved, after it was found to be over expensive, unfeasible and risky endeavor.
The energy situation began to change last year, when Jordan signed a contract with a U.S.-based company, Noble Energy, to supply 3 billion cubic meters of gas annually over a period of 15 years. The gas supply, scheduled to start in 2020, comes from fields in the Mediterranean basin claimed by Israel. Shortly after, Egypt announced that it will resume pumping gas to Jordan during 2019, at reduced prices to compensate for the losses incurred by the discontinuation of the previous contract. Supplies from Egypt are expected to gradually reach half of Jordan’s needs.
A simple calculation shows that the quantities of gas that Jordan has committed to buying through long-term contracts exceed its actual needs by 50 percent. This confirms that the problem is neither from solar and wind farms, nor the electricity network, but rather originates from the surplus of production of electricity from committed purchases of gas. Although switching to renewable energies and gradually terminating gas-operated plants was the cheapest and cleanest solution, the commitment to buy overwhelming amounts of gas was behind the illogical decision. In this case, renewable energies were, unfortunately, the “weakest link,” as their contracts could be terminated with no penalties and legal consequences, whereas annulling the gas contracts would have attracted penalties.
A puzzling question still remains: Why commit to such an amount of imported gas, creating an immediate glut, besides long-term surplus? We will not find the answer in energy and environmental norms or in economic principles, as most likely it lies somewhere else.
The renewable energy market in Jordan will not return to its affluence for a long time. The major blow it received sends a negative message to investors, as it uncovered instability of legislation. The only viable way out could be to export the surplus of electricity produced to Saudi Arabia, Iraq, Syria and Lebanon. This will allow these countries to bridge shortages, while offering breathing space to the booming renewable energy industry in Jordan. It is worth noting that a proposal in this regard, which I presented on behalf of Arab Forum for Environment & Development when the suspension of licenses was announced, was soon to be seriously considered. This had been demonstrated in the initiation of discussions, at the highest state levels, to exchange the surplus of electricity in Jordan with water from Lebanon.
For those who might object to buying electricity generated from gas supplied to Jordan by Noble Energy, due to its origin, the solution could be restricting the export of electricity from Jordan to that generated from local “national” renewable sources. This is the practical solution that protects the future and preserves the Jordanian edge in renewable energy competitiveness.
Anything less than that means a death sentence for the renewable energy dreams in Jordan.
A version of this article appeared in the print edition of The Daily Star on March 27, 2019, on page 6.
http://www.afedmag.com/english/mountada-albia-details.aspx?id=104