20110524171937inv Asem Medenergy Study Ve 2011 Def-9 Ms

STUDY INVESTMENT OPPORTUNITIES IN THE TUNISIAN AND EGYPTIAN ENERGY SECTORS
Investment opportunities in the Tunisian and Egyptian energy sectors
Publication co-funded by
The European Union
In April 2008, the Med-alliance consortium led by ANIMA and formed by ASCAME, BusinessMed, Eurochambres, UNIDO, GTZ, Euromditerrane, launched "Invest in Med", an initiative co financed up to 75% by the European Commission. The aim is to encourage European investments in the region and to build solid relations between the companies of the two shores of the Mediterranean. The project was implemented in 36 months and it involves 27 countries of the European Union and 9 Mediterranean countries under the New Neighbourhood Policy (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority, Syria and Tunisia). It has the ambition of increasing the volume and the quality of Euro-Med partnerships investment flow and trade with a view to a sustainable economic development of the region.
This publication has been produced with the support of the Invest in Med programme financed by the European Union. The contents of this publication are the sole responsibility of ASEM and can be regarded under no circumstances as reflecting the views of the European Union.
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Copyright Invest in Med / ASEM 2011. Tous droits rservs pour tous pays. Copyright Invest in Med ASEM 2011. All rights reserved for all countries.
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CONTENTS Abbreviations .......................................................................................................................... 5 1 2 Introduction ............................................................................................................................ 7 Tunisia................................................................................................................................... 11 2.1 2.2 2.3 2.4 2.5 3 Regulatory Framework ............................................................................................................. 11 Renewable Energy Situation ..................................................................................................... 20 SWOT Analysis ........................................................................................................................ 32 Investment Opportunities ......................................................................................................... 37 Success stories ........................................................................................................................ 44
Egypt ..................................................................................................................................... 48 3.1 3.2 3.3 3.4 3.5 Regulatory Framework ............................................................................................................. 48 Renewable Energy Situation ..................................................................................................... 60 SWOT analysis......................................................................................................................... 71 Investment Opportunities ......................................................................................................... 74 Success stories ........................................................................................................................ 79
Annex I List of Tunisian Actors and contact.82 Annex II - List of Egyptian Actors and contact ........................................................................... 84
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Abbreviations
AEO ASRT BBOE BOOT CAPMAS CNG DANIDA DOE DRTPC ECEP EE EEAA EESBA EGP EGPC EREDO ESCO EU FEI GDP GEF GHG GNP GoE GOFI Ha HV ICCEPT IEA IMC IPP ISCCS KfW LPG LRMC Annual Energy Outlook Academy of Scientific Research and Technology Billion Barrels Of Oil Equivalent Build Own Operate Transfer Central Agency for Public Mobilization and Statistics Compressed Natural Gas Danish International Development Assistance Department of Energy Development Research and Technological Planning Centre Energy Conservation and Environment Project Energy Efficiency Egyptian Environmental Affairs Agency Egyptian Energy Service Business Association Egyptian Pounds Egyptian General Petroleum Corporation Egyptian Renewable Energy Development Organization Energy Service Companies European Union Federation of Egyptian Industries Gross Domestic Product Global Environment Facility Greenhouse Gas Gross National Product Government of Egypt General Organisation for Industrialisation Hectare High Voltage Imperial College Centre for Energy Policy and Technology. International Energy Agency Industrial Modernization Center Independent Power Producers Integrated Solar Combined Cycle System Kreditanstalt Fr Wiederaufbau Liquefied Petroleum Gas Long Run Marginal Cost
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MENA MOEE MOP NGO NGOs NIB NRC NREA OECD OEP OPEC PT PV R&D RE REA RES RET SCE STEG T&D TOE TWh UN UNDP UPS WC
Middle East and North Africa Ministry Of Electricity and Energy Ministry Of Petroleum Non-Governmental Organization Non-Governmental Organizations National Investment Bank National Research Centre New and Renewable Energy Authority Organization for Economic Cooperation and Development Organization for Energy Planning Organization of the Petroleum Exporting Countries Piaster (1/100 EGP) Photovoltaic Research and Development Renewable Energy Rural Electrification Authority Renewable Energy Sources Renewable Energy Technologies Supreme Council of Energy Solar Thermal Electricity Generation Transmission and Distribution Tons of Oil Equivalent TerawattHour United Nations United Nations Development Program Unified Power System Watt Crest (Nominal power supplied)
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1 Introduction
Med Energy Study presents a comprehensive overview of the opportunities in Tunisia and Egypt, specifically for the energy sector. It is an instrument of knowledge available for both industrial and institutional bodies. The study was carried out in collaboration with Tunisian, Egyptian and intermediary bodies under the supervision of ASEM of Palermo as Italian partner. Two fact-finding missions were also held in Tunisia and Egypt to see the field the potential for energy sector development and to gain the necessary research information to complete the present study. The study represents an updated and comprehensive tool in the potential development of the energy sector and in particular, the renewable energy sector in the target countries. The study also contains most recent legislative measures currently adopted in the field of energy in Tunisia and Egypt and therefore constitutes an operational tool for attracting investment. Inside the study, there are two SWOT analyses for the Tunisia and Egypt energy sectors. The SWOT analysis is an extremely useful tool for understanding and decisionmaking for all sorts of situations in business and organizations. The aim is to identify the strengths and weaknesses of energy sector, pinpoint opportunities and note threats in order to make good business decisions. Thanks to GAFI and the other public bodies we identified the business opportunities in Tunisia and Egypt. The SWOT analysis reconstructs a concrete framework of economic and energy policies, which is also confirmed by numerous stakeholders in the target countries.
Energy context in the Mediterranean Region

Southern and Eastern Mediterranean countries (SEMCs) need to meet growing energy requirements closely linked to their socio-economic development. While conventional energy resource endowments greatly differ among countries, they all face increasing local and global environmental constraints. In addition, some wellendowed countries are facing a declining hydrocarbon production, though hydrocarbon exports are the backbone of their economies. As such, their preservation and valorisation are essential to the sustainable development of the region. In this context, renewable energies can play an important role. Renewable energy is inexhaustible and abundant. Renewable energies will dominate the worlds energy system, due to their inherent advantages, such as mitigation of climate change, generation of employment and reduction of poverty, as well as increased energy security and supply. In this context, the Mediterranean region is endowed with a high potential for renewable energy resources. A regional cooperation in the field of renewable energy in the Mediterranean is necessary. The Mediterranean countries are not equally endowed with energy resources. Libya, Algeria and Egypt export hydrocarbon, while Tunisia and Morocco are energy dependent. In all these Mediterranean Countries, energy demand and especially electricity are increasing rapidly because of a rapid demographic growth, a rapid urbanisation and strong socio-economic development needs. This means a new and growing demand for infrastructures and energy services. However, all of them have important potential for improving their energy use and efficiency, strengthening the security of their supply while contributing to a more sustainable energy development path. The population of the Mediterranean Countries was 154 million in 2005 and it will increase to 190 million in 2020 according to the United Nations (Plan Bleu). The urban populations will increase more rapidly. The medium GDP per capita amounted to 2,406 US $ (2000) in 2005, to be compared with 17,300 US$ in countries of the Northern shore of the Mediterranean. Coastal regions will become overcrowded and ecologically threatened. This double phenomenon of urbanisation and littoral concentration will have a marked influence on the nature of energy use in the future. During the last decades, primary energy consumption in the SEMCs has been growing very rapidly from 74.6 Mtoe in 1980 to 218,2 Mtoe in 2005. This was due, among other things, to the increase in electricity demand. In the Mediterranean countries, Primary energy consumption is dominated by hydrocarbon sources with more than 54% for oil and almost 41% for natural gas. The share for coal, hydro and renewable energy are respectively 3.6 %, 1.2% and 0.03%. At present, renewable energies have a marginal role, but they are expected to increase in a near future. In particular, the share of natural gas will increase more rapidly in the coming years owing to resource availability and its eco-friendly aspect. The situation varies in the different countries and it depends on the energy situation of each country.
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POPULATION ON MEDITERRANEAN COUNTRIES Population (million) 1990 Algeria Egypt Libya Morocco Tunisia Mediterranean
Source: UN, AIE
2005 33 74 6 31 10 154
2010 35 81 7 33 11 167
2020 38 94 8 38 12 190
25 52 4 24 8 113
It is important to underline that the average level of energy consumption per capita in the Mediterranean region is much lower than in the Northern Mediterranean countries (over 5 times in 2005 between France and the SEMCs). Next figure shows the trends for the TPES, GDP and energy intensity during the three last decades in the SEMCs (1980 = 100). It clearly shows that TPES is growing faster than GDP and indicates that the economic development in the region is increasing energy intensity of more than 20% over the period 1980 - 2005 (1.2% annual growth rate over the period). TPES and population in SEMCs 1980-2005
Source: OME
The Mediterranean countries have important oil reserves amounting to more than 6000 Mt. Two thirds of total reserves are located in Libya, a quarter in Algeria and minor quantities in Egypt and Syria. Thus, oil reserves in Mediterranean region are mostly concentrated in the SEMCs countries. During the last three decades, there was a spectacular increase of the electricity consumption in the Mediterranean countries (almost 10 times in 30 years), which is higher than the energy demand and GDP growths. This trend will continue (6 to 7% average annual growth expected up to 2020). Hydrocarbon sources dominate power production in the Mediterranean countries with 61.2 % for natural gas and 22.2 % for oil. The share for coal, hydro and renewable energy are respectively 5.7 %, 10.6% and 0.3%. Actually, the contribution of renewable energies in the power production of the region is dominated by large hydro sources and represents almost 11% of total power generation. The share of natural gas will increase more rapidly in the coming years owing to resource availability and its eco-friendly aspect.
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Additional capacities will be installed to meet the growing electricity demand. Electricity generation in the SEMCs countries will almost double by 2010, according to OME prospects, increasing from 141 TWh in 2000 to 245 TWh. This involves the construction of more than 23 000 MW capacity, the greatest part of which would be natural gas fuelled power stations, because of their low costs and the resource availability of the region. It must be emphasized that it is important not only to install new power generation stations, but also to develop, strengthen and reinforce electricity transmission and distribution networks. This includes also carrying on rural electrification policies with adequate funding mechanisms. Such infrastructure development (both for power generation and for transmission/distribution networks) requires substantial, timely and sustained investments. According to OME estimates and data collection from Mediterranean power industry, investment requirements for the electricity sector in these countries should represent more than 60% of total investment needs of the energy sector in the region. In particular, about 60% should be dedicated to power generation, 25% to electricity transmission and 15% to electricity distribution. Moreover, it is essential to develop a strong demand side management (DSM) strategy, promote clean electricity supply, optimise the electric supply networks and reinforce electric interconnections in the Mediterranean region. In the present context, the three major challenges in the development of the SEMCs countries electricity sector are: To mobilize financial resources transmission/distribution networks; both for new power generation capacities and
To create electricity interconnections and regional power markets (both South-South and SouthNorth); To promote a sustainable development through the rational use of energy and renewable energy sources. In the framework of the Euro-Mediterranean Partnership, these challenges can be considered as an opportunity for investment, an opportunity for the promotion of a Mediterranean regional interconnected market and an opportunity for the promotion of sustainable development. In the present context of liberalization and rise of environmental concerns, the SEMCs are facing two major problems linked to the energy sector. The first one is how to meet the increasing demand for commercial energy (principally in the cities), and the second one is how to provide access to modern, efficient and clean forms of energy for the majority of the population in rural and isolated areas. The best solution in many situations is renewable energy technology.
Recent events and new opportunities

After a month of escalating demonstrations, the President of Tunisia was forced to step down from power and leave the country after 23 years of rule. The discontent towards this regime stems from a lack freedom of expression, the suppression of oppositional views and inequitable wealth distribution. One of the largest and most widespread causes of dissatisfaction was the blatant corruption within government and the Presidents family. To measure the scale of the corruption, some estimates even put the size of their wealth at 40% of the Tunisian economy, all accumulated during his rule. The origins of the crisis in Egypt are largely similar to those in Tunisia. Hosni Mubaraks regime, over its 30 years in power, has maintained two key policies founded by his predecessor, Anwar Sadat. Peace, stability, and security has been priority number one; priority number two was maintaining Sadats Open Door Policy, designed to ignite capitalism and a free-market economy after Sadats predecessor Gamal Abdel Nassers socialist policies. Over the course of Mubaraks rule, while the regime was maintaining a policy of stability, Egypt lost its position as the leading voice in Middle Eastern regional affairs, no longer able to unify the voices of other Middle Eastern countries under one powerful stance. Over the years this gradual slide has destroyed national confidence on a social, political, and economic level. The Open Door Policy was put into high gear in 2005, when Hosni Mubaraks son, Gamal Mubarak, began to play an increasingly meaningful role in domestic political and economic affairs as Secretary General of the National Democratic Partys (NDP, Egypts ruling party) Policy Committee. Gamal Mubarak influenced the
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change of the Ministerial cabinet to cause young, western-educated, capitalist businessmen to take over key roles such as the Ministry of Tourism, Investment, Finance, and Trade, under the leadership of Ahmed Nazif. This cabinet shuffle ignited sharp economic growth since 2005, with GDP growing between 4.0% and 6.5% annually through 2010. However, during this period of unprecedented economic growth, not all socioeconomic groups benefited. The masses experienced high unemployment, even higher underemployment, rapidly rising inflation, low productivity and stagnant wage growth; while the privileged class benefited from rising asset prices and corporate income growth. The resulting frustration culminated this month as the masses assembled to protest the regimes lack of freedom and lack of economic opportunity. Today, in Tunisia, a new transitional government is nearly complete and general elections will take place in six months. Its widely expected that the new government will be a parliamentary system. No matter the results of the elections, the people have seized their right to assembly, to free speech and to a free media. With regard to the ex-presidents familys assets, its been established that the assets will be nationalized, and it is expected that at least part of them will be sold to the market. The timing of these sales is still unclear. As of today, Tunisia is materially calmer than at the peak of the crisis. Since the end of the crisis, institutional investors have all affirmed their desire to continue investing in Tunisia. In addition, the majority of the foreign enterprises has confirmed they would like to continue seeking growth capital and investing in expansion. In short, the sentiment is overwhelmingly conclusive that the recent changes will be positive for the country over the long run and that there will be great opportunities over the next 18 months. In change comes opportunity and in great change comes great opportunity. In Egypt, the situation as it stands today is still fluid, and the coming months will be extraordinarily telling about the long-term prospects of the country. As Mubarak has yet to step down, it seems most likely that Revolution 2.0 will continue on its current pace with persistent protesting expected going forward. However, while the timing is unclear, it seems certain that at some point between today and the September elections there will be a clear regime change - hopefully to the democratic system the people are demanding. For a successful revolution to be seen though, constitutional amendments and a strong judicial framework must be installed to legally secure an irrevocably secular and democratic republic. After installing a lasting political framework as a building block towards structural economic reforms, the cyclical nature of economies should take hold. We must assume that the Egyptian Pound will continue to devalue in the near term. As a result, Egypt will become significantly more competitive in labor markets and export-oriented industries, particularly relative to its regional peers, in serving the European markets. The agriculture industry will also become more competitive, while margins will expand greatly, affording Egyptian companies higher valuations over the longer term. This trend, coupled with the birth of a new democracy, will ultimately allow Egypt to emerge far beyond any economic position it has witnessed in the past. One of the major stumbling blocks in attracting more foreign investments in the last five years has been political risk and succession risk. While foreign investments did grow between 2003 and 2007, Egypt was one of the few emerging markets which had fast growth driven by domestic demand and consumption, yet suffered greatly from low relative levels of investment. A crisis creates opportunities, and this will be the case in Egypts crisis as well. The key will be Egypts ability to install a strong political framework and constructive economic policies to take advantage of an economy that will have cheaper asset prices, a more competitive labor and export market and a highly competitive tourism market (all in light of the Egyptian Pounds devaluation).
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2 Tunisia
2.1 REGULATORY FRAMEWORK
Regulations of imports and foreign investment

Tunisia is a medium income country with a satisfactory economic growth and constantly improving social conditions. Since the late 80s the annual average GDP growth rate has been around 5%. At the same time, the poverty rate has decreased in 2000 to reach 4,2% compared to 40% in the 60s. Today Tunisia enjoys a favourable economic and business situation.
Import regulations
Tunisia began to liberalize its economy at the end of the 80s, after a strong period of protection and severe state control on the economy. Tunisias urge to have a wider opening of its own economy can be seen by the numerous signatures on preferential commercial agreements with many countries in the world. Both import and export need to have import/export authorization issued by the foreign trade ministry or the API. Furthermore, it is necessary to obtain customs ID number, called customs code. The customs declaration can be done by the importer/exporter or by a commissioned transit agent acknowledged by the customs department. It gives pertinent information on the declared goods (value) tax, country and province of origin). However, there are particular regimes that exist, according to the type of companies: Companies that only export-
Assimilated incentive regimes to the off-shore regimes in the free zones: this type of company, whose major production must be destined to export (with the possibility of a limited reduction of the internal market production -for the agricultural and fishing sector the percentage must not be more than 30% of the total production, while for the manufacturing sector at 20%), benefits from: tax exemption on import, the suspension of formality on foreign trade and the trade of equipment, raw materials, halfworked products, means of transport, goods, as all other goods necessary for the business, simplified procedures and domestic customs clearance (and not at the border) at the customs office nearest to the industrial plant. Furthermore, the commercial relations abroad and among operators in the free zone are free.
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Companies that partially export they have a suspended customs regime: customs regulations offer companies, which are partial exporters, a vast assortment of suspended duty free customs regimes so that they can easily adapt to different needs. Companies which produce for the entire market customs fees: the import of equipment, semiworked products, raw materials are subject to custom fees, customs control provided for trading abroad, for exchange and customs regulations.
Restrictions on import
From 1997 the Tunisian state has engaged in a process of simplification in the administrative procedures and the elimination of quantitative restrictions on import. There are 3 different types of import regimes: A) Import not subject to formal foreign trade procedures, they are: - The import of necessary products to the realized production of the companies which only export. - The imports realized by operators in the zone. B) Imports of goods subject to liberal regimes according to foreign commerce laws: all goods subject to liberal trade regimes are automatically imported without authorization, by means of import domiciliary by a recognized intermediate. C) The import of banding goods that need authorization; the request for authorization for importing, attached with the contract must be given to an acknowledged inter-mediator (the bank of the requester). The import authorization is valid for 12 months and allows the fractioned importing of all the goods written on the authorization itself. Today, about 97% of imports are more or less free. However, there are restrictions estimated by ART. 128 of the code des douanes and other exceptions (some agricultural produces and automobiles).
Temporary Imports
Export industrial companies have tax exemption on primary materials, semi-worked and equipment necessary for their companies. In order to take advantage of this procedure, customs officers request the importer to declare that he/she commits to the re-export of the imported products and to supply a caution money of 54% of the value of the goods. This preferential regime is only applicable to 2 types of import: 3rd party labor and self employed labor.
Foreign investment regulations.

Tunisia benefits from foreign investment. Their evolution, in rapid growth, contributes to finance the 10% of the productive investments and generate the 34% of the exports. This has been realized because Tunisia offers very important advantages to foreign investors (qualified labor, low cost, simplified administrative procedures for all companies, favorable legislation, functional infrastructures that are always improving). The country attracts foreign investments, both direct investments and portfolio acquisitions (with particular reference to private companies) for the following reasons: free access in the EU market, qualified and competitive human resources, free economy, adequate infrastructures in an attractive environment, a steady political regime, a legislative, normative and administrative cadre which facilitates the areas, the competitive cost of production factors (electricity water and gas). The investment code of 1993 confirms the principle of free investment in the agriculture, industry and service sectors, which are not financed. The promoters have only to declare an investment to the authorities. The foreign investment is treated the same as the national one. Furthermore, the financial law of 2007 has reduced the fiscal pressures on companies profits (from 35% to 24%) and the value added tax (VAT) on luxury products (from 29% to 18%), substituted by the consumer tax (equivalent to 10%). Fiscal advantages are expected for those companies, which only export (the only exemption on the value added tax on benefits for the first ten years, reduction or exemption on customs fees for investment goods relating to the project, state contributions for investments in undeveloped regions). The foreseen profits for an export company, which should have ceased starting from the 1st January 2008, have been extended till 31st December 2010. In December 2007 parliament had also approved a new law on investments (n. 2007/69) that provides further incentives, particularly for disadvantaged regions. The budget law 2008 also provides fiscal advantages for reinvested profits and the reduction act 2.5% on compensation deductions for professionals or companies that lend their services to companies that are nonresidents (offshore regime).
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It is also important to note that since 2005 foreign investors can buy land and industrial buildings, just like lands and buildings destined to the tourism businesses they do not need government authorization. In particular, it is important to distinguish among: -The regime of common rights, that disciplines private companies in Tunisia, is not particularly favourable to foreign investor, because companies are subject to severe control and severe fiscal discipline. -The privileged regimes, which give foreign investors ample space and notable fiscal exemptions. -Various privileged exemption regimes in Tunisia, those who are mostly interested in foreign investors, fiscally speaking, are regulated by the following laws: Law 92-81 3/8/1992 relating to the Economic zone free in Tunisia. Law 93-120 27/12/1993 relating to Investment codes. Law 94 -42 7/3/1994 relating to the International Commerce Society (SCI).
Free Zones: In Tunisia, there are 2 free zones, in Zarzis in the South and in Biserta in the North-west, controlled by Law 93/120. The aim of these delimited areas was to welcome, in 20 years, more than 1.500 companies, to create 11,000 jobs and attract foreign investments. The export companies that operate in these areas have many advantages, they do not pay duty fees and income tax, taxes on raw materials, they have a 50% reduction on income, they are tax exempt for the first 10 years, they have free and total transfer of profits and total reduction on reinvested profits of the social capital. The companies that establish themselves in the free zones enjoy the same advantages as the export ones and can have at their disposal efficient infrastructures and take advantage of a notable flexible employment. The investment code of 21 December 1993(law n 93-120) offers numerous fiscal and financial advantages. It covers all sectors with the exception of mining, energetic, finance and internal commerce. Seven priority businesses have access to state fiscal and financial advantages: export, regional development, agriculture, technology promotion, research development (R and D) and energy saving, the war against pollution and environmental protection, the encouragement to new promoters to create small and medium business and to start projects, and finally the investment of consolidation or support. Every investment is connected to fiscal and financial incentives, in particular: A deduction up to a max of 35% of the value added tax on the incomes of all the profits reinvested; A 10% reduction on customs fees and IVA exemption on imported equipment that does not exist locally. VAT exemption on consumer tax for primary goods produced locally; The possibility to choose a regressive redemption system for the equipment utility, whose duration is more than 7 years. The 18% of the social safety contribution of the employer is at the state expense for a period of 5 years for the newly employed Tunisian agents salaries, high school graduates. Furthermore, additional specific advantages can be granted in function with the following priorities: export regional development, technology transfer, environmental protection, new promoters.
The Superior Commission for Investments must approve the authorization for those investments that are in the service sectors, listed in the special decree, companies that partially export when the participation of the foreign company is more than 50% of the companys total capital. The investment code incentives the creation of the following types of companies that participate abroad: Foreign agencies: to set up an agency it is necessary to produce an authentic copy of the companys statute or equivalent laws and the company or main office address. Partnership: the number of partners is not limited; each partner is solely responsible for debts made by the company. The law does not oblige account revision neither it imposes the publication of the budget. Joint ventures: they are encouraged with government agencies; they may be set up as partnerships or as a capital companies in which all the parts are shareholders.
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Most of the businesses are regulated by Tunisian law and can be set up, on request, only without certification of deposit of declaration, issued by: The Agency for the promotion of industry (API) for all industrial businesses and services connected to industry; The export promotional centre (LEPEX) for international commerce projects. The promotion agricultural investment agency (APIA) for agricultural and fishing projects; The national tourism agency (ONTT) for touristic and para-touristic projects; The national artisan agency (ONA) for artisan businesses.
Fiscal Treatment
Tunisian fiscal system has been subject to some important reforms. The fiscal resources come from direct and indirect taxes, the withdrawing of registered rights, taxes, just like custom fees. After 1996, there was a program to dismantle taxes, in order to create a free trade zone with the EU. Tunisian fiscal system was modified by the new fiscal law of 1988, which introduced into the country a value added tax to be applied on imports, production, gross and retail distribution in all sectors excluding the agriculture one. The present Tunisia fiscal system provides the distinction between direct taxes and indirect taxes.
Direct taxes.
Regarding income tax applied on workers, the applied rate goes from 0 to 35% (for yearly incomes that are more than 50.000 DT, tax is equivalent to 35%) according to the following scheme: Groups of Yields in DT Till From From From From Beyond 1.500 1.500 to 5.000 5.000 to 10.000 10.000 to 20.000 20.000 to 50.000 50.000 % 0 15 20 25 30 35
The incomes of legal status are subject to taxation with a 35% rate. Yet, the new investment code has foreseen a reduction according to the sector or the type of business the company: 10% for agriculture, artisans, formation and education. While a total exemption is provided for export incomes during the first 10 years for agriculture development projects. Furthermore, a 50% reduction is provided for development project taxes for another 10 years and export income, for an unlimited period starting on the 11th year.
Indirect taxes.
The tax on the value added tax has a base rate equivalent to 18% and it is applied on 85% of products. VAT is applied on imports, production, gross and retail distribution, on all sectors, except the agriculture one. The sale taxes paid on purchases is deductible from the total sales tax. Special taxes are provided on same types of products and services.
The repatriation of profits.

The total transfer of the invested value capital and of the profits gained by the company, represent the main point of the Tunisian normative, relating to various productive sectors: industry, services, agriculture, fishing and tourism. The principle of the total transferability of invested foreign capital and profits is applied on a general scale, in other words, without taking into consideration if the type of business done is totally or partially directed to export.
Industrial zones and economic activity parks
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Tunisia has 121 industrial zones distributed all over the territory covering a surface of 3,807 hectares and offering several facilities. The 11th economic development plan (2007-2011) provides for the achievement of 31 industrial zones covering 650 ha to reach a total area of 4,500 ha in 2011. There are also two high-level operational economic activity parks: Bizerte and ZarzisJerba. The Bizerte Park is located at the citys port (just 60 km from Tunis Airport) and the Zarzis Park is located just half an hour from Jerba Airport.
Institutional framework
Tunisia has provided an appropriate institutional framework for the promotion of energy efficiency and, more particularly, of renewable energies, since the early 1980s. The institutional set-up is based on the establishment of the National Agency for Energy Conservation (ANME) which is the core component, as well as the creation of several bodies assigned to the implementation of the energy efficiency policy. National Agency for Energy Efficiency (ANME) National Agency for Energy Conservation (ANME) acts under the authority of the Ministry for Industry and Energy. It was established in 1985 under the name of Agency for Energy Conservation (AME), subsequently renamed National Agency for Renewable Energies (ANER) in 1998. ANME is responsible for the development of rational energy use, renewable energies and energy substitution. The end objective of the ANME mission is to improve the energy balance and contribute to the reduction of gas emissions generated by energy use. ANME actions cover a wide range of tasks, including: The development and implementation of national energy efficiency programmes; Conducting prospective and strategic studies; Setting out the legal and regulatory framework relating to energy efficiency; The granting of tax and financial incentives; Launching awareness-raising, information, education and training activities; Providing support to research & development, and to show-case projects; Encouraging private investment in the sector. As regards public institutions, the major actors are: The Ministry of Industry and Energy undertakes the implementation of the countrys energy policy through the General Directorate for Energy (DGE). It has 5 principal public agencies under its supervision, which constitute the implementation vehicles for its energy policy: National Agency of Renewable energies (ANER) promotes a rational use of energy and the use of renewable energies. It ensures the implementation of State policy in these two areas; Tunisian Company of the Oil Activities (ETAP) holds a monopoly for the marketing and supply of crude oil and certain oil products in the country. ETAP controls a great number of companies in the sector significant holdings in their share capital. Tunisian Electricity and Gas Company (STEG) ensures the management of the electricity sector and holds a monopoly over the transport and distribution of gas and electricity. It is, therefore, the sole buyer of this type of energy. Tunisian Refining Industries Company (STIR) is the only countrys refinery and sole supplier to the national oil products market. National Oil Distribution Company (SNDP) shares oil products distribution market with a certain number of private operators (Total, Shell, BP, etc). Other bodies involved in renewable energies Besides the public institutions directly or indirectly involved in the field of renewable energies, several other actors bring in their contribution, particularly NGOs and the private sector. As regards public institutions, the major actors are:
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The Ministry of Industry and Energy which undertakes the implementation of the countrys energy policy, and this through the General Directorate for Energy (DGE); The Ministry of Agriculture, Environment and Water Resources, together with several institutions that belong under its authority, such as the National Environment Protection Agency (ANPE), the National Sanitation Board (ONAS) and the Tunis International Centre for Environmental Technologies (CITET) ; The Ministry of Higher Education, Scientific Research and Technology whose missions cover the research & development related aspects in this field, via several institutions, as the National Institute of Scientific and Technical Research (INRST), various schools of engineers (ENIT, ENIM, ENIS, ENIG) and certain Faculties, especially the Sciences Faculties ; The Ministry of Equipment, Housing and Land Use Planning; The Ministry of Communication Technologies and Transport. The involvement of civil society also constitutes a pre-requisite for the development of renewable energies. Accordingly, particular interest has been granted to NGOs in view of the role they can play in this field in Tunisia. The private sector plays also an important role because it allows a gradual takeover from the public sector with regard to production activities. The private sector has already manifested interest in various activities, particularly wind energy and the recycling of wastes for electric power generation, as well as the solar, thermal and voltaic energies. The Socit Tunisienne dElectricit et du Gaz (STEG) of Tunisia used to hold the monopoly of production, transmission and distribution of electricity. This monopoly ended in 1996 by a law authorizing the state to grant independent producers concessions for production of electricity for its exclusive sale to STEG. Private sector Tunisian energy sector is generally characterized by an important role of the state, according to the level of social and economic development. This role is changing in order to attract foreign direct investment in energy infrastructure projects, which is crucial to satisfy the growing demand for energy, particularly in the electricity and gas sectors. Over the past decade, energy policy and regulatory reforms progressed significantly in Tunisia. The most important Tunisian enterprises are: African Energy, ENOVE, Energy Engineering Maintenance Service, Al-Karim HSSQ Group (AL KARIM)
Regulatory and legislative framework

Electricity
Within the framework of the Law n.62-8 of April 3th, 1962 on the creation and the organization of the STEG, ratified by Law n. 62-16 of May 24th, 1962, the STEG laid out up to 1996 the monopoly of production, of transport and distribution of electricity. Under certain conditions, defined by the Ministry for Industry and Energy, the STEG can carry out the production of electricity starting from renewable energy. This monopoly granted by the law n. 96-27 of April 1th, 1996, authorizes the State to grant independent producers of the concessions of electrical production in sight of its exclusive sale to the STEG. Conditions and procedures of granting of concession are fixed by the decree n.96-1125 of June 20th, 1996, specifying in private individual what follows: The choice of the dealer is carried out after competition by way of invitation to tender; The creation of an Interdepartmental Commission of the Independent Electricity Production (CIPI), inside the Minister of Industry. The main mission of this Commission is to propose advantages to grant to the dealer, to examine the examination of the offers and to subject, for decision, its conclusions and its recommendations at the Higher Commission of the Production Independent of Electricity.
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The Higher Commission of the Production Independent of Electricity (CSPIE), lately created also by this decree, is an interdepartmental commission charged to come to a conclusion, for each project of production independent of electricity, mainly about the choice of the dealer. The CIPI is also charged to follow the negotiations between the independent producer and the Ministry of Industry and of Energy (MIE) until the signature of convention. This convention should specify the characteristics of the concession, in particular its duration, advantages, and information that the dealer will have to provide.
Renewable energies
The regulation framework relating to renewable energies (and the control of energy in general) knew an evolution throughout the 2 last decades. It can be shared in 3 great phases overall:
Beginning of the 80s: creation of A.M.E.

The beginning of history of the renewable energies regulation dates back to April 25th 1985. Few months before the publication Law n85-8 on energy control, AME was created. The law aimed at supporting renewable energy sector and in particular applications of solar heating of the water and wind energy.
1985-1989: lawful bases of the control of energy

This was the period of the first laws regarding energy sector. These laws set up the framework of the regulation of the energy management, with its two components: rational use of energy sector and renewable energies. During this stage, the following renewable energies laws were enacted: Law n 85-48 of April 25th, 1985 to improve research, production and marketing of renewable energies; Law n85-8 of September 14th, 1985 regarding to energy sector in general, ratified by the Law n85-92 of November 22th, 1985; Decree n86-96 of January 16th, 1986 to set up the ANME - National Agency for Energy Conservation.
1990-1993: to upgrade the regulation framework

This period knew the promulgation of two important laws: The Law n90-62 of July, 24th 1990, regarding the management of energy sector; The Law n91-1918 of December 16th, 1991, regarding the ANME - National Agency for Energy Conservation. These two laws upgraded the legal framework of the control and management of Tunisian energy sector. The principal assets of these laws were: the coordination and management of ANME; the direct aid for the energy projects of demonstration; The reduction of all the advantages expected in the previous laws.
From 1993 to nowadays

The legislative and fiscal framework, related to the promotion of energy efficiency, in general, and of renewable energies, in particular, is regulated for the main part by the following laws and decrees: Law n 93-120, dated 27th December 1993, bearing promulgation of the Investment Incentives Code, particularly articles 40, 41, 52 and 52 b. This Code has abrogated articles 12.13.14 and 15 of Law n 90-62 and stipulated, under articles 40 and 41, a new system of incentives and of direct and indirect financial allowances ; Decree n 94-537, dated 10th March 1994, such as amended by Decree n 2002-174, dated 28th January, 2002, setting the amounts and criteria of granting specific investments in the field of energy efficiency;
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Decree n 95-744, dated 24th April, 1995, bearing application of articles 88 and 89 of Law n 94127, dated 26th December, 1994, bears Finance Law for the financial year 1995, whose articles relate to setting the lists of the raw materials and products necessary for the manufacture of equipment used in the field of energy efficiency or in the field of renewable energies. Law n 2004-72 dated 02nd August 2004, relating to energy efficiency, updates the types of financial incentives and the criteria for their attribution. In particular, a decree on September 15th, 2005 sets the rules for the operations of ESCOs in Tunisia. Law 2006-106 of December 19th, 2005 implements Law 2005-82 by creating the energy efficiency fund (FNME). Law n 2009-7 dated 09th February, 2009, relating to energy efficiency, modifying Law 2004-72, lowers the threshold for mandatory energy audits in industry, sets norms and standards for buildings, makes urban transport plans mandatory, sets access rules to network, buys back of excess power from cogeneration units and self-generation from renewable energies. Decree 2009-362 of February 9th, 2009, modifying decree 2005-2234, stipulates the levels of FNME investment subsidies for each type of investment, as well as the applicable ceilings. The regulatory framework relating to energy efficiency, in general, and to renewable energies, in particular, has steadily developed in Tunisia for the past two decades, and at a more rapid pace in recent years. Indeed, the presidential decisions announced in May 2001 have involved, in particular, the set up of an appropriate framework that is specific for each area of activity with a view to encouraging the private sector to invest in the field of renewable energies. Besides the decisions of a general nature, related to updating the regulatory framework of energy efficiency, increasing financial incentives, designating a National Energy Efficiency Day and establishing a Presidential Award in this field, those specific to renewable energies relate to: Mandatory use of solar water heaters in new public buildings ; Optimizing a profitable use of photovoltaic energy in various fields ; Enhancing the use of wind energy for electric power generation ; Encouragement of energy capitalisation of wastes and geo-thermal waters.
Tax and financial incentives

The main tax and financial incentives related to the development of renewable energies, such as provided by the various regulatory texts, are: Allowance to show-case projects amounting to 50 % of the cost, with a maximum of 100.000 TD (Tunisian Dinars); Allowance to investment of 20 %, with a maximum of 100.000 TD ; Application of minimum customs duties (10%) and VAT exemption for equipment and products used for energy efficiency, which are not manufactured locally; VAT exemption for energy saving equipment goods and products purchased locally; The application of minimum customs duties (10%) and VAT exemption in case of importation.
National Fund for Energy Conservation (FNME)

The law N 2005-82, dated 15th August 2005, which sets up an energy conservation system, supports the effective implementation and sustainability of the actions aiming at rationalising energy consumption, the promotion of renewable energies and energy substitution. This system has developed into a National Fund for Energy Conservation (FNME), subject of Law N 2005-106, dated 19th December 2005, thus representing a quantum leap towards the choice of an extra-budgetary resource for financing the public support to energy conservation investments in Tunisia, and this based on the granting of allowances.
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New FNME subsidies and ceilings
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2.2 RENEWABLE ENERGY SITUATION Energy context

Tunisia enjoyed a favourable energy situation characterized by a largely surplus energy balance, until the mid eighties. During this period, the energy sector played a key role in financing the economic growth of the country. In 1980 this represented approximately 13 % of the national GDP and 16 % of national exports. However, from the end of the eighties, this favourable situation started to deteriorate under the combined effect of two major factors: The stagnation of national hydrocarbon resources; The rapid increase of energy demand caused by economic and social growth. Energy balance moved from a surplus situation, of approximately 3 Mtoe, at the beginning of the eighties, to a slight deficit in the first years of 2000. The contribution of the energy sector to the economic growth has been decreasing since 1986. At present, the energy sector accounts for approximately 5 % of the GDP and less than 7 % of total national exports. The evolution of the energy balance over recent years is summarized in the graphic below:
Energy balance evolution 2006/2009 (Mtep)

12
Demand
Supply
10
8,4 7,4 6,9 7,5 7,7 7,9 8,1 7,2

6 8
4 2006
Source: ANME
2007
2008
2009
National primary energy sources showed an increase in 2007, totalling 7,642 thousand toe, compared to 6,527 thousand toe in 2006, i.e. an increase of 17%, but a decrease in 2008 with 7,200 thousand toe. On the other hand, primary energy consumption also increased; totalling 7,706 thousand toe, compared to 7,406 toe in 2006, i.e. an increase of 4% and 7,900 thousand toe in 2008. Accordingly, the primary energy balance posted a deficit of about 46 thousand toe in 2007, compared with a deficit of about 879 thousand toe in 2006 and about 700 thousand toe in 2008. In terms of structure of primary energy resources, oil resources amounted to 4,645 thousand toe in 2007, and showing a significant increase, of 39%, in comparison with 2006, in which oil production totalled 3,335 thousand toe. Natural gas resources showed a decrease in 2007 off 5.9%, totalling 2,977 thousand toe, compared to 3,163 thousand toe in 2006.
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Primary Energy Balance 2006/2008

9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2006 2007 2008 Supply Demand Deficit
Source: ANME
It is worth pointing out that the contribution of renewable energies in sustaining the national primary energy resources via primary power production based on wind and hydropower remains modest; indeed, its share in the national resources stands at mere 0.3%. Renewable energy resources reported a decline between 2006 and 2007, owing to their dependence on the countrys climate conditions, especially with regard to rainfall inflows to dams and, hence, hydropower production, in addition to a lack of wind velocity, as the chief wind power production factor. The breakdown of national primary energy resources for 2007 is illustrated by the following graph:
Breakdown of primary energy resources fro 2007
Natural Gas Renew able energies Crude oil
Source: ANME
In terms of demand for primary energy, it totalled 7,706 thousand toe in 2007, of which 4,208 thousand toe satisfied by oil products, 3,477 thousand toe by natural gas and 20 thousand toe by renewable energies (wind and hydropower energy). Demand for primary energy for 2007 was as follows.
Breakdow n of prim ary energy de m and fo 2007
Natural Gas Renew able energies Crude oil
Source: ANME
Tunisian authorities have engaged an energy policy, which is compatible with sustainable development, to solve this situation. It is based on: The intensification and reinforcement of efforts made for the development of country's hydrocarbon resources (the Hydrocarbons Code). This allows the discovery and exploitation of new reserves compensating for the decline in the old layer;
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The ensuring of energy supply at lower cost, to facilitate access to energy by the entire population; The adoption of a voluntary sustainable energy strategy. Moreover, to improve the energy balance, the public authorities created a National Energy Efficiency and Renewable Energies Commission in October 2000. In particular, its missions included the creation of a national programme in order to rationalize energy consumption and promote renewable energies. The programme consists of two types of actions: short term and medium term ones. The short-term programme relies on twenty presidential decisions announced in May 2001, which attest government's determination to engage fully in favour of a rational use of energy and of the development of renewable energies. These decisions referred to: Improving awareness-raising and information; Setting out the appropriate legal framework to encourage the private sector to invest in the field of energy efficiency; Involving the public sector in making profitable use of the energy efficiency potential; Mobilising the financial resources necessary for the development of the sector; Building local capacities and providing support to research and development programmes. The objectives of medium term programme are a large-scale dissemination of solar water heaters, the optimization of rural electrification through photovoltaic systems and the development of wind energy for electric power generation. Tunisia undertook a strategic study on the development of renewable energies to ensure a consistent and sustainable energy policy. This study was completed in April 2004 and led to draw up an Action Plan for developing the whole range of sectors at horizon 2011, as well as set out strategic options for each sector for the three coming decades. Electricity Fossil fuel plants generate the majority of Tunisian electricity. In 2003, Tunisian overall power generating capacity was 2,900 megawatts (MW). The 97 percent of that came from thermal power plants, the remainder from hydroelectric and wind ones. In 2004, the Tunisian government invested $687 million in the country's energy sector to increase electricity production in existing thermal plants, as well as facilitate the search for additional oil and gas deposits. The STEG has wide production facilities spreaded on 23 stations (steam turbines, Gas turbines, and cycles combined, hydraulic, windmills) of an installed working capacity of about 3.314 MW in 2007. Production of electricity, in 2006, rises to 10.036 GWh. In 2003, Tunisia generated 11.56 billion kilowatt-hours (Bkwh), and consumed 10.76 Bkwh, up to 10.03 Bkwh in 2002. Much of this growth reflects the increasing comprehensive nature of the Tunisian grid. Information from the government-owned electric utility, Socit Tunisienne de l'Electricit et du Gaz (STEG), indicates that 96 percent of the country now has access to electricity, compared to 86 percent in 1994. In 2007, STEG transmission network involves: 73 HV Substations, 5.593 km of HV lines, 5 inter-connection lines with Algeria, 2 inter-connection lines with Libya, In addition to their function to meet a perpetual growing demand, the new works will allow us to minimize the risks of obsolescence and to prepare our network to play its role as a link in a large system interconnected around the Mediterranean, a system where electrical power will not have borders. The STEG has introduced the work under voltage on its HV network, digital techniques in the protection system of HV lines and the techniques of armoured substations.
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The armoured substations will have an increasing presence in the dense agglomeration of Tunis and in the coastal zones. The digital techniques used in the control of substations will be generalized, gradually, on the HV network. The STEG launched a project for the renewal of its control system and the installation of a telecommunication network with high flow optical fibre. Ensuring an important jump in the telecommunication and the network control, this project will meet the requirements of a healthy and effective control, as well as on the level of equipment and management mode. The national transmission network is interconnected to European network through Algerian and Moroccan networks. The interconnection with Libya is already completed. A general agreement draft was signed in 2006 and it concerned the electric interconnection of the networks of ELTAM (EGYPT, LIBYA, TUNISIA, ALGERIA and MOROCCO) and its reinforcement by works of transport of 400 Kw during the period 2010-2015. This will make possible to extend the zone of synchronism to the countries of Machrek, to Syria. Until 1996, STEG had a monopoly over power production, distribution and pricing, and the utility still generates approximately 80 percent of Tunisia's power. In 2002, Tunisia's first independent power plant (IPP), a $261 million, 471-megawatt (MW), combined cycle (natural gas and diesel-fired) power project went online at Rades. It is owned and operated by the Carthage Power Company - a consortium comprised initially of U.S.-based Public Service Enterprise Group (PSEG) (60 percent) and Japan's Marubeni Power Holdings BV (40 percent) - on a 20-year build-own-operate-transfer (BOOT) basis. In May 2004, PSEG sold its stake in Carthage Power Company to BTU Power. In July 2003, Tunisias second IPP, a 30-MW associated gas plant operated by CME Energy started commercial operations. In addition to already established IPPs, Tunisia is encouraging other projects in order to reach its goal of an installed capacity of 3,540 MW. In March 2004, BG signed a Memorandum of Understanding (MoU) to construct a $250 million, 500-MW power plant (Barca Power) near Sfax. In December 2005, this project was still under discussion. BG also plans to build a liquefied petroleum gas (LPG) plant that will serve the Tunisian market. Electricity Activity Generation (GWH) STEG National Sales (GWH) High Voltage Medium Voltage Low Voltage Electricity Customer High Voltage Medium Voltage Low Voltage Electrification Rate GLOBAL RURAL
Source: ANME
2008 10.250 13.747 11.743 1.192 5.494 5.057 2.963.494 17 14.476 2.949.001
2007 10.036 13.138 11.249 1.133 5.309 4.807 2.871.600 17 14.415 2.857.168
2006 9.632 12.551 10.868 1.109 5.055 4.704 2.782.427 17 14.236 2.768.174
99,50 % 99,00 %
99,40 % 98,80 %
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Sales Electricity HT-MT by Economic Sector (GWh)

Economic Sector Mining industries Food Industries Textile industry Industry of paper and The Edition Chemical industry Industry of Material of construction Basic metallurgy industry Diverse industries Sous-total 1 2008 341,400 529,700 537,400 132,500 289,300 1.292,100 215,100 763,100 4.100,700 2007 323,700 494,600 564,100 156,900 291,900 1.225,700 207,400 727,100 3.991,500 2006 286,900 492,100 540,300 153,600 270,900 1.226,800 197,600 656,700 3.824,800
Agricultural pumping Transport Tourism Services Sous-total 2 Total

Source: ANME
452,200 515,200 268,00 640,900 708,700 2.585,000 6.685,700
396,300 466,900 249,100 630,000 668,800 2.411,100 6.402,500
364,600 437,700 239,000 618,900 638,100 2.298,200 6.123,000
Renewable energy resources and potential

Despite Tunisia is endowed with important potential of RE and the willingness to promote them, these resources are not fully exploited at present. Indeed, RE sources represent 12% of TPES consumption (biomass mainly) which may seem relatively high, in comparison to other Southern and Eastern Mediterranean countries. However, excluding biomass and large hydro, RE sources represent only 1% of TPES. Next figure illustrates the structure of TPE in Tunisia in 2005. Share of RE in TPES in Tunisia (2005)
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In view of the current and future situation of the energy sector in Tunisia, marked mainly by the increasing demand on energy and the limited energy resources, and considering the rise in oil prices, the field of energy efficiency has enjoyed special attention in recent years. In this regard, the actions listed under the projects of Rational Energy Use (REU), Renewable Energies (RE) and Energy Substitution (ES), within the framework of the National Energy Efficiency Plan (PNME) were focused on pursuing the three-year energy efficiency programme for the period (2005-2007). In May 2003, Tunisia announced that 12 additional windmills would have been added to the wind farm in Hawariya, bringing total capacity to 20 megawatts (MW). Separately, the Global Environment Facility (GEF) is providing $10.5 million to build windmills in Tunisia. GEF expects that an additional $106 million in private funding in order to generate 100 MW will follow its initial investment. German Technical Cooperation Agency has also provided money for wind power. December 2004 marked the launch of the Mediterranean Renewable Energy Centre in Tunis, an agency that promotes and develops renewable technologies across North Africa. Tunisia has a new National Plan named Tunisian Solar Plan (2007-2011) which aims at intensifying energy conservation efforts and promoting new projects in renewable energies. Given the urgency to intensify energy conservation efforts, the Government has formulated a 4-year energy conservation program (4ECP) for the period 2008-11, which was adopted by the Council of Ministers on January 15th, 2008 and presented to the public in a National Conference on Energy Management (NCEM) on February 12th, 2008. The objective is to reduce the energy use of the Tunisian economy by 3% p.a. over the period and to increase the contribution of renewable energies to 4% of primary energy demand. In line with the Mediterranean Solar Plan initiative and other programmes, the Tunisian Government is implementing this national plan with 40 public-private projects scheduled over the 2010-2016 period in the fields of energy efficiency and renewable energies. The plan proposes to allow an estimated CO2 emission reduction of 1,300,000 tonnes per year. In addition, Clean Development Mechanisms (CDM) will generate an approximate 130 million Euro revenue (240 million dinars) for a 10 year-period (based on 10 Euro per tonne). Targeting an annual energy saving of 660 kTep, that is 22% of the overall forecast for Tunisia's energy consumption reduction by 2016, the Tunisian Solar Plan confirms the country's ambition to become an international hub for energy production, exportation and its commitment toward sustainable development. In the following, the development of RE relates in particular to four major energy sectors: photovoltaic, solar thermal (solar water-heaters), wind and biogas. Solar thermal: solar water-heaters In Tunisia, the best-known and most widely established technology, which uses renewable energy, is the solar water-heater. However, the development of this technology is slowed down by its lack of competitiveness due to the current energy prices and to the size of the initial investment, as compared with conventional systems (LPG-fired/Gas-fired water heaters and electrical water heaters. The solar water heater market has a conspicuous growth in the mid-1980s. After a slump, it boomed again between 1997 and 2001, thanks to the stipulation of a purchase subsidy of about 35 % of the cost in 1995, financed by GEF (The Global Environment Fund) and the Kingdom of Belgium. At the end of 2003, the total panel surface area of solar water heaters installed was about 100,000 m2.
Industrial and commercial infrastructure of the solar thermal sector

The industrial and commercial infrastructure for solar water-heaters is the most developed of all renewable energies sectors in Tunisia. This consists mainly of: Nine companies which commercialise the equipment, 3 of which are local manufacturers and six are importers representing various different brand names; A network of 130 installation agents covering the whole national territory; 500 direct employment positions.
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Wind energy It is difficult to evaluate the technical potential of wind power in Tunisia owing to the absence of a precise wind atlas. However, STEG (Socit Tunisienne de lElectricit et du Gaz) and ANME (National Agency for Energy Efficiency), have undertaken studies on sites that can be developed for electricity production. According to preliminary studies, the on shore wind potential in Tunisia is estimated at 1,000 MW, with an average energy production capability of about 3 MWh per year and by kW installed. High-level studies were carried out in about fifteen sites, five of which located in north and the northeast, and were the subject of further evaluation studies. These studies confirmed the existence of a potential about 300 MW, with annual average wind velocities of between 7 and 10 m/s. Actually, in Tunisia, the wind energy sector attracts considerable interest not only of the public authorities but also of certain independent private developers. STEG (Tunisian Electricity and Gas Company) undertook to construct its first 10 MW wind energy plant in Sidi Daoud on the northern coast of Cap Bon. Commissioned in 2001, this plant increased to a capacity of about 20 MW in 2003. By virtue of Law N 96-27, dated April 1st, 1996Tunisia has also started to open up electric power production to the private sector. It authorizes the State to grant electricity production licences to independent producers with a view to exclusive sale to STEG. Decree n 96-1125, dated 20th June 1996 stipulated the conditions and modes of granting licences. Tunisia has undertaken to adapt the legal and institutional framework for this option, which entered into force with the construction of the IPP type plants (Independent Power Production) in Rads and in El Bibane. Moreover, in 2001 Tunisia benefited, via National Agency for Energy Efficiency (ANME), from preliminary assistance (via international cooperation) for national capacity building in the field of wind energy. The aim of this assistance was to remove the barriers and the identified constraints and to create a competitive wind energy market. It had to be realized by installing wind data measurement stations in sites located in various regions of the country, by conducting technical and economic feasibility studies for the implementation of wind energy projects in Tunisia and by training technicians at national and regional level in this field. To consolidate the interest shown by the public authorities in the development of wind energy in Tunisia was developed a comprehensive and integrated national programme. It involves about 300 MW (100 MW in the first phase) to be implemented in the period 2004-2011 via a tender-based production licence. In the context of the 100 MW project, Tunisia obtained a financing agreement from GEF/UNDP (Global Environment Fund/ United Nations Development Programme) intended to cover part (about a third) of the cost overrun (excess costs) incurred by the project. At present, the wind energy sector seems to be the nearest in terms of economic competitiveness for power production, even though it is still more expensive than conventional power plants. Moreover, it appears as the most promising medium term means to combat climate change. This sector will be more competitive in the future years owing to decreased costs because of technical progress and economies of scale.
Industrial and commercial infrastructure of the wind energy sector

In the wind energy sector, the Tunisian industry produces certain components such as electrical control panels, cabling, transformers and sometimes-even towers, in addition to a whole range of civil engineering and site development services. Indeed, for the STEG 20 MW project, the rate of local integration was as high as 30%. This rate is expected to increase considerably owing to relocation of some industries in Tunisia, for the manufacture of certain solid parts of machinery (carriage, rotor), and to the development of the local and regional markets. Concerning consultancy, some private sector agencies have started to operate in partnership with international consultants and foreign investors. Moreover, the wind energy plants constructed by STEG, as well as the capacity building actions from which ANME has benefited, have made possible to build the knowhow in this field. Solar photovoltaic energy Tunisia has good sunshine conditions. In particular: The total annual irradiation on a horizontal level varies between 1500 and 1900 kWh/m2 year. The irradiation per day, on annual average, varies between 4.1 and 5.2kWh/m2 day.
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On an annual basis, the insolation index varies between 64% and 75%. On a monthly basis, this index varies between 47% and 89%. The temperatures are relatively high. The monthly average exceeds 19C in general. In Tunisia, the development of the photovoltaic market is closely connected to the electrification of isolated and sparingly populated rural zones. This electrification is normally made by means of individual 100 Wc photovoltaic systems. It is based on a public approach via national programmes financed by the State and implemented by ANME. Over 11,000 households and about 200 schools have been electrified in this way. In addition, about 60 solar water-pumping installations have been constructed, mainly in southern Tunisia where there are many surface wells and a need for drinking water. Other applications include telecommunications. The total installed energy, for all uses, is estimated at 1.4 MW of which about 1.2 MW is for electrification.
Industrial and commercial infrastructure of the photovoltaic sector

The industrial and commercial infrastructure of this sector consists of several companies, three of which are wholesaler and installation companies, which import various brands of panels, one electronic part assembly company (mainly ballasts), two companies specialising in the importation and installation of photovoltaic pumping systems, and two solar battery manufacturing companies. Biomass
Biogas
The energetic potential valorization of solid waste in Tunisia is significant, owing to the fact that this country produces more than 30 million tons of organic waste every year. In Tunisia, in the early 80s, biogas went through a pilot phase with the installation of about fifty household digesters. The plan involved several bovine and goat breeders, which were located distant from the power network in the North West region of the country. The produced biogas was used for household lighting, cooking and refrigeration. Since the mid 90s, ANME adopted the strategy to resort to a capitalisation of the waste produced by farming (industrial farming) and agri-business industries through the production and utilisation of biogas: energy capitalisation was then a by-product of the waste treatment. In 2000, this brings to the installation of a biogas producing plant based on poultry waste at the premises of a private stockbreeder. It has a treatment capacity of 3 tons of waste per day and produces about 200 m3 of gas per day, which is then transformed into electric power at a rate of 300 kwh/day.
Wood energy
Wood energy balance is in slight disequilibrium, but there are significant regional disparities. The demand for wood energy comes primarily from the residential sector, which accounts for 98% of national consumption. The cooking of bread in traditional furnaces (Tabouna) constitutes approximately half of the consumption in the residential sector. Nowadays the wood energy problem depends more on its rationalization and consumption than on its valorisation. In the nineties, to reduce the consumption of wood, ANME launched a distribution programme of metal lids for tabouna, aiming at lowering the consumption by approximately half. ANME trained ten artisans from the north west of the country to manufacture these lids. The manufacturing cost was estimated at approximately 9 Tunisian dinars per lid. ANME has distributed approximately 15,000 lids via local NGOs.
Energy and Environmental impacts

The protection of the environment in Tunisia represents a national priority in matter of economic and social development. Tunisia has committed itself fully with regard to environment protection since the 1980s. In this regard, the Tunisian government has implemented policies and programs to conserve and manage the country's resources and to save energy. The government is also examining ameliorated waste treatment systems, as well as the application of ecological consciousness for the public at large.
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In this regard, Tunisia has ratified the United Nations Framework Convention on Climate Change (UNFCCC) in July 1993 and the Kyoto Protocol in June 2002. Tunisian CO2 emissions levels are thus increasing rapidly since 1990 and the country is not obligated to curtail carbon emissions. However, Tunisian Government is looking to use the CDM as a means for supporting sustainable development and partly remove the financial barriers that clean technology projects (for e.g., RE) are facing. Under these circumstances, the execution of the strategy of renewable energies development should reduce CO2 emissions and generate an aggregate primary energy, saving of 1,3 M toe in 2010 ; 6,7 M toe in 2020; and 18,6 M toe in 2030. The aggregate emissions avoided should reach 3 MteCO2 in 2010; 15,7 MteCO2 in 2020; and 43,6 MteCO2 in 2030. The following table sums up the achievements to attain in the major renewable energy sectors, and this in the course of the three coming decades:
Energy sector Wind Solar Thermal Photovoltaic Biogas Energy saving Emissions avoided
Source: ANME
Unit MW m3 MWc MW Mtoe MtoeCO2
2010 310 280.000 3,5 30 1,3 3
2020 1130 950.000 8,5 50 6,7 15,7
2030 1840 2.500.000 18 80 18,6 43,6
Renewable energy contribution in the primary energy consumption

2500
2000
1500
Biogas Photovoltaic Wind
1000
500
0 1
Source: ANME
Scenario Analysis
Solar water heating A strategic study on renewable energies by ANME reveals that, according to a proactive scenario of solar water-heater growth, the aggregate solar water heating area installed in Tunisia could increase by 300,000 m2 in 2011, about 1 million m2 in 2020 and 2.2 million m2 in 2030.
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Scenario for solar water-heater growth
Source: ANME - Strategic Study
Such a proactive development would generate major impacts in energy, environmental, economic and social terms: An aggregate primary energy saving in the order of 160 thousand toe in 2010, 700 thousand toe in 2020 and 2 Million toe in 2030 ; An aggregate emissions reduction of about 0.4 MTeCO2 in 2010; 1.7 MteCO2 in 2020; and 4.5 MTe CO2 in 2030. Both the Tunisian situation and international experience reveal that a growth in solar water heating and its introduction into the market cannot be achieved without the benefit of financial support, tailored to support market penetration. Wind energy Based on the evaluation of the wind energy potential in Tunisia, a strategic study on renewable energies reveals that, according to a conservative scenario of wind energy development, installed capacities should reach 310 MW in 2010; 1130 MW in 2020; and 1840 MW in 2030. This scenario allows for a significant development with a more gradual rise in investment. According to this scenario, power production based on wind energy would be around 2.8 TWh in 2020 and 4.6 TWh in 2030. The primary energy saved per year would be 0.7 Mtoe in 2020 and 1.2 Mtoe in 2030. The CO2 emissions annually avoided would be 1.5 million tons in 2020 and 2.8 million tons in 2030. In aggregate terms, the primary energy saved would be in the order of 0.9 Mtoe in 2010, 5.5 Mtoe in 2020 and 16 Mtoe in 2030. The aggregate reduction of emissions would be about 2 MTe CO2 in 2010; 13 MteCO2 in 2020; and 37 MTeCO2 in 2030.
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Evaluation of the installed wind energy capacity between 2000 and 2030
At the moment the ANME programme aims at developing wind energy for power production. In particular ANME wants to install, via STEG (National Electricity Distribution Utility), a 20-MW plant in Sidi Daoud (in north-eastern Tunisia) which will be scaled up to a capacity of 55 MW and begin a capacity building programme (i.e. Wind Atlas, Dedicated Legal Framework, etc). Solar energy As regards the development prospect sector, the countrys small surface area, the growth rate of the electrical power network, mean that the rural photovoltaic electrification potential is limited to about 6,000 households (whose cost of connection to the network is over 5000 Dinars) with a power supply of about 600 KW. Including other applications, such as pumping, the potential by 2010 would amount to 3.5 MW. However, there may be opportunities for a much greater potential by 2020 and 2030, through the creation of a real market by the establishment of electrification programmes alongside the national programme, the equipment of a reasonable number of surface wells with solar pumps, as well as the development of new applications, such as water desalination. In order to support the creation of this market, a photovoltaic modules assembly plant need to be established and it is also important the improvement of the services provided by private companies to ensure the maintenance of present and future installations. The quantitative impacts of such a programme, in terms of energy saving and reduction of greenhouse gas emission (GHGs), are obviously quite small. Several factors need to be taken into consideration for a proper evaluation of the impact of the development of the photovoltaic energy sector: the first factor is the scope of the service provided: for scattered housing, this energy contribution has a great importance when equipping households, schools and community clinics (dispensaries); water pumping is a vital need, and solar pumps are particularly well-adapted to this; photovoltaic energy may prove to be, within a few decades, one of the energy techniques depicting a solar civilisation, and it is appropriate that Tunisia, a pioneer country in energy efficiency, should remain somewhere at the leading edge of progress. Biomass
Biogas
Given the lack of market for locally produced gas and seeing that the supply of such gas is not likely in the near future, the optimal solution for the development of biogas is its use for power production. It is also worth emphasising the importance of the capitalization of waste and the use of biogas in the reduction of greenhouse gases emissions (GHGs).
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The quantitative objective for power production based on biogas is to reach an installed electrical power capacity of about 30 MW in 2010; 50 MW in 2020; and 80 MW in 2030 (i.e. 90% of the estimated potential).
Scenario for the development of biogas
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2.3 SWOT ANALYSIS

For a better understanding of the country's energy situation and the potential investment target, a SWOT analysis has been provided. In general, the SWOT analysis represents an essential instrument for making strategic decisions. The technique comes from the world of business marketing, where it is used to analyse product-positioning taking into account market conditions and competitiveness. Competitiveness analysis results from the combination of the different elements of analysis relating to the product (points of strength and weakness, areas of threats and opportunities). Weaknesses In the Tunisian context, as in most developing countries, the cost/benefit analysis largely penalizes energy conservation because energy is subsidized for end-users. For example, in 2006, for every toe of energy consumed in Tunisia, 172 Tunisian Dinar were granted in subsidies, i.e. 27% of the economic cost of a Toe. Energy conservation is further penalized as it involves investments aiming at reducing operating costs (increased efficiency and competitiveness), unlike traditional investments that aim at boosting production or productivity (increased market shares). With subsidized energy prices, production-oriented investments usually have better financial results than energy efficiency investments. Furthermore, economic operators and households generally favour production-oriented investments in their core business, even if profitability is lower or if the payback period is longer. Investment in energy conservation is seldom a corporate or household priority. Lastly, the financing of energy efficiency projects faces obstacles which are difficult to overcome: selffinancing is usually insufficient and/or allocated to production-oriented investments, and commercial banks are generally reluctant to finance projects that are relatively small, diffused, difficult to evaluate and which do not generate any apparent cash flow. The terms offered and the guarantees requested for such loans are much less advantageous than for production-oriented loans, and act therefore as a disincentive. Risk premiums and transaction costs are sometimes very high due to the inadequate financial instruments available. Tunisia currently finds itself in a quite paradoxical situation: (a) the stakes, the potential and the financing needs of energy management have been well identified, studied and analyzed and (b) resources allocated for implementation, and financing in particular (despite the significant liquidity of the financial system), are far below the needs required to deal with the challenge of expensive energy. Despite the large potential market for energy efficiency investments in the industrial sector, there are inherent commercial barriers to both the implementation and financing of efficiency improvements in Tunisia, reflected in the fact that no significant portion of that market has developed up to now. These include: lack of project financing on reasonable terms for energy efficiency projects, due to commercial financial institutions unfamiliarity with assessing energy efficiency investments, limited interest by the banking sector in familiarizing themselves with the associated risks, the relatively small investment sizes and high transaction costs, end-users reluctance to invest in projects with unknown and untested performance; inadequate information/expertise from end-users on potential efficiency improvements, actual performance of efficiency measures, low cost measures, access to new technologies/practices, etc; poor prioritization of customers for energy efficiency projects because of lack of knowledge about the potential benefit of such projects compared to other investments, or no institutional incentive to prioritise such projects, for example through taxes on pollution. high project development costs, which may involve extensive auditing that is only eligible for partial ANER support or potentially supported by an ESCO market that is currently still too weak; Production priority bias in the industrial sector, where there is an inherent incentive to focus on production enhancement investments and not to operate cost reductions, despite the incentives provided by the PMN for measures that enhance competitiveness. Collectively, these issues have discouraged private sector interest and prevented meaningful investments in efficiency measures.
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Lack of expertise of the consultants working in many industrial areas on cost efficiency improvements, which makes the end-user uncomfortable with the implementation of the EE projects. To remove some of these implementation barriers to energy efficiency investments, the MOIE has requested GEF support to assist in the development of an energy efficiency program for Tunisian industrial sector. Among the many mechanisms that could be used to help developing this market, it appears that the development of credible ESCOs with an adapted financing mechanism would be one of the most productive option based on the barriers identified and the experience of the last twenty years in Tunisia. The main reasons for this are: ESCOs have a unique capability to bundle and implement several small energy efficiency investments on a turn-key basis, that actual stakeholders are unwilling and/or unable to do themselves; ESCOs may be better able to access commercial financing to implement such projects, due to their willingness to package small investments, isolate project cash flows, and bear the performance risk of the entire project, thus addressing, in part, barriers (a), (b), (d) and (e) above; ESCOs would bring improved technical expertise and facilitate access to more modern energyefficient technologies as well as offer potential to achieve additional equipment cost reductions by packaging a number of similar investments and procuring high-efficiency equipment in higher quantities. Threats Despite the large potential market for the renewable energy, there are some important threats:
Tunisian Government could choose to keep on supporting gas and oil sector to avoid the decrease of foreign investments in this sector, to the detriment of renewable energies The contribution of RE in the energy balance remains limited due to the less competitiveness of these energies compared to conventional ones. The Tunisian government will not adapt a clear institutional and regulatory framework for wind energy. An inadequate institutional capacity within the Tunisian government in managing and coordinating energy politics.
The bad perception of energy opportunities offered by the new ESCOs to end-users. The confirmation of the ability of the existing and newly created ESCOs to enter the energy market with sufficient capability to design and implement a range of efficiency improvements Strengths Tunisia has a long tradition in energy conservation and a well-established policy, legal and institutional framework for energy efficiency and development of indigenous resources. In particular, Tunisia has been a pioneer among developing countries in terms of energy management policy, having formulated and implemented a policy for rational use of energy and promotion of renewables as early as 1985. The energy intensity stopped increasing in the 90s and since then has declined to the lowest level in the MENA region. However, the intensity remains high compared to some other Mediterranean countries, such as Greece and Portugal. Moreover, energy expenditure/consumption valued at international energy prices accounted for 12% of GDP in 2006, which is a high level compared to industrialized countries (they amount to 4% of GDP in Japan and 7% in Greece). A strategic position and a good integration in Arab and Maghreb markets. Less than three hours flying time from major European and Middle East cities, Tunisia is a preferred destination for those seeking a foothold in this 800 million consumer market. Moreover, Tunisia is tied to Maghreb and Arab countries by preferential agreements. Bilateral agreements have set up free-trade zones with Turkey, Egypt, Morocco, Jordan, Iraq and Libya to govern trade with these countries; A regional agreement was signed in 1998 to set up an Arab free-trade zone; Jordan, Egypt, Morocco and Tunisia signed the Agadir free trade agreement in 2004.
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A stable country and an investor-friendly incentive system, Tunisia is blessed with sound economic and social stability, as reflected in a number of indicators. In particular, the energy efficiency fund (FNME) subsidises investment in the energy sector. This system developed into a National Fund for Energy Conservation (FNME), subject to Law N 2005-106, dated 19th December 2005. It represents a quantum leap towards the provision of an extra-budgetary resource for financing public support to energy conservation investments in Tunisia. The rates and amounts of the allowances granted by this Fund, as well as the terms and methods of their granting, were established by Decree N 2005-2234, dated 22th August 2005. The innovation introduced by this law relates to how the Fund is replenished: A duty levied on the first registration of private cars, at a rate set by the Law at 250 to 1000 TND (for petrol-powered cars), and 500 to 2000 TND (for diesel-powered cars), with a certain number of exemptions; An import or local production duty, excluding export of air-conditioning equipment, at customs duty rates of 10 TND for very 1,000 thermal units.
Favourable Geo-Climactic Conditions. Tunisias consistently hot climate, high wind speeds and abundance of agricultural land give it a competitive advantage in renewable energy production. Moreover, its proximity to European energy markets and energy-equipment manufacturers make it an attractive investment opportunity; Wind energy sector enjoys considerable interest. The "On Shore" wind potential in Tunisia is estimated, according to preliminary studies, at 1000 MW with an average produced energy of about 3 MWh per year, by kW installed. Different studies have highlighted around fifteen sites for implementing wind projects. There is a potential of about 300 MW, with annual average wind velocities between 7 and 10 m/s. High-Intensity Solar Radiation and long hours of sun operation. The high intensity of direct solar radiation (2,000-2,200 KWh/m2) in Tunisia shows great potential for solar energy development. Every year, Tunisias primary locations offer 2,200 or more hours of solar operation, compared with maximum European figures of 1,900 in Spain and Greece, the next-closest countries. The Government of Tunisia has a well-established experience in business co-operation among companies of Energy sector (ENI, BRITISH GAS, ect..). Opportunities Despite some investment barriers, Tunisia is a land of opportunity. In particular: Tunisia has a significant Greenhouse Gas mitigation potential, which could be tapped via Clean Development Mechanism (CDM) projects under the Kyoto Protocol. This mechanism offers the possibility of selling Certified Emission Reductions (CERs) to private or public foreign investors, which would use them to meet their GHG commitments under the Kyoto Protocol. For project proponents, CER revenues resulting from CDM registration will confer an additional attractiveness upon GHG reduction projects, and thus a real incentive to implement effectively the projects. By improving the financial performance of projects, the CDM presents, as far as developing countries are concerned, an additional impetus for national investments as well as Foreign Direct Investments and the transfer of clean technologies. Acknowledging the opportunities offered by the CDM and its related stakes, Tunisia has taken several steps to promote the set-up of CDM projects in the relevant sectors and, more particularly, in those offering the greatest potential for GHG reduction. On the institutional level, Tunisia established a Designated National Authority (DNA) in December 2004 for the approval of CDM projects. In addition, the Ministry of Industry, Energy and SMEs (MIEPME) created a CDM Task Force, in December 2005, whose mission was to promote the implementation of CDM projects in the energy and industry sectors. The results of the work conducted by the CDM Task Force were a project portfolio of 76 projects, divided into five main fields: energy efficiency, renewable energies, fuel switching, other energy projects and industrial processes. Investments opportunities, new public and private projects as expected in Tunisian Solar Plan (40 public-private projects).
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The raising of oil price and fossil fuels will make the use of renewable energies and its market more competitive. The presence of international high pressures and institutional commitments to reinforce the use of renewable energies and the reduction of CO2 emissions.
The opening of the Energy market and the processes of liberalization the Tunisian Government has already put into action.
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SWOT ANALYSIS TABLE Strengths

1. A strategic position and a good integration in Arab and Maghreb markets. Tunisia is a border country between Africa and Europe and represents an important link for electric network in the Mediterranean. Tunisia is tied to Maghreb and Arab countries by preferential agreements. Tunisia is a stable country and it has important tax and financial incentives. The incentive system regards foreign and local investments.
Weaknesses
1. 2. Lack of financing project on reasonable terms for efficiency energy projects. High development project costs. In particular, very high costs of certain sections of energy effectiveness and renewable energy sources. In the Tunisian context, the cost/benefit analysis largely penalizes energy conservation because energy is subsidized for end-users. Current low prices of conventional energy sources, which remain below international prices. Poor prioritization efficiency projects. of customers for energy
3.
2.
4. 5. 6.
3. Favourable geo-climatic conditions. Tunisias constant hot climate, high speed wind and abundance of agricultural land give competitive advantages in renewable energy production. In particular, different studies have highlighted around fifteen sites for implementing wind projects. Tunisia has highintensity Solar Radiation and long hours of sun operation. 4. A well-established experience in business cooperation among companies in Energy sector (ENI, BRITISH GAS, ect..)
Absence of adequate institutional and statutory framework allowing a large-scale diffusion of mature technologies. Lack of consultants expertise. Lack of a credible ESCOs with an adapted financing mechanism. Inadequate information/expertise. Insufficient information, awareness and promotion among potential public and private users.
7. 8. 9.
Opportunities
1. Tunisia has a significant Greenhouse Gas mitigation potential which could be tapped via Clean Development Mechanism (CDM) projects under the Kyoto Protocol (the projects portfolio comprises 76 energy projects). Investments opportunities, new public and private projects as expected in Tunisian Solar Plan (40 public-private projects). The raising of oil price and fossil fuels will make the use of renewable energies and its market more competitive. The presence of international high pressures and institutional commitments to reinforce the use of renewable energies and the reduction of CO2 emissions The opening of the Energy market and the processes of liberalization the Tunisian Government has already put into action.
Threats
1. Tunisian Government could choose to keep on supporting gas and oil sector to avoid the decrease of foreign investments in this sector, to the detriment of renewable energies. The contribution of RE in the energy balance remains limited due to the less competitiveness of these energies compared to conventional ones. The Tunisian government will not adapt a clear institutional and regulatory framework for wind energy. An inadequate institutional capacity within the Tunisian government in managing and coordinating energy politics. The bad perception of energy opportunities offered by the new ESCOs to end-users. The confirmation of the ability of existing and newly created ESCOs to enter the energy market with sufficient capability to design and implement a range of efficiency improvements.
2.
2.
3.
3.
4.
4.
5. 6.
5.
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2.4 INVESTMENT OPPORTUNITIES

The national strategy for developing renewable energy sources consists on the following main orientations: The distribution on a large-scale of renewable energy technologies, in particular the thermal solar for water heating, and the photovoltaic for rural electrification; The creation of a market favourable to the promotion of renewable energy sources; The elaboration of a national strategy regarding Scientific Research, which ensures the development of renewable technologies in order to reduce costs and improve competitiveness; The encouragement of private investments in the renewable energy sector to develop a local market and create new jobs.
To attain these aims have been set up short and long-term. In the short-term, the presidential decisions should be carried out to let the adaptation of the institutional framework and capacity building. In the longterm, the ten-year programme intends to develop renewable energy sources on a commercial basis, i.e. solar heaters and wind power for electricity production. The main parts of this programme, which should be implemented by 2010, are the following: The electrification of 15,000 to 20,000 homes to raise the 100% rate in rural areas; The installation of solar cells over an area of 300,000 m, so to increase the amount of solar energy used in heating sanitary water; The installation of 200-MW wind parks, thus increasing the amount of wind power in the electrical production capacity from 0.1% to 6%; The development of biogas using organic waste both on a familiar and industrial scale, which will allow a contribution to energy of 100 Ktep; A large-scale distribution of lights to homes with improved living conditions, which will allow energy savings of 300Ktep a year, starting from 2010.
In this context and in the last few years, foreign investment increased in high added value industries for which Tunisia has significant comparative advantages. Direct foreign investments, FDI, have an important growth. In 2008, they represented 20.8 % of productive investments, 6.5 % of the GDP, 50 % of foreign capital inflow and account for 20 % of newly created jobs. Tunisian political, economic and social stability and its business environment improvement contributed to achieve these positive results due to numerous carried-out reforms. Investors appreciate its stability and geographic proximity to Europe. An investment law and other funding instruments provide additional incentives. In the energy sector 58 foreign companies or joint capital were operational in Tunisia at the end of 2008 employing 3.500 people. They are earning profits and developing their activities. The number of expanded operations increases every year. Several major groups have intensified their presence and increased the number of factories over the past years. Here some important investment opportunities: Electric Power Plant in Al-Haouaria region The projects objective is to construct a combined-cycle electric power plant with a total capacity of 1,200 MW, of which 800 MW will be exported to Italy within the framework of Tunisian-Italian energy cooperation. The plant will be a 1,200 MW combined-cycle power plant situated in Al-Haouaria. Implementation will take place over the period 2010-2015: 400 MW for the Tunisian Electricity and Gas Company (STEG) with which to supply the local market; 800 MW for export to Italy via the connection to Sicily (Italy), as per the standing agreement. The total cost is expected to be 1,900 million Euros. The duration of the concession is 20 years. Progress of the project: A Tunisian-Italian joint study and development company (Newco1) was created with a capital of 2.7MD (50% for each partner). Launch of the pre-qualification tender in June 2009. Call for tender for the selection of the production rights contractor in Tunisia in early 2010.
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Bizerte Power Plan The project is to construct a combined cycle power plant with a capacity of 1,200 MW. The Ministry of Industry, Energy and Small and Medium Enterprise, proposes to pre-qualify potential promoters for achievement concession (BOO) a combined cycle power plant 350 to 500 MW including the operation of the plant for twenty years, with an optional second tranche of the same power. The plant will be located in the north of Tunisia. Commissioning Business must take place during the second quarter 2014. Gas natural fuel based power plant will be supplied by STEG, which also will buy the electricity produced. Proponents are invited to submit an offer pre-qualification. Tenders will be evaluated on promoters experience in the development, financing, construction and Exploitation concession, similar projects. Only pre-qualified candidates will be invited by the Department to meet the restricted tender. The total costs of the project will be TD2bn ($1.5bn). The Ministry aims at selecting a preferred bidder for the contract by March 2010 and making a contract award in January 2011. The winning bidder will develop the project on a build-own-operate basis under a 20-year concession. The foreign developer must collaborate with a local company, which will hold a minimum stake of 35 per cent in the project company. State-owned utility Tunisian Electricity and Gas Company (STEG) will supply the gas feedstock for the plant and buy its power output. Although Tunisia has a number of natural renewable energy sources, they remain largely untapped and renewable energy projects are not widely established across the country. However, this may change following the Tunisian governments commitment to diversify its power generation portfolio through investments in renewable energy and in particular in wind and solar power capacity. Wind power Studies indicate that Tunisia can produce 1,000 MW of wind power with many parts of the country, in particular the coastal regions, averaging wind speeds exceeding 5-6 m/s. At present, Tunisia has one 20 MW wind farm in Sidi Daoud near El Haouaria in the north east of the country. The government has pledged US$18 million for developing wind power projects. In addition, the German technical co-operation agency GTZ will contribute US$1.26 million to prepare aero-generators, electrical material and civil engineering tasks. Spain, one of the global leaders in wind technology, has also repeatedly expressed interest in developing Tunisian-Spanish cooperation in this field. By the end of 2010, Tunisia expects to add an additional 120MW of wind energy from new wind plants at Sidi Daoud, at a cost of 44.5 million and Metline and Kchabta in the Bizerte region, at a cost of 273 million. Gamesa, the Spanish wind turbine manufacturer, is supplying STEG with 91 turbines, worth 200 million, for its wind plants in Bizerte. The Spanish Development Aid Fund will finance the project, which is set to become Tunisias largest wind-power facility. Once these new plants come on-line, it is expected that wind production will supply up to 5 per cent of national energy requirements. Solar power In Tunisia, solar energy capacity has increased from 8,000 square meters of solar panels in 2004 to 80,000 square meters in 2008. The Ministry of Industry, Energy, Small and Medium Enterprises announced in February 2009 that he is preparing legislation to increase the incentives given to owners of households who use solar energy. Tunisian Solar Plan Tunisia was one of the foremost countries in the region to adopt the Mediterranean solar plan. The Tunisian solar plan includes 40 projects in solar energy sectors, wind energy and underwater electrical interconnection between Tunisia and Italy. As part of the global network of renewable energy promotion programs, Tunisia's solar plan will benefit from the Mediterranean Solar Plan and World Bank funding. Its overall cost is estimated almost 3600 million dinars (2.000 M). The estimated costs will be share between: 260 MD (145 M) from the National Founds to the Renewable Energies; 800 MD (445 M) from public sector (STEG) 2 500 MD (1390 M) from private investors 40 MD (20 M) from the Mediterranean Solar Plan and World Bank.
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Among the 40 projects retained between 2010 and 2016 within the framework of the Tunisian solar plan, 29 will be achieved by the private sector. The public sector will realize 5 projects and the Tunisian gas and electricity company (STEG) will be entrusted with 3 solar energy projects. These projects will enable energy savings of 660 kilotons of petrol equivalent per year representing 22% of the total production of energy by 2016. Moreover, they will also prevent the emission of some 133,000 tons of carbon dioxide. The setting up of Tunisia's solar plan also represents a long-term economic strategy and a real employability potential. Among the projects that Tunisia is undertaking in the sector of solar energy, there is Zarzis Djerba Eco-solar Village, which stretches over a surface of 9167 square kilometres and which will be able to produce enormous quantities of energy. This solar eco-village will be soon operative in Zarzis-Djerba (Tunisia): ready in a scale model - produced by Scolartech-south - the Technopark, specialized in renewable energy, will start working very soon. The National Agency for Energy Conservation (ANME) is the promoter of the project. With an investment amounting from 130 to 160 million dinars, the "Zarzis Djerba Solar EcoVillage" aims to create more job positions, produce renewable energies and desalinate seawater to generate sustainable revenues and promote organic farming, as reported African Manager. The target is also to become a training platform for Africans by developing organic farming, offering investment opportunities to generate sustainable revenues and assets, and accordingly bring about a kind of economic training for the entire region. In particular the project has five major components, according to a development oriented mutual enrichment, complementarity and synergy between them: (1) A space dedicated to research and innovation. This space is supposed to accommodate research centres and laboratories in conjunction primarily with renewable energy. (2) A space for innovative companies. This space is supposed to host Tunisian and foreign companies in the sector of innovative technologies related to renewable energy. (3) A space for training. This space is supposed to receive training institutions to meet the business needs of the village, but also the needs of the national economy in general, qualified personnel, always in the field of renewable energy and related specialties (welding, carpentry, glass processing, electronics, construction, etc.) (4) A space for experimentation. This space will be dedicated to testing equipment and processes developed within the village, as well as agronomic experiments in order to better exploit opportunities offered by technologies that are developed. The aim is to produce agricultural products with high added value, consistent with the specificities of the region. (5) An industrial zone. This area would replace the industrial zone of Zarzis, programmed in the 10th and 11th plan, which could not be materialized due to lack of building land in town. This industrial zone would be dedicated to nonpolluting activities, complementing the activities of the village. The Timing estimates of the projects are: - Before the end of 2009 : constitution of the research and monitoring firm - 2010: Technical studies and closure of the financing scheme - Q1 2011: launch of bidding works - Q2 2011: Commencement of work of the first tranche of the village - During 2012: Installation of the first companies on the site. In April 2009, STEG announced the launch of a series of new investments in the solar energy sector including the establishment of Tunisias first concentrated solar plant with a capacity of 25MW in the south of the county. The government plans to launch a tender for international companies to carry out feasibility studies. Germanys KfW will contribute 1 million to finance the studies. Construction is scheduled to be completed by 2014. The DESERTEC concept The DESERTEC concept is a supranational grid project, which would see a new era of renewable energy distribution between Europe and the MENA region whereby renewable energy generated in the MENA region is brought to European markets. It aims to do it using high-voltage direct current (HVDC) transmission lines, which make long distance transmission economically feasible (with only 3 per cent power loss per 1000
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kilometres). A principal driver for the concept is the vast renewable sources of energy in the MENA region, particularly solar. The DESERTEC concept is at an early stage and it would depend on the expansion of renewable energy projects in countries such as Tunisia, Algeria and Morocco. On 13 July 2009, market leaders in the renewable industry signed a memorandum of understanding to establish the DESERTEC Industrial Initiative (DII) with the objective to analyse, develop and evaluate the technical, economic, political, social and ecological framework required to make carbon-free power generation and the DESERTEC supergrid in the EU-MENA region possible. The founding companies of the DII are: ABB; ABENGOA Solar; Cevital; Deutsche Bank; HSH Nordbank; MAN Solar Millennium; Munich Re; M+W Zander; RWE; SCHOTT Solar and Siemens. Map of the DESERTEC Concept for the EU-MENA region
(DESERTEC Foundation. www.desertec.org) Energy Efficiency Project The objective of the Energy Efficiency Project for Tunisia is to scale up industrial energy efficiency and cogeneration investments, and thereby contribute to the government's new four-year energy conservation program. The project concept was designed to provide an integrated technical and financial analysis of enduse projects to be financed by Participating Financial Intermediaries (PFIs). To avoid lengthy and cumbersome application processes for projects that commercial banks will not be interested in financing, the National Agency for Energy Control (ANME) will work closely with PFIs to pre-screen projects for financing. This set-up will also allow the integration of Energy Efficiency, Renewable Energy Fund (FNME) subsidies and other grants and loans from different sources in the financing plan of each project, therefore avoiding that projects do not reach financial close because of lack of one of the components of the financing plan. Technical assistance might be useful to complement lines of credit to provide support to Financial Intermediaries (FIs), Project Implementation Unit (PIU), and developers of sub-projects. However, ANME already has very strong capabilities and resources allowing it to provide the support required to PFIs in the area of business planning and sub-project evaluation. It also benefits from technical assistance from various sources that aims at supporting skill enhancement or capacity building in matters related to financing of Energy Efficiency (EE) activities. Finally, a strong pipeline of identified sub-projects already exists. Other sources of financing will eventually arise for complementary technical assistance and they will mainly focus on: (a) the training and the capacity building of commercial banks in the area of energy efficiency and cogeneration; (b) providing support to project developers in the preparatory studies and business development, including technical and financial feasibility studies; and (c) support for targeted awareness and training efforts to pipeline development efforts.
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Energy Efficiency and Biomass Project Tunisia has a significant potential for energy recovery from biomass. Biomass production in the country was estimated at about 6 million tons/year in 2009: 2.2 million tonnes of household waste; 2.2 million tonnes from farms and agro-industry; 1 million tonne from olive oil processing; 400,000 tonnes from poultry droppings; and 200,000 tonnes from waste water treatment. The Government of Tunisia has a policy to improve energy efficiency and increase the role of biomass. The Projects biomass Component focused on rural/agro-business production of biomass (farms and agro-industries, olive oil processing, poultry droppings), i.e. 3.6 million tonnes or 60% of the total biomass capacity in Tunisia. The Projects Biomass Components II (co-financing a Biomass power plant in a farm) and III (TA) aimed at reinforcing existing capacity and providing analysis and knowledge on biomass in the country. The project development objectives were to: (i) facilitate the disbursement of the existing energy efficiency credit line of US$55 million to three commercial banks; (ii) pilot biomass demonstration project in the rural/agro-business sector, and (iii) provide capacity building for biomass development in Tunisia. The project contributed to Tunisia's higher level objectives of increasing energy efficiency using alternative energy sources, including biomass. The Project had four components: Component I: Capacity Building and Market Outreach for EE Credit Line: This component supported the WB EE/Cogeneration Credit Line Project (P104266 - approved by the Bank Board on June 30, 2009) by providing (i) technical training and capacity building to the participating commercial banks and the ANME (National Agency for Energy Management) in the area of energy efficiency and cogeneration, including biomass generation/cogeneration; (ii) supported subproject developers in the industrial sectors assisting them in the preparation of required financial documents (financial studies and business plans), as well as during subproject implementation; and (iii) supported for targeted awareness and training efforts. Component II: Pilot Biomass Power Plant: This component supported the co-financing of a biomass power plant selected by the Ministry of Environment and Sustainable Development (MESD) and approved by the World Bank. The selected project provided an example (from reserves, technology and financing structure points of view), so as to encourage other financiers to participate in its funding in a successful and timely manner. The beneficiary farms were proposed by the MESD, according to a number of sustainability criteria such as availability of biomass resource reserve, economic and technical feasibility of the plant, and successful completion of social and environmental safeguards screening procedures. Component III: Biomass Feasibility Studies and Institutional & Capacity Building: The main purposes of this Component were to (i) finance detailed business plans and execution studies and preparation of request for funding proposals of the selected farm for direct GEF funding and 3-4 other farms; (ii) provide assistance to co-financing research for the 4-5 biomass projects; (iii) prepare a biomass energy production master plan for Tunisia including aspects uncovered by existing studies and analysis such as identification of optimum project and technology structures for Tunisia, and training and dissemination activities to target sector/project stakeholders (farms, local governors, private sector representatives and public authorities, etc.). Component IV: Project Management: In addition to the above components, the GEF funds were utilized for supporting project management to the extent of less than 10% of total costs. Project management at the level of the PIUs (including management of the WB Credit Line) was estimated around US$1.99 million, of which US$190,000 were funded by Global Environment Facility (GEF) funds and US$1.8 million by Tunisian public funds. In this context, energy efficiency efforts of the Government of Tunisia have benefited from several sources of support over the years, particularly as related to Market Transformation and Labeling of Refrigerators (UNDP), Experimental Validation of Building Codes and Removal of Barriers to Their Adoption (UNDP), Credit Line for Environmental and Energy projects (Agence Franaise de Dveloppement), Development of an Energy Efficiency Program for the Industrial Sector/PEEI (World Bank/GEF), and the recently approved Energy Efficiency/Cogeneration Credit Line to Commercial Banks Project (World Bank). The proposed Energy Efficiency and Biomass Project is complementary to these previous World Bank EE projects (PEEI and EE/Cogeneration Credit Line). The US$55 million WB EE/Cogeneration Credit line was
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approved by the WB Board in June 2009 and made effective in February 2010. It is intended to address the barriers to scaling-up EE/cogeneration investments, and expected to mobilize US$55 million of additional financing from subproject sponsors, commercial banks and the Government of Tunisia, so that total investment under this project would reach an estimated US$110 million. The proposed Project will finance technical assistance to support this EE/Cogeneration Credit Line, and also assist the development of biomass potential in Tunisia. The Banks involvement into the proposed Project can be justified as follows: (i) it will reinforce the existing EE/Cogeneration Credit Line project through TA - Techinical Assistance, and (ii) it will support a new type of cogeneration fuel, biomass. The proposed Project, including TA support to the WB Credit Line, will scale up the previous work in industry, and will seek to address areas not sufficiently covered by the previous activity, including biomass. So far, the industrial capacity building activities of the PEEI project have been successful and have generated a steady pipeline of good EE subprojects, including the subprojects that have already been approved for receiving the GEF investment grant, as well as a sizeable amount of new subprojects. The proposed Project is intended to support the efforts to manage energy demand and reduce carbon emissions, while developing the biomass potential as an alternative to conventional fossil fuels in Tunisia1. It contributes to: (i) the promotion of energy efficiency/cogeneration through facilitation to disbursement of existing WB EE/Cogeneration credit line to commercial banks, and (ii) the development of biomass potential with implementation of a pilot project and capacity building activities through technical assistance, direct investment and capacity building. The EE Technical Assistance Component of the proposed Project was already considered during preparation of the Credit Line, but the allocation of GEF funds has been delayed and hence the TA has been included into the proposed EE and Biomass Project. This was not seen as a major issue in the short term, as existing capacity is already significant in Tunisia, but the proposed TA will be a key element to allow efficient and prompt disbursement of the Credit Line. The project will be implemented by the ANME and the implementation completion will be in December 2013. CDM Projects Portfolio in the Energy and Industry Sectors in Tunisia Since the coming into force of the Kyoto Protocol on 16th February 2005, the Clean Development Mechanism (CDM) has reported significant progress in Tunisia. Acknowledging the opportunities offered by the CDM and its related stakes, Tunisia has taken several steps to promote the set-up of CDM projects in the relevant sectors and, more particularly, in those offering the greatest potential for GHG reduction, namely the energy and industry sectors which account for over 60% of the national emissions. On the institutional level, Tunisia established a Designated National Authority (DNA) in December 2004 for the approval of CDM projects. Besides, the Ministry of Industry, Energy and SMEs (MIEPME) set up in December 2005 a CDM Task Force whose mission is to promote the implementation of CDM projects in the energy and industry sectors. The Projects portfolio comprises 76 projects that are interesting for new investment in Tunisia for the period 20072011. In total, assuming the implementation of all the identified projects, the aggregate CDM projects portfolio for the abovementioned five fields of activities would avoid the emission of about 107 million tCO2e from 2007 to 2031, which represents the total crediting period of all projects. Approximately 27 million tCO2e of these emissions, i.e. a quarter of the CERs potential, would be achieved by the end of the Kyoto Protocols first commitment period (2012). The Project of Development of Renewable Heating and Cooling use in the Tertiary sector The objective of this project is to identify the existing barriers for renewable energy development in Tunisian hotels and produce an integrated policy structure for their development, highlighting the potential for ESCO's project development. Its main activities and outputs are, to: Define the legislative and financial background regarding renewable and energy in general;
1
CPS for Tunisia for FY10-13, Report No. 50223 TUN.

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Develop a catalogue of state-of-the art technologies appropriate for the region; Conduct technical and economical analysis of renewable energy applications for hotel heating and cooling uses; Identify the main aspects (obligations and benefits) of renewable energy policies; Develop guideline policy in hotel sector; Complete detailed analysis for the implementation of renewable energy installations following an ESCO model; Spread information through activities such as conferences, published articles and direct mailers. Expected impacts are: Innovative solutions for renewable energy applications involving both heating and cooling needs; Reduction of primary fossil fuel energy consumption and thus the environmental impact of such energy generation with a focus on the significant reduction in the summer electric load; Adoption of appropriate policies and strategies for renewable energy development at different levels (local, regional, national); Definition of positive financial conditions for the development of renewable projects, in particular regarding the implementation of projects with an ESCO model (based on Energy service contract);
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2.5 SUCCESS STORIES

BRITISH GAS British Gas is the major operator in Tunisia because it has worked there for more than 15 years, with investments of more than USD 900 million. B.G. TUNISIA is the most important company in Tunisian gas market, providing more than 50% of domestic demand. Production comes from the Miskar offshore fields in the Gulf of Gabes. Crude gas is piped to the coast south of Sfax where it is processed at the Hannibal plant and sold to the Tunisian Electricity and Gas Company (STEG). British Gas production in Tunisia goes mainly to the national energy supply network. Apart from the gas field, where B.G. TUNISIA is the only operator, the company is exploring and producing gas in the Gulf of Gabes under other licenses in collaboration with the Tunisian Oil Activity Company (ETAP). The major energy source for producing electricity in Tunisia is natural gas. In 2003, it met 44% of the countrys energy needs and its consumption is growing from 5 to 6% a year, representing an opportunity for national production development of natural gas. British Gas produces 136 million barrels of oil, which is equivalent to a year throughout the world. Tunisia provides about 10% of the groups production with about 12 million barrels of oil equivalent and its priority is to develop energy production capacities. There is an investment program involving several million US dollars to build the BARCA electrical power plant and to increase capacity to use piped gas. This program will allow to tap new resources in the fields of the Gulf of Gabes, to use non refined gas and to improve national resource energy profitability. The development of liquid gas production will reduce imports. B.G. TUNISIA, in partnership with the Tunisian Government, is carrying out a strategy of integrated development of energy production chain. This partnership, which is a model in more than one way, permits to stabilize the countrys autonomy in energy and contribute to lower energy prices. In short, it improves Tunisias international competitiveness. B.G. TUNISIA actively supports local projects, which also target environmental concerns.USD 500,000 is available for joint initiatives with local structures working in training and other schemes to get people established on the job market. For example, British Gas has provided a bus equipped with computers that goes around rural areas providing extension services. The aim of the project is to let children familiarize with computers and to demonstrate the environmental advantages of using natural gas. ENI SpA Eni has been involved in Tunisia since 1960 when a Convention was signed between the Tunisian government and Agip. In 1961 Socit Italo-Tunisienne d'Exploitation Ptrolire (SITEP) was set up in a joint venture with the state-owned ETAP. In September 1961, SITEP obtained a concession and began exploration activities. In 1964 the El Borma oil field was discovered in the Sahara, approximately 800 kilometres south of Tunis, and it subsequently proved to be a giant deposit with over 1 billion barrels in reserve, making it the biggest in Tunisian history and one of the main oilfields in the Sahara. Since its discovery, intense exploration and production operations have been carried out, leading to the development of the potential hydrocarbon resources that after more than 40 years are still being exploited. In 1960, Eni and the Tunisian government set up Socit Tunisienne Italienne de Raffinage (STIR) as a joint venture for the construction of Biserta refinery, which entered service in 1964, while in 1975 Enis stake in the refinery was sold off to the Tunisian government. At the end of the 1980s, Socit Mediterrane Bitumes was set up, with Eni holding a 34% stake. In the gas sector, between 1977 and 1983, Eni constructed the Transmed gas line, which crosses Tunisia and links Algeria to Italy. This gas pipeline represents one of the most complex projects ever constructed and its capacity was doubled between 1991 and 1994. The Tunisian stretch of the pipeline is called the Trans Tunisian Pipeline Company (TTPC) and comprises two 48-inch-diameter pipelines and three compression stations at Ferina, on the Algerian border, Sibikha and El Haouaria, at capo Bon. The construction and running of the gas pipeline project resulted in the setting up of Socit Pour la Construction du Gazoduc Transtunisien (SCOGAT), TTPC (for the planning, construction and financing of the project) and, in conjunction with the Tunisian state, Socit de Service du Gazoduc Transtunisien (SERGAZ).
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SIDI DAOUD WIND Farm Project The development objective of this project (PDO) is to reduce greenhouse gas emissions by replacing electricity generated from fossil fuel-fired power plants by electricity from the Sidi Daoud wind farm. Its objective is the purchase of about 50,000 tCO2e annually of Emission Reductions (ERs) generated by the newly built wind farm through an Emissions Reduction Purchase Agreement (ERPA) under the Bankmanaged Spanish Carbon Fund. The emissions reduction will arise from the displacement of fossil fuel-based power generation by grid-connected electricity production from wind power. The project will contribute to reduce energy dependency and improve energy security in Tunisia. It is the first project of this size in Tunisia and the first to be connected to the national grid, thus paving the way to the scaling-up of wind power in the country. The project activities will generate Certificates of Emission Reductions (CERs) and revenues through the sale of CERs under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The secured revenues contribute to improve the profitability of the project and alleviate one of the barriers to investment in wind power in Tunisia. The project consists in the purchase of about 50,000 tCO2e annually of ERs through an Emissions Reduction Purchase Agreement (ERPA) under the Bank-managed Spanish Carbon Fund. The exact amount of ERs eligible for purchase will be subject to further study and CDM validation and verification process. There is no IBRD lending involved in this project. The Spanish Carbon Fund (SCF), administered by the IBRD as Trustee, will purchase ERs from the project and will make annual payments upon verification of the generated ERs by an independent entity (Designated Operational Entity, or DOE). The emissions reduction will result from substitution of electricity generated by a newly built wind farm with an installed capacity of 34.32 MW for electricity generated by fossil fuel fired plants. The project sponsor is Tunisian Electricity and Gas Company (STEG), the national vertically integrated power utility in Tunisia. The equipment for the wind farm was financed with a concessional financing from the Spanish Government and the remaining project costs, related mainly to civil works, were financed by STEGs own resources. STEG is the owner of the project, operates the project and dispatches the electricity produced by the wind farm into the national grid. STEG has a sound financial track record. STEG reported US$ 2.9 billion in assets and total revenues of US$ 1.1 billion in 2006. Moreover, STEG has in-house expertise in the field of wind power project development and operations due to the first two pilot projects developed in Tunisia and located at the same site, a 10.56 MW pilot in operation since 2000, and 8.72 MW pilot in operation since 2003. Carbon Finance revenue streams generated by the sale of emission reductions will provide an additional source of financing, which was already taken into account by STEG at the time of the decision to invest in the wind farm. The wind farm operations started in February 2009. Testing of the wind farm took place in November 2009. The wind farm is located in Sidi Daoud approximately 100 km North-East of Tunis, next to the previous two pilot projects. It comprises 26 wind turbines, each of 1.320 KW and a transformation substation. A newly built 22.5 km high voltage transmission line allows the dispatching of the power generated by the wind farm to the Tunisian interconnected grid. The wind farm is expected to operate with a capacity factor of 33% and produce approximately 95,000 MWh. The main alternatives available to STEG were: (i) a wind power plant with comparable electricity output but located in a different area; (ii) a power plant using other sources of renewable energy with comparable electricity output, such as solar, biomass or hydro, etc. The first alternative was not considered by STEG because wind records showed that the current location was the best choice. The second alternative, electricity from other renewable energy sources, was not attractive due to: a lack of sufficient potential (for hydro and geothermal projects), high costs (for solar PV and solar thermodynamic), or a lack of experience from pilot projects (for biomass). The project is expected to have a strong demonstration impact to promote the development of future CDM wind power projects in Tunisia by STEG or other stakeholders identified in the national CDM portfolio prepared in 2008. PROSOL residential Within the framework of The Mediterranean Renewable Energy Programme (MEDREP), a financing mechanism is jointly implemented by the Tunisian National Agency for Energy Conservation (ANME), the
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Tunisian State Utility for Gas and Electricity (STEG) and the United Nations Environment Programme Division of Technology, Industry, and Economics (UNEP/DTIE) with the support of the Italian Ministry for the Environment Land and Sea through the Mediterranean Renewable Energy Centre (MEDREC) , to support the Tunisian market of Solar Water Heating (SWH) systems. This project started in 2005 to boost the solar water heating market through an innovative mechanism combining investment subsidies and interest rebates, with loans from the banking sector. Based on the Tunisian Governments strategy, PROSOL supports solar water heating market and provides training for local SWH suppliers. The aim of PROSOL is to overcome the existing barrier of a higher initial cost of solar water heaters, helping local financial institutions to build loan portfolios in the SWH area by providing an interest rate subsidy that will effectively lower the interest rate for a PROSOL loan. The Tunisian State Utility for Gas and Electricity (STEG) promotes the use of solar water heating systems by recovering the monthly loan payment via customers utility bill. This decreases the risk of a consumer defaulting on the loan and, consequently, it lowers the banks risk. This contributes to the creation of a sustainable market for solar water heating systems. The customer financial measures, which allow the reduction of higher initial cost for solar water heaters, are: - capital cost subsidy to customers covering the 20% on the initial cost of a SWH, served by the Tunisian Government through the National Fund for Energy Saving (FNME) with a maximum of 100 TD/m2 (60 Euros/m2); - complementary capital cost subsidy to customers of about 80 TD (55 Euro) on the cost of a solar water heater of 300l, served by MEDREC Funds; - interest rate subsidy to customers for the loan, granted by commercial banks, covering the left cost of a SWH (total initial cost less 20% subsidy); - recovering of the bank loans over a 5 years period through STEGs electrical bill. The PROSOL has proved to be a great success. It takes in charge only 10% cash of the total initial cost of the SWH system, while the rest is covered by the capital cost subsidy of 20% on the initial cost of a SWH and by a special loan with a subsidized interest rate. Since February 2005, this project leads to the installation of total 73.000 systems, for a total of 218.000 m2 of collectors; the whole turnover has reached 57.000.000 Euros. PROSOLs success stimulated a rapid growth of solar thermal appliances in household systems, the program has been extended also to industrial and tertiary sector. The financial mechanism proposed to support Tunisian market of solar water heating systems in tertiary sector is based on: - the provision of an investment premium covering 20% of the total cost of the solar system; - the provision of an additional premium for investment covering 10% of the total cost of the solar system; - two bonus points in the interest rate on loans granted by banks; - the management of maintenance costs over 4 years. At present, UNEP is working for the definition of the financial mechanism for the deployment of water heating systems in the industrial sector. A Boosted Industrial Energy Efficiency Program Tunisia has boosted its industrial energy efficiency process through the implementation of the following measures: (a) The creation of a specialized unit within ANME, endowed with significant human and financial resources, and dedicated to industrial energy efficiency; (b) The implementation of an IGCE (Industries Grosse Consommatrice d'Energie) Task Force to cooperate closely with the relevant players and to contribute technical and institutional support in the application of energy efficiency programs; (c) The launch of a generic action process, based on the identification of selected branch-specific actions, which are selfevident, simple, efficient, based on past experience and easy to generalize. The process is based on the simplification of procedures applicable to contract-programs and the access to subsidies; (d) The contribution of experts, acting as relays in the field with industrial establishments, to identify energy efficiency actions, contract-program preparation, support to the set-up of action plans, and monitoring of contract-programs; (e) The launch of cooperation projects with companies, targeting each branch, including
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training workshops as well as consultation, organization and best practice presentation seminars on energy efficiency. This set of measures has already yielded results as regards the number of signed contract programs (75 in 2006, i.e. as many such contracts signed by the industrial sector as over the period 19932005), as well as efficiency and speed of implementation by companies. Trans-Maghreb Electricity Integration. Tunisia is part of a trans-Maghreb project, which aims to link the power grids of all the Maghreb countries to those of Spain and the rest of the European Union; however, Tunisia's domestic power grid must first be upgraded to meet domestic demand and ensure greater reliability. The African Development Bank, the European Investment Bank and the Kuwait-based Arab Fund for Economic and Social Development have all provided loans for various upgrades. In March 2004, a Spanish-led consortium won a $30.6 million contract to work on the modernization of Tunisia's power grid. Tunisia already is linked to Algerias electrical grid, and efforts to connect to Libyas grid have begun. When the two networks will be connected, an integrated North African power grid will stretch from Morocco to Egypt.
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3 Egypt
3.1 REGULATORY FRAMEWORK
Regulations on Imports and Foreign Investments

Egypt is one of the most important countries in the Middle East. In a strategic position between the Middle East and North Africa, it is contextually near the European influence through the Mediterranean. Today, Egypt is considered the main political and cultural centre in the Middle East regions and the Arabic World.
Regulation on Imports
Presently there have been some restrictions on import both on the scale of charges and on the non-scale of charges. Instead, other products (petrol, fertilizers, agro, and insecticides) can only be imported by the State. For some types of primary necessities, customs duty does not exceed 10%. All the products, except wheat, are subject to a statistic tax equivalent to 1% of the CIF value of the imported product. Furthermore, on most of all imports, an added value tax is applied equivalent 10% of the CIF value. However, there are some exemptions (busses lorries, fodder for animals) and some reduced taxes (2-5%) on products such as, wood, chemical products and metals. Some products (wheat, cattle, meet, coffee, rice, tea, milk, machines, and raw materials imported by Egyptian industries and authorized companies with foreign capital, hospital supplies, equipment for regional electrical power station, books, military equipment, gold, silver and platinum) can be imported without being subject to a 5% tax. To improve the commercial trade situation, the Ministerial Decree n.770 was emanated in 2005. This decree intends to make Egypt a more competitive country on the international market. With the 619 Decree of 21st November, the Egyptian Minister of Commerce introduced as a preliminary condition for the import of consumer goods both durable and non durable, which are sent from their country of origin. Another condition is that these goods have to be accompanied by an authentic certificate of origin, drawn up by the authorities and they must conform to the import quality control regulations. An important measure has been taken to improve the degree of the economy- it is the Association Agreement between Egypt and the EU. It was signed on 25th June 2001 and has been rectified and in vigor since 1st June 2004. The agreement provides a dismantling scheme on the customs fees and on European product prices imported into Egypt, and on Egyptian products exported into Europe, whose implementation is proceeding with the reduction of customs fees. As regards to industrial products, the Egyptian ones exported into Europe are exempt from customs fees and quota. Instead, it is predicted a reduction of the existing customs fees for European products imported into Egypt
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Since 1st January 2004, customs fees have been reduced by 25% on raw materials and industrial equipment. Agricultural products, listed in the agreement and imported into Europe, are exempt from customs fees and quota, and since they still exist, they will be progressively increased. Instead, European products imported into Egypt will be subject to a reduction, according to the product, from 25 to 100%; for foodstuffs the customs fees, according to their category, have been abolished or reduced since 2006.
Regulations on Foreign Investments

The discipline on foreign investments can be found in Law 8/1997, which substitutes the preceding law 230/1999. The concession procedures of the benefits and privileges for foreign investors are in regulation 218071997 in execution of the Law 8/1997. The investment authority is the only competent state agency authorized to deal with foreign investments- it receives the requests of the investors. It is important to note that the Egyptian government has adapted different measures to improve the legal frame work of businesses, through some legislative reforms as reform law 13/2004, relating to guarantees and investment incentives, and the law for the development of small businesses and micro businesses 141/2004. For the remaining, the running of the foreign businesses in Egypt has to follow the competent areas provided by article 1 of the law on foreign investments (Law 8/1997) and of article 1 of the regulation. By law (n.141of 2004), the general authority for investment and free ports (GAFI, General Authority For Investment And Free Zones) will be responsible for the simplification of the procedures for medium and large firms, while the Social Fund For Development (SFD) will supply concession to them. On the bases of law 8/1997 and regulation 2.108/1997, put in practice by GAFI law, it has the duty to accept the foundation of the company. All rights will know on the day of registration.
Guarantees for Foreign Investors

Following the liberalization of the capital market in 1991, capital and profits can be freely repatriated. Authority cannot nationalize or confiscate the companys business, which works in the sectors whose incentives have been provided for investments. Neither revoke nor suspend property license issued in concession if the issuing conditions still exist. Only a decree, emitted by the prime minister, can suspend or annul all or in part a license requested by GAFI; those who are concerned have the right to contest the decision within 30 days. The beneficiary companies have the right to possess and be owners of building areas for the development of their own businesses, independently of their nationality, their partners hometown or the percentage of shareholders. The companies have the right to import, even through 3rd parties, all they need to develop businesses, for example, machinery, equipment, materials, parts. They also have the right to export their goods, even through 3rd parties, without having a registered import license or registration issued by the Register of Exporters (article 13).
Financial, fiscal and contributive easy terms

The period of fiscal exemption provided for companies established on the bases of foreign investment normative is 5 years. The businesses that are established in the new industrial areas, new urban areas and remote areas benefit from a ten-year fiscal exemption. The same benefit is also applied to projects financed by social funds (article 16). Businesses that operate outside the Old Valley benefit from a 20-year fiscal exemption (article 17). Businesses established inside the free zones are exempt from taxes on legal status for an unlimited period. Interest on obligations and shares are exempt from taxes. Equipment and machinery necessary for the setting up of a business are subject to a fixed rate of 5% (article 23). There is no control on prices or limitations on profit margins of projects realized on the hereby law. Law 141 of 2004 has introduced specific easy terms for medium businesses Not less than 10% of the areas available for agriculture, industrial or touristic investments must be reserved for small or micro businesses; Administrative costs for the emission of commercial license must not exceed half of the usual value, At least 10% of the public offshore purchases must be reserved for small and micro businesses of the Egyptian public administration.
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Special Economic, Free, N.U.C, Technological Parks Zones. Special Economic Zones.
Law 83 of 2002 was approved to favor export making Egyptian products more competitive and to attract direct national foreign investments in Egypt. It provides the setting up of Special Economic Zones in nonurban areas for the realization of projects in the industrial, agricultural and service sectors, which can compete with the same zones that can be found abroad. The law establishes services in the zones that have simple, fast and special procedures. Furthermore, the law establishes the institution of a special tax system; it regulates the work supply, the relationship between employer and employee and the social assurance within the ZES. It also provides a more flexible labor normative that allows employer to terminate the contract with the employee in exchange for an equivalent compensation. The ZES areas are Toskha, The Gulf Of Suez, Port Said East and Damietta. The incentives for the ZES are: A 10% tax levied on an annual income to people and legal status that work there; A 5% tax levied on workmens compensation. The exemptions in ZES; Businesses in ZES are exempt from taxes on loans; Easy credit; Sales tax exemption; Taxes levied on businesses profits which derive from mergers and divisions; Customs fees; Sales tax levied on instruments, equipment, raw materials, parts necessary for the establishment of the economy (all these products, if they are imported to domestic market, are subject to customs control and sales tax).
Free Zones
With the laws 230/89 and 8/97 numerous free zones have been established. In Egypt, there are two types of free zones: public and private. The public free zones, whose location is favorable for trade, are in Il Cairo, (City Of Nasr), Alexandria, Port Said, Sohag, Suez, Ismailaya, Damietta and Sofaga. It is possible to create businesses with a partial or total foreign participation (without any restrictions on the origin of the investment, whether Egyptian or foreign), under any legal business form and without any limits on the nature of the investment, only if the products are destined to export. The companies that do business in the Egyptian free zones are exempt from customs fees only if they have to import necessary material to their productive cycle, they can expatriate the profits and re-import the capital invested in case of liquidation. Furthermore, they are exempt from fiscal taxes for the first 10 years, even if they have to pay the Egyptian revenue service an annual percentage of the value of the goods produced. The goods produced in these zones, which are imported to the rest of Egypt, are considered very important foreign goods. The import of products in the free zones is not subject to customs fees. Even if the invested capital may totally be foreign, 75% of the employees must be Egyptian. Free zone agreements are subject to revision after a certain period of 25 years for the industrial sectors and 10 years for storage; the renewing of the agreement is considered case by case.
New Urban Communities

Law 59 of 1979, denominated New Urban Communities Law was approved to encourage the development in specific geographical areas of the country. With the application of this law, the government built 19 new cities in the desert. A foreign investor can request to establish a business based on Egyptian laws, both SPA or SRL, taking advantage of the laws bearing foreign investment incentives, both those provided by the hereby law, and only if the project is developed inside the area in question; the projects are subject to authority approval. The benefits are: The businesses profits are tax exempt for a minimum period of 10 years; The derived dividends of project development which are distributed are tax exempt for a period of 10 years;
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Fiscal exemption on construction for 10 years; A 5% fixed rate on necessary imported materials and equipment for the development of the company.
Technological Parks
Some specific measures regard the formation of technological parks and networks that are strongly interconnected with universities, industries, research institutions and other active entities of the technological progress. The Research Foundation and the Study of Technical and Technological Consulting have founded 5 technological parks, with the aid of the Minister of Scientific Research, in the following sectors: Fundamental chemistry for the pharmaceutical industry Leather industry Varnish industry Glass industry Mine industry The 5 parks include 167 businesses, 12 universities, research institution and 300 other partners.
Business Laws
Among the various forms of business organizations, mainly in Egyptian private sector, the most used instrument for foreign investment is corporations or limited liability companies. The foreign investor can establish an SPA of SRL bearing Egyptian rights, by applying 3 regimes: Law 8 of 1997 bearing guarantees on investments and incentives (Investment Laws) Law 159 of 1981, modified by law 3 of 1988 (Business Laws) Law 95 of 1992 (Capital Market Laws) Foreign investor usually establishes a company by applying the laws bearing investments.
Institutional framework
In the Egyptian energy sector operates many institutions, some of them have a direct influence on governance, others influence activities and decisions indirectly. In the following section, it is presented in detail the role of each entity operating in the energy sector and their responsibilities. Ministry of Electricity and Energy (MOEE) The MOEE is responsible for planning, generating, transmitting and distributing electricity. This role is managed through some authorities or organizations, which directly implement policies, based on the general policy of MOEE. The authorities/ sub-organization of MOEE are: The Egyptian Electricity Holding Company (EEHC) was established by Law 164/2000 and it is responsible for system studies and planning, power plants projects, HV/ UHV transmission, network projects, operation and maintenance. The Regulatory Body for the Electricity Sector has to supervise all questions relating to the electricity sector in the field of production, transmission, distribution and consumption. It was based on the Presidential Decree No. 339/2000 and it is chaired by the Minister of Electricity and Energy. The Rural Electrification Authority (REA) is involved in the planning and construction of HV transmission, medium voltage and low voltage networks in rural towns and villages. The Hydropower Project Authority deals with the study, design and construction of hydropower plant projects. The Nuclear Power Plants Authority deals with nuclear power plants projects. It has been concerned with studies of sites, appropriate types of plants, preparing tender documents for the first nuclear power plant, as well as bidding and negotiation. The New and Renewable Energy Development and Utilization Authority (NREA) have appeared in the national energy plan since 1980, but NREAs activities started with the establishment of the New and Renewable Energy Authority in 1986, through Law 102/1986. Its aim is to identify and evaluate new
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and renewable energy sources, in particular solar, wind and biomass resources, and to plan their development. NREA certifies and provides guarantees for renewable energy (RE) products and implements RE projects, both alone and in cooperation with others, including overseas governments and authorities. The Atomic Energy Authority deals with research on different peaceful applications in fields, such as medicine, agriculture, radiation technology, control of radiation levels, regulatory procedures and the training of personnel. The Nuclear Materials Authority is responsible for studies about nuclear fuel materials in the country, as well as the processing of these nuclear materials. Ministry of Petroleum and Mineral Resources (MOP) The Ministry has a key role in Egyptian energy sector. It sets up and monitors the implementation of various energy policies related to the petroleum area. The General Egyptian Petroleum Corporation (EGPC) is a main authority in the petroleum sector under MOP and it manages all the petroleum activities in Egypt. The Egyptian Gas Holding Company (EGAS) was created to cover all gas activities, from upstream to down stream. Supreme Council of Energy (SCE) The Supreme Council of Energy was established as the highest policy-making authority in the energy sector in Egypt. The Prime Ministerial decree of 1979 defines SCEs responsibility as short and long-term energy planning, with direct reporting to the President. The Deputy Prime Minister and the Minister for Petroleum first chaired it, then since 1985, there were the Deputy Prime Minister and the Minister of Planning. Membership of the council includes ministers for petroleum, electricity, industry, water supply, transportation and housing. However, the council undertakes very limited activities and has little impact on decisions in the energy sector, because of the active role of both MOEE and MOP. The highly cooperative relationship between these two ministries has reduced the need for the SCE. Energy Efficiency Council (EEC) The EEC is a voluntary consortium of public and private organizations which deals with the generation, distribution and use of energy resources in Egypt. At present, the Council includes 12 organizations representing seven Ministries (Electricity and Energy, Petroleum, Environment, Industry, Transportation, Water Resources, and Planning) and 2 organizations representing the views and interests of the private sector. These two organizations are the Federation of Egyptian Industries (an organization representing most Egyptian industries) and the Egyptian Energy Service Business Association (a non-governmental organization representing providers of energy efficiency products and services). The main idea of the Council is to create a framework, which allows the development of a national energy strategy to increase the efficiency of Egypt's use of its natural resources. Ministry Of Environment (MOE) The Ministry Of Environment establishes and supervises all environmental policies in Egypt. The main executing agency under the ministry is the Egyptian Environmental Affairs Agency (EEAA). In 1982, a presidential decree established it as a cabinet department. The main tasks of the agency are to plan environmental policies and organize plans necessary for environmental protection and environmental development projects, following up on their implementation and undertaking pilot projects. A first unified Egyptian Law on Environmental protection passed in February 1994. It increased the role of EEAA, expanding its size and influence. The aims of EEAA as regards the energy sector are: The promotion of better energy efficiency in Egyptian industry; The decrease of overall consumption of fossil fuels and the promotion of their conservation; The promotion the exploitation of natural gas; The use of new and renewable sources of energy. Ministry of State for Planning The Organization of Energy Planning (OEP) was established in 1983 and currently belongs to the Ministry of Planning. OEPs objectives with respect to the energy sector are to:
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to sustain and take part in the national effort required by decision makers, concerned authorities and the public; to guarantee a safe and effective energy supply; to meet energy demands efficiently through integrated energy planning; to develop technical expertise; to spread energy information in cooperation and coordination with other concerned bodies, so as to serve national sustainable development.
Other ministries and institutions relevant to energy sector Other important Energy Sector Ministries are : Foreign Trade and Industry, International cooperation, Housing and New Communities, Communication and Information Technology, Public Enterprise, Investment, Irrigation and Water Resources, Tourism, Local Community Development, Information, Transport, Civil Aviation. National Investment Bank (NIB) is an organisation attached to the Ministry of State for Planning and International Co-operation, which disburses investment allocations under five-year plan. Its responsibilities include appraising and monitoring the implementation of investment projects and funds. Parliamentary and Governmental Committees, there are two committees under the Parliament and the Senate related to industry and energy issues responsible for implementation within the legislative framework. The parliamentary committee for industry and energy is consulted on energy sector major decisions and the committee should approve them before further procedure. Research, Development and Educational Institutions, much of the research, development and education in the energy sector are taking place through organisations previously described in this section. In addition, the Academy of Scientific Research and Technology and Egyptian Universities are important institutions within the field of research, development and education. Academy of Scientific Research and Technology (ASRT) consists of several institutions and research centres, which are dealing with many activities such as social studies, applied science, energy, etc. Three institutions are playing an important part in the field of energy. The academy provides a great amount of its budget annually to finance the research in the field of energy and make a great emphasise in energy efficiency and renewable energy. Company Organizations; The Federation of Egyptian Industries (FEI) organises the industries in Egypt. The organisation is active within the energy field. Another organisation for the industry, General Organization for Industrialization, (GOFI), is mainly dealing with public industries. A newly established organisation, Egyptian Energy Service Business Association (EESBA) organises private companies that offer energy efficiency products and services, including ESCOs (Energy Service Companies). Non-Governmental Organizations do not play an important role in the governance of the energy sector. Two NGOs are involved in various energy and environment issues: the Egyptian National Committee of the World Energy Council and the Arab Office for Youth and Environment (AOYE). Donors and Financing Agencies in the energy field include USAID, EUROPE AID, KFW, DANIDA, CIDA, JAICA, UNDP, and GEF. Some of the donors, energy conservation and renewable energy are considered as part of the environmental protection area, while the energy area covers infrastructural projects such as major power plants and transmission and distribution lines. Within the donor assistance group, a donor subgroup on environment and energy exists, however, during recent years; the activities have mainly been focusing on the environmental activities.
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Private sector Efforts to reform the Egyptian Electricity sector started as early as 1964, when the national utility (the Egyptian Electricity authority) was unbundled and eight distribution companies were formed. This arrangement has gone through several structural changes until 1998, when a decision was taken to rebundle the distribution and generating entities into seven new vertically integrated subsidiaries, state monopolies. In 1996, Law Number 100 was issued and specified: local and foreign investors may be granted public utility concessions allowing them to build, operate and maintain power generation stations. The latest major stage of reform was the reorganization of the EEA into the Egyptian Electricity Holding Company (EEHC) in 2000, through Law Number 164. The change also involved the unbundling of seven
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vertically integrated subsidiaries and the subsequent separation of generation, transmission and distribution. Each generation and distribution subsidiary was established as a separate corporate entity with its own board. The corporatization of Egyptian Electricity Holding Company (EEHC) was intended as a step to prepare shares for privatization. However, this process has not yet begun. Through EEHC, the government still controls about 90% of all generation and maintains a monopoly over transmission and distribution. A regulatory agency was established in 2000 by a presidential decree (the Egyptian Electric Utility and Consumer Protection Regulatory Agency (ERA)). Private sector participation has been encouraged through several "build-own-operate transfer" contracts. In terms of future reforms, ERAs main goal is to create conditions where bilateral contracts between producer and consumer are the norm, and third party access to the transmission system is allowed. The most important Egyptian enterprises are: Egyptian Solar Energy Society (ESES), Solar Energy & Environment Technology (SE), Egyptian Solar Energy Society, Middle East Engineering & Telecommunications (MEET), Arabian Company For Industrial Batteries (HBL Nife Egypt S.A.E.), Arabian Solar Energy & Technology Co. (ASET), BIC for Electronics Environment and Energy, City Pulse - Trade & Marketing, Eagle For Engineering & Trading Co., Egyptian Solar Energy Systems Company (ESESC), Exact Co. For Battery Production, Fadico International For Engineering Projects, IMF, Lotus Solar, MISR America Group For Investments, Solenco, SunPower Company, Technological & Electrical Systems Co. T.E.S.
Regulatory and legislative framework

Electricity
In recent years, Egypt has launched a restructuring and liberalisation process of the electricity market, a sector that was originally private and then nationalised in the 60s. However, the state maintains a dominant role, through the Egyptian Electric Holding Company. At present, the market comprises a single client. The liberalisation of the electricity sector started in 1996 with the law no.100, which allows national and foreign investors to construct, operate and manage power stations. The presidential decree no. 326 of 1997 called for the creation of the Electric Utility and Consumer Protection Regulatory Agency (EUCPRA). Law no.18 of 1998, established that the distribution companies would be affiliated to the Egyptian Electricity Authority and that all the power stations and high voltage networks would affiliated to this organisation. In 2000, through the law no. 164, the Egyptian Electricity Authority became a joint stock company and was renamed the Egyptian Electric Holding Company (EEHC). In 2001, the EEHC separated its production and distribution functions. At present, consequently, various production companies sell to a single transmission company. The Egyptian electricity market has two sub-markets: The first one, the unified electricity system, covers most of the inhabited area of the country. The government has possession of five power stations: four thermal and one hydroelectric unit. Private participation in the sector is represented by three long-term (20-year) BOOT contracts (BuildOperate-Own-Transfer) with the Egyptian Electricity Transmission Company (EETC). Four industrial producers are connected to the network and they can emit and absorb electricity according to their needs. But, their market share is quite small. The State-owned companies are currently organised in the form of a single market buyer in which all the production companies sell electricity to a single transmission buyer/company, the EETC. The latter in turn sells electricity to the consumer and to nine States distribution companies. The existence of a single transmission buyer/transmission company means that competition among the production companies is not possible. The second one consists of isolated markets, mainly in the tourists zones of the Red Sea and the Sinai Peninsula. They are niche markets and there are some private production companies that, as well as the State companies, sell directly to the consumer.
It is necessary to restructure the electricity sector to satisfy internal demand, which grows annually at a rate of 7%. The first aim of increased energy production is to promote the use of renewable sources. However, subsidies represent one of the main obstacles on the road to liberalization, chiefly in connection with national consumers. As regards cross-border connections, Egypt is a member of the Mediterranean Electricity Ring, which links a number of North African and Middle Eastern countries, and will soon connect with the European network. Egypt is also cooperating with a number of other African states (Burundi,
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Eritrea, Ethiopia, Kenya, Ruanda, Sudan, Tanzania and Uganda) in the construction of a network, as part of the Nile Basin Initiative.
Electric Utility and Consumer Protection Regulatory Agency (EUCPRA)

EUCPRA is a Cairo based body with legal personality, affiliated to the Ministry of Electricity and Energy. In 1997, the presidential decree 326 created it, in 2000, the decree no. 339 established its structure, activities and in 2001 it was formed its board of directors. The main tasks of the agency are: To ensure the respect of current laws and norms, especially where environmental protection is concerned, for all activities related to the generation, transmission, distribution and sale of energy; To examine the plans regarding the generation, transmission, distribution and sale of electrical energy, including relevant investments, to guarantee the availability of energy for diverse uses, in conformity with government policy; To define norms in matters of competition in electricity generation and distribution, in order to safeguard consumer interests; To ensure that the costs of generation, transmission, and distribution guarantee the interests of all parties involved; To guarantee a fair profit for the electricity companies so that they can keep on in business and maintain a solid financial position; To publish information, reports, and recommendations for the electricity companies and for consumers; To examine consumer complaints and settling disputes between the parties involved; To grant licences for the construction, management and maintenance of projects for the generation, transmission, distribution and sale of electricity. The budget of EUCPRA is made up of funds allocated from the State budget (this is currently not used), revenues for the granting and renewal of licences, from services rendered by the agency to the electricity company users, from the investment of funds, from donations and subsidies that do not conflict with its objectives. The agency is directed by a board of directors reporting to the presidency of the Ministry of Electricity and Energy. Three of its ten members represent the electricity companies, four represent consumers and the remaining three are technical experts. The main duties of the board are: To define the organisational structure of the agency; To ratify the procedures for the granting of licences; To decide concessions, renewal and monitoring of licences for projects involving the generation, transmission, distribution, and sale of electricity. Moreover, it must supervise the realisation of the projects; To approve the annual budget.
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Structure of the electricity sector in Egypt
Source: http://www.egyptera.com
Electric Utility and Consumer Protection Regulatory Agency (EUCPRA)

This is a Cairo based body with legal personality, affiliated to the Ministry of Electricity and Energy. The EUCPRA was created by presidential decree 326 of 1997. Decree no. 339 of 2000 established its structure, activities and its board of directors, which was formed in 2001. The main tasks of the agency include: Ensuring that all activities related to the generation, transmission, distribution and sale of energy are conducted in accordance with current laws and norms, especially where environmental protection is concerned. Examining, on a regular basis, the plans regarding the generation, transmission, distribution and sale of electrical energy, including relevant investments, in order to guarantee the availability of energy for diverse uses, in conformity with government policy. Defining norms in matters of competition in electricity generation and distribution, so that consumer interests are safeguarded. Ensuring that the costs of generation, transmission, and distribution guarantee the interests of all parties involved.
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Guaranteeing a fair profit for the electricity companies so that they can continue in business and maintain a solid financial position. Publishing information, reports, and recommendations for the electricity companies and for consumers. Examining consumer complaints and settling disputes between the parties involved. Granting licences for the construction, management and maintenance of projects for the generation, transmission, distribution and sale of electricity. The agency has a budget made up of funds allocated from the State budget (this is currently not used), revenues for the granting and renewal of licences, from services rendered by the agency to the electricity company users, from the investment of funds, from donations and subsidies that do not conflict with its objectives. The agency is directed by a board of directors reporting to the presidency of the Ministry of Electricity and Energy. Of its ten members, three represent the electricity companies, four represent consumers and the remaining three are technical experts. The main duties of the board are: The definition of the organisational structure of the agency. The ratification of procedures for the granting of licences. Decisions on matters of concessions, renewal and monitoring of licences for projects involving the generation, transmission, distribution, and sale of electricity. It must also supervise the realisation of the projects. Approval of the annual budget.
Renewable energies
The government supports the deployment of RE technologies in general. However, yet, there are no specific commercial programs that the government is currently implementing and which aim at facilitating commercial deployment of RE technologies. The majority of existing RE programs with commercial orientation is donor-related. Now there is no legislation specifically promoting the use of RE (only a proposal), and almost no policy instruments or regulations currently set to promote the adoption of clean energy technologies. However, the government has been committed over the years to allocate a budget for NREA and its R&D work in the various RE technologies, specifically wind, PV, biomass, and solar thermal technologies. Purchase conditions for existing projects follow individually negotiated terms. The energy generated from wind farms projects, for example, is sold to the transmission company through Power Purchase Agreements (PPA) at a tariff with a premium of 0.6 piasters (the base tariff is 12 piasters) and a 5% yearly increase (OME, 2007).
Tax and financial incentives

In June, 2004, the Minister of Electricity and Energy, and the Minister of petroleum have mutually agreed to establish the Renewable Energy Fund for financing part of the incremental cost of wind energy projects from revenues difference between international price of natural gas, saved hence exported due to use of RE, and local subsidized prices. The Fund allows a kWh premium to support RE of maximum 2 piaster/KWh. Another RE technology the government supports is solar water heating. The purpose of the 1986 law enacted in this regard was to impose on all new apartment buildings built in the new urban cities outside of main citifies to use solar water heating systems. However, as underlined in the previous section, the results were not successful. Indeed, urban developers and contractors complied with the new law for some years but gradually stopped abiding by this law due to two main reasons. First, adequate enforcement of the law was not sustained by the government, and second, tens of solar water heating systems of poor quality were procured and installed. The government is very interested in developing the market in a sustainable manner.
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Moreover, Egypt is currently developing the following incentive schemes (from General Authority for Investment - GAFI) to encourage RE investment: A feed-in tariff scheme in the development of wind farms, encouraging investment by ensuring revenue stream. A seamless licensing process by ensuring timely management of authorization requests, creating a single point of interface authorized to deal with land-related issues. The entire authorization process will be facilitated in full cooperation with all government authorities. Area zoning, by planning logistically appropriate areas, and preparing the locations with connection access to the national grid, thus reducing the cost of infrastructure investment for investors.
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3.2 RENEWABLE ENERGY SITUATION Energy context

The energy sector plays a very important role in the economic development of Egypt. The primary energy source of Egyptian energy sector is mainly fossil fuel products and natural gas. This energy is considered as the prime mover for country development plans. The annual consumption of primary energy, as of 20052006 fiscal year, amounts to 50.97 million ton oil equivalent (TOE) of which about 54.9% of natural gas. The projected consumption of primary energy over the next 15 years is presented in table below. National Projected Consumption of Primary Energy over the Next 15 years
Source: Egyptian Ministry of Electricity and Energys (MOEE)
The table above shows that the growth rate in fossil fuel product consumption will decline over the next five years, meanwhile in natural gas it will remain high. This is explained by a country plan which substitutes heavy fuel oil with natural gas, because of the environmental benefits and due to the elimination of the subsidy on heavy fuel oil. The projected consumption by year 2022 will be almost tripled for natural gas and will be one and half for fossil fuel products. The overall consumption will be doubled. Electricity generation is almost entirely driven by conventional technologies, which are: 1) steam thermal power stations, 2) gas turbine and combined cycle generation, 3) off-grid diesel engine generation, 4) hydropower plants, and 5) wind turbines. Ninety per cent of available hydropower resources are being utilized, but only a small amount of wind resource is being utilized. Therefore, the majority of power generation depends on fossil fuel and natural gas. In this context, thermal power generation, including the first three technologies, represents about 84.4%, whilst hydropower represents about 14.8%, and wind technology 0.8%. Electricity generation, with its associated emissions and fuel consumption, is shown in the following below. The Egyptian Ministry of Electricity and Energy (MOEE) plan for projected added power generation capacities over the next 15 years is shown below. It could be concluded that there is not potential interest in deploying RET for power generation in the MOEE plans, although RES are proven in Egypt. This leads to a need to redraft plans and policies instruments in order to enhance the role of RET in the future, including new scenario directives for implementation.
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Electricity Generation since 2005
Egyptian Ministry of Electricity and Energys (MOEE)
Projected added capacities for power generation over next 15 years By MOEE
Source: MOEE Planning Data, 2005.
Electricity Egypt plans to expand electricity capacity to 32,000 megawatts (MW) over the next five years. The government announced that the additional capacity will come principally from 11 new thermal plants and expansions: Kureimat 2 and 3, Talkha, Tabbin, Nuberiya 3, Cairo West, Sidi Krier, el-Atf, Abu Qir, Ain Sokhna and Sharm el-Sheikh. In 2005, nearly 75 percent of Egyptian electric generating capacity was powered by natural gas, 14 percent by petroleum products, and the remaining 12 percent by hydroelectric, mostly from the Aswan High Dam according to the IEA.
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In the late 90s, there was a growing electricity demand that stimulated industry to restructure and plan for limited privatization of the electric power sector, although this process has to result in significant independent power projects. At present, Egyptian power sector is comprised of seven regional Authority (EEA). In July 2000, the EEA was converted into a holding company, though still owned by the state. At this time, there are in Egypt a number of privately owned power plants under construction, which are financed under Build, Own, Operate, and Transfer (BOOT) financing schemes. The first BOOT project was a gas-fired steam power plant with two 325-megawatt (MW) generating units, located at Sidi Kerir on the Gulf of Suez. It began commercial operation in late 2001 and cost $450 million. U.S.-based InterGen (a joint venture of Bechtel Enterprises and Shell Generating Ltd.), together with local partners Kato Investment and First Arabian Development and Investment, have the 20-year BOOT contract for Sidi Kerir. The second BOOT power project award went to Electricite de France (EDF), for two natural gas-fired plants located near the cities of Suez and Port Said. The two plants have a total capacity of 1,366 MW. The World Bank agreed in February 2006 to fund a 700-MW plant that will contain two 350-MW steam turbines and have an expected cost of roughly $260 million. In April 2007, Egyptian Orascom Construction Industries (OCI) signed a contract to build a 700-MW power station al_Tebbin power plant outside Cairo that will be completed by 2012. In July 2007, General Electric (GE) and its Italian partner Techint Cimi Montubi (TCM) were awarded a contract to build two gas turbine generators at the new 750-MW al_Kureimat III combined cycle power plant in the south of Cairo. Other Sources of Electricity Generation The Egyptian government has started an important renewable energy program to generate 500 MW of solar energy, 600 MW of wind power, and 600 MW of hydroelectric power by 2017. Egypt is building a new hybrid power plant the Integrated Solar Combined Cycle power plant - at Kureimat as a BOOT project, which will have 30 MW of solar capacity out of a total planned capacity of 150 MW. The World Bank will finance $327.57 million from its Global Environmental Facility that will compensate the cost difference between the solar capacity and thermal capacity. Moreover, since 2004, Egypt has a wind farm at Zafarana, which has been operational at an output capacity of 80 MW and is expected to increase. There is also a Netherlandsfunded project to build 60 MW worth of wind power units in the Suez Canal area. Egypt is also working with Nuclear power. It has a 22-MW nuclear research reactor at Inshas in the Nile Delta, built by INVAP S.A. of Argentina, which began operation in 1997. In March 2008, Egypt also signed an agreement with Russia to assist the building of Egyptian first 1,000-MW nuclear plant at al-Dabaa. International Connections Egypt has completed the electric transmission grid with other countries in the region. In December 1999, it activated a link to Libya's electric grid and in 2002 it was completed the interconnection of Egyptian system with those of Jordan, Syria, and Turkey.
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Renewable energy resources and potential

Egypt has a high potential of RE sources. In particular, it has abundant solar energy resources and a wealth of wind resources in certain locations. In addition, large quantities of agricultural wastes are produced annually from various agricultural activities, which could potentially be utilised in biomass energy production. However, despite the favourable geographical conditions, RE sources represent 4.3% of TPES and 0,2% without biomass and large hydro. The figure below illustrates the situation of TPES in Egypt in 2005. The share of RE in Total primary energy consumption in Egypt (2005)
Egypt is on the way to develop its own "National Sustainable Development Strategy". Efforts are being coordinated through the Ministry of State for Environmental Affairs with all concerned stakeholders to draft the strategy. For this purpose, a ministerial committee has been established. It is headed by the Minister of State for Environmental Affaires and assisted by a technical group constituted of representatives of all concerned ministries. Energy is a major component of this anticipated national sustainable development strategy. The sustainability of energy calls for a sustainable long term vision for the energy supply/demand balance scenarios including maximizing the use of all available renewable resources, as well as setting quantitative targets and necessary mechanisms to insure the rational use of available resources. To minimize the negative impact on the environment represents an integral part of energy sustainability. The formulation in late 2006 of the National Sustainable Development Strategy in which energy represented one of its major component, facilitated the coordination of all existing and future policies and orientation into a well defined integrated energy strategy, defying quantitative measurable targets for the enhancement of the wide spread use of both RE and the rational use of energy (RUE). Moreover, RE has received more attention thanks to the existence of a national organization (NREA). Egypt is endowed with a high potential of RE sources. In particular, it has abundant solar energy resources and a wealth of wind resources in certain locations. In addition, large quantities of agricultural wastes are produced annually from various agricultural activities, which could potentially be utilised in biomass energy production. This section describes the renewable energies resources and potential in Egypt. Wind energy In 1996, a wind atlas of the Gulf of Suez area was published, including wind data covering the period from 1991 to 1995 for four sites (Abou Eldarag, Zafarana, Elzait Gulf and Hurghada), which are classified as having high average wind speeds. The resulting analysis of such data has encouraged international financing institutions and donor countries to cooperate with Egypt to implement large-scale, grid connected, wind farm projects. The Egyptian wind atlas is shown in the figure below.
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Map of wind regimes and wind potential in Egypt
Source: NREA 2006
In cooperation with the Danish Government, a project to draw up a Wind Atlas for Egypt was initiated. The first phase ended in March 2003 with the issuing of a detailed Wind Atlas of the Gulf of Suez area, including accurate wind data for the period 1991 to 2001, for thirteen sites. The purpose of the first phase was to assess the wind potential of the area; the conclusion was that in the area north of Ras Ghareb up to Elzait Gulf, there is an excellent wind regime, exceeding 10 m/sec in many parts of the area. The table below shows annual average wind speed for the sites measured at a height of 25 meters. Average Wind Speed Measured at a 25 meter height
The area in the west of the Gulf of Suez is the best and uninhabited desert region, suitable for wind farms with capacities of about 20,000 MW. The Egypt Wind Atlas collected wind data from 27 wind masts erected over several sites, situated in North and South of Sinai, Port Said, Owenat and the New Valley. The data collected was analyzed in order to define the more promising areas for hosting wind farms, based on their wind regimes. The Atlas was issued in 2006.
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Solar photovoltaic energy Egypt is located in the worlds solar belt and has an excellent solar availability. The solar atlas, issued in 1991, shows that Egypt, being one of the sun belt countries, is endowed with high intensity of direct solar radiation ranging between 2000 3200 kWh / m2 /year, ranging from the north to the south of the country. The sunshine duration ranges from 9 to 11 hours, with few cloudy days throughout the year. With such high solar insolation, Egypt is still considered as a pre-matured market for solar thermal applications, both for power generation and for heating process applications. The reason for the lack of interest in solar thermal applications is due to the non-feasibility of such projects, because of the subsidized energy prices in the Egyptian residential and industrial sectors. However, a Solar Thermal Power Plant (150 MW), approx. 90 km South of Cairo was proposed and scheduled for operation in 2009. Being an un-inhabited location close to the extended unified power grid, natural gas pipelines and a source of water for cooling, the project site was selected because of its high intensity direct solar radiation, which reaches 2400 kWh /m2/ year. The solar atlas of Egypt, presented below, demonstrates high potential for power generation. The German Aerospace Centre (DLR) studied this potential and quantified it as amounting to 73,656 TWh/year (economically proven potential). Moreover, the utilization of solar energy in heating processes, both in residential and in industrial sectors, has significant potential for removing the existing barriers. Map showing solar energy potential in Egypt
Source: NREA
In spite of being an expensive technology, PV systems are considered the most appropriate application for rural and remote areas of small-scattered loads, which are far from the national grid. The cost of PV system maintenance is limited, while the PV life span is about 25 years. The total capacity of PV systems in Egypt ranges from 4 to 4.5 MW, for lighting, water pumping, wireless communications, cooling and commercial advertisements on highways (see next figure). According to the high solar insolation level, a study by the German Aerospace Centre (DLR) for MENA countries shows that the potential for power generation in Egypt amounts to about 36 TWh/year (economical potential).
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Distribution of PV Applications in Egypt
Biomass Total waste resource potential, based on the NREA information, shows that there is a good potential for the utilization of biomass resources in Egypt for bio-energy production. The total amount of biomass is in the order of 47 million ton/year, which is equivalent to about 17 million toe/y. However, the whole amount of this biomass cannot be collected and used exclusively for energy. Significant quantities of crop residues, for example, are used for other purposes (animal feed, composting, etc.). In addition, in many areas the residues are dispersed over a large area and would have to be collected and transported to energy production utilities, which is a costly process. However, a conservative estimate is that about 20 per cent of the biomass resources can be easily collected and used for energy production in the short term. This would be equivalent to about 5 million toe/y, after considering conversion factors of modern bio-energy technologies. Biomass potential resources (available and used quantities)
Small hydro Hydroelectric power is an important source of energy in Egypt. During the 80s, the Aswan High Dam on the Nile River provided half of Egyptian electricity. Its contribution has fallen while energy demand has increased, but over the past ten years, hydropower still contributed about 20% of the total electricity generated in the country. At present, it represents 12% of the total electricity generation. Hydro capacity is important with 2,783 MW and it is mainly produced by Aswan in Upper Egypt. All installations have a capacity greater than 10 MW, except Nag Hamadi (4.5 MW) and El Lahoun Fayoum (0.8 MW). Egyptian terrain and topography allows limited opportunities for small hydropower projects. At the same time, average annual precipitation levels in Egypt are extremely low (often reaching zero) and it
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makes difficult the use of micro dams. In conclusion, the total capacity for all possible small dams does not exceed 25 MW.
Energy and Environmental impacts

The protection of the environment in Egypt represents like a Tunisia an important priority in matter of economic and social development. The economic development has placed great stress on Egyptian environment. High population density, combined with long-postponed infrastructure investments, has severely overwhelmed water and wastewater services of urban areas creating numerous environmental hazards. Oil pollution and the careless anchoring of boats have damaged coral reefs off the coast, as pollution from urban and industrial sources and improper disposal of solid wastes has done. Moreover, rapid population growth is straining natural resources as agricultural land is being lost to urbanisation and desertification. The Nile River the lifeblood on Egypt - is contaminated with pollutants, chemicals, and heavy metals. Although Egypt does not have an extensive history of environmental law, a regulatory policy has gained momentum over the past few years. In 1994, Egypt approved Law n. 4 for the preservation of the environment. This law restructured the existing environmental Ministry and created the Egyptian Environmental Affairs Agency (EEAA) to draft laws, create and enforce regulatory environmental standards, establish near- and long-term plans for environmental management, coordinate local, regional and national environmental protection efforts and report on the state of Egyptian environment. From the Egyptian Environmental Programme results that the main emissions of Greenhouse Gas (GHG) in Egypt are caused by fuel combustion in the energy sector (22%), in industry (21%), and in the transport sector (18%). Other important contributors are agriculture (15%), small combustion (9%), non-combustion emissions in industry (9%), and waste (5%). In total, energy-related emissions are responsible for 71% of the GHG emissions. On this point Egypt has ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1990 and the Kyoto Protocol in January 2005. Egyptian CO2 emission levels are rising rapidly since 1990 and the country is not obligated to curtail carbon emissions. However, the Government is promoting CDM projects to support sustainable development. Energy-related CO2 emissions (1992-2005)
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Actually, the Egyptian portfolio has more than 40 CDM projects. These projects include 19 energy projects, seven of which relate to RE. The implementation of the CDM projects will promote many of the development plans of the Egyptian government, such as the National Energy Strategy, the development of natural gas and RE utilisation, and the plans in the transport, waste and forestry sectors.
Scenario analysis
In Egypt, there are several opportunities for implementing RETs but there are also some barriers. The most important one is the high investment necessary for RETs and the low current energy prices applied in different consumption categories, which range from low to high subsidy rates. The subsidy rates consider the socioeconomic impact and the energy consumption rates relating to the annual average income per capita. In this framework, an appropriate evaluation of future prospective would take into consideration conventional energy prices to setup the national strategy, action plan for renewable implementations and the potential market, with regard to manufacturing capabilities and governance mechanisms. The governing factors are the energy prices that are applied locally and internationally, and the technical potential of RET implementation, with the aim of stimulate economic/financial viability of each technology. The renewable technologies for power generation are wind, concentrating solar power and photovoltaic. These technologies target the national prospective of electricity generation as a unique segmented market as power generation is still under public sector. The remaining two technologies, biomass and solar water heating, are customer-driven, based on the existing customers energy tariff structure and the barriers to implementation for such technologies. As far as Biomass technology (for power generation and its connection to the countrys Unified Power System (UPS)), commercialization may be far away, because some necessary components are costly, i.e. land (non-desert), cooling water (cost and availability constraints), and segregation and transportation systems. Moreover, the growth rate of waste is non-sustainable. For this reason, biomass technology will focus on a number of different applications covering heating, distributed electrical generation in rural and remote areas, and cooking systems. Solar water heating technology will concentrate on domestic and commercial sectors, as well as lowtemperature applications in industrial sectors. Grouped systems for domestic hot water production are the most appropriate because of the lack of space for plant installation and the vertical (as opposed to horizontal) expansion of housing premises. For implementation of renewable energy power systems in Egypt there are three possible scenarios: the low scenario is based on the existing MOEE plans (business as usual); the medium scenario; The high scenario includes a portion of the proven technical potential of RES in Egypt, for which there are ample renewable sources. Three scenarios are based on a constant requirement for produced energy and different installed capacities, which comes from the difference between the installed and the demonstrated power via the RESPG (Renewable Energy System for Power Generation). Actual measurements by RESPG for demonstrated power show that its capacity factor ranges from 32% to 35% of installed power. In relation to previous scenarios for power generation proposed by RESPG, the estimated added power capacities using wind technology, from 2006 to 2022, range from 3,105 MW to 10,335 MW, for low and high scenarios respectively. As regards the concentrating solar power, it ranges from 750 MW to 2,550 MW for low and high scenarios, respectively. PV ranges from 300 MW to 500 MW for medium and high scenarios, respectively. For each different scenarios the evolution of installed renewable is presented in the figures below. The quantified renewable can be considered as the projected market volume in Egypt. To take a reasonable share in such a market, it would be required the setting-up of a strong manufacturing, in addition to a policy that mitigates existing barriers and incentives programs for investors. In the meantime, the three
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technologies for power generation are positioned with respect to conventional systems from the perspectives of environmental impacts, revenues of CER (Certified Emission Reduction) and the elimination of the subsidy burden for energy generation cost.
Evolution of Installed Wind Technology in Power Generation for Egypt
Evolution of Installed CSP Technology in Power Generation for Egypt
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Evolution of Installed PV Technology in Power Generation for Egypt
Market Volume in Power Generation Sector of Egypt for all Scenarios (Million US$)
There is a significant incentive due to CER from a private sector partnership perspective. Calculations based on the eliminated amount of carbon dioxide per each generated kWh via RESPG and an average estimated value for the CER (10 US$/ton of carbon dioxide), give values ranging from 10 to 14 US$/ton (although the 10 US$ per ton is considered as a conservative value for scenario analysis).
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3.3 SWOT ANALYSIS

As for Tunisia, it has been provided a SWOT analysis of Egypt. SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It represents an essential instrument for making strategic decisions, because it specifies the objectives of the business venture or project and identifies the internal and external factors that are favorable and unfavorable to achieve them. Weaknesses Many barriers and weaknesses are hindering the development of the renewable energy sector, such as the economic and financial barriers due to subsidized conventional energy prices and the absence of welldefined legislation supporting RET; the institutional barriers of having two ministries responsible for energy issues that make integrated energy planning more difficult; and market barriers. In particular: High investment required for RETs; Low current energy prices applied to different consumption categories; In the power generation sector of Egypt, the use of RET such as wind, concentrating solar power, and photovoltaic to generate electricity needs regulations and legislation. These regulations and legislation will have to consider the effect of tariff in motivating partnerships in the private sector; The lack of RE cost-competitiveness compared with conventional energy; The impact of the depletion of national oil resources on the national energy security and the national balance of payments. It encourages the Government to look for the development of alternative sources of national energy supply. The rapid transformation of Egypt from an oil exporter into an oil importer has led to concerns in the population about a repetition of the situation in the natural gas sector. In newspapers there are Complaints about the sell-out abroad of exhaustible national resources which should be used by future national generations; A last factor is the need to make Egyptian manufacturing more effective in capturing international market share, creating new employment and improving the balance of payments. Two international developments favour the emergence of a new industrial development policy: the coming into force of the free-trade agreement with the EU and the growing international concern about the destabilizing impacts of Chinas huge trade surpluses. This forces China to increase gradually its currency value, making Egyptian production more cost-competitive. Moreover, it motivates EU politicians to encourage EU industries to look at the out-sourcing in the Mediterranean Arab countries as an alternative to China. Government drive for modernization and productivity improvements, in the industry and services sector, includes efforts to use energy more efficiently. As part of the efficiency drive, subsidies to commercial energy products are eliminated in Egypt; the poverty impact of that is alleviated by well-targeted support to the poorest households. Another key effort includes a vast expansion of public and private investment in R&D, highlighted by the fact that the share of high-technology exports, as a percentage of total manufactured exports in 2005, amounted to a more 0.6%. Since RE is acknowledged as an area of natural competitive advantage for Egypt, due to the high quality of national RE sources, the development of the national RE industry is benefiting from favourable attention in terms of funding and policy. Inadequate financing instruments for RE projects on national level (grants, bonds, soft loans, RE funds, etc..) Lack of rules and legislation for quality assurance, standardization and certification of all renewable energies components and systems. Lack of expertise of the consultants and lack of mechanism. credible ESCOs with an adapted financing
Inadequate information/expertise. Inadequate information, awareness and promotion among potential public and private users. Threats But many threats are hindering the development of this sector and in particular:
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Egyptian government could delay the formulation and passage of a bill on renewable law. The contribution of RE in the energy balance remains limited due to a lesser competitiveness of renewable energies than conventional ones. The destabilizing impacts of Chinas huge trade surpluses. An inadequate institutional and administrative skill at managing, co-coordinating and implementing suitable Energy policy. The bad perception of renewable energy opportunities. The confirmation of the ability of the ESCOs to enter the energy market with sufficient capability to design and implement a range of efficiency improvements
Strengths Favourable geo-climatic conditions. Egypts consistently hot climate, high-speed wind and the abundance of agricultural land give it a competitive advantage in renewable energy production. Furthermore, its proximity to European energy markets and energy-equipment manufacturers make it an attractive investment option; Highest Wind Electricity Generation in Region. With Egypt producing almost 57% of the region total wind energy, it has already become the leading producer ahead of Morocco, Iran and Tunisia. Furthermore, Suez Canal area has one of the highest consistent wind speed in the world of 10 m/s. Other important areas include the western and eastern deserts, in addition to the Red Sea coast along the Gulf of Aqaba; High-Intensity Solar Radiation. The high intensity of direct solar radiation (2,000-2,600 KWh/m2) in Egypt shows great potential for solar energy development, especially in Upper Egypt; Longer Hours of Sun and Wind Operation than in Europe. Every year, Egyptian primary locations offer 2,400 or more hours of solar operation, compared with the maximum 1,900 of the European next-closest countries, Spain and Greece. As for wind energy, the hours of operation in areas with the highest speeds can reach up to 3,900 hours per year; Stable and Investor-Friendly Government Incentive System. Proving its commitment to the RE sector, the Egyptian government is currently developing an investor-friendly incentive system based on successful European models. The government plans to introduce a feed-in tariff and a seamless licensing process to boost private investment. Furthermore, it will reduce the cost of infrastructure investment for foreign renewable energy companies by identifying logistically suitable areas and, at the same time, providing the locations with connection access to the national grid; High Degree of Public Acceptance. Wind projects and biomass plants will provide an estimated 40 jobs per project. In addition, cultivation of plants for bio diesel production could result in 3,0005,000 new job openings, thus creating job opportunities to help the boost countrys economy and RE public image sector. Opportunities Logistical Advantage for Bio diesel Production. Egypt has a logistical advantage in bio diesel production: the country has a competitive labour force, a stable and hot climate that facilitates plant growth, and an abundance of affordable land for plant production. The government plan indicates that biomass will generate an expected share of 1,500 MW worth of electricity by 2020; There are many investment opportunities and projects (over 40 projects proposal for CDM) The depletion of national oil resources will encourage the Egyptian Government to develop RE. There will be an expansion of public and private investment in R&D, highlighted by the fact that the share of high-technology exports, as a percentage of total manufactured exports, amounted to more than 0.6% The presence of international high pressures and institutional commitments to reinforce the use of renewable energies and the reduction of CO2 emissions.
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The opening of the Energy market and the processes of liberalization the Egyptian Government has already put into action.
SWOT ANALYSIS TABLE Weaknesses Strengths

geo-climatic conditions. Egypts consistently hot climate, high speed wind and abundance of agricultural land give it a competitive advantage in renewable energy production
2. Biodiesel - Egypt has a stable and hot climate which facilitates plant growth and an abundance of affordable land for plant production. 3. Proximity to Global Markets. Shipping perishable goods, commodities, manufactured articles, services and energy, from Europe, Arab world, Africa are all ready accessible from Egypt. 4. Large Consumer Market. The sheer size of Egypts population, as well as the doubling of per-capita income to EGP 10,055 in 200/07 from EGP 5,548 in 2000/01 have transformed Egypt into a consumer market of significant importance. 5. High Degree of Public Acceptance. Egypt is a stable 1. Favourable 1. Density of population, desertification, urbanization and pollution from urban and industrial sources stress on Egypts environment. 2. High investment required for RETs and lack of access to the technology/know how. 3. The low current energy prices applied to different
consumption categories. The prices of fossil fuels, natural gas and electricity have been kept stagnant over the long period, despite the increase in production costs. The result has been an inefficient use of energy and has depressed private investor interests.
4. The impact of
the depletion of national oil resources on the national energy security and the national balance of payments.
5. Lack of cost-competitiveness of RE compared with conventional energy. 6. Inadequate financing instruments for RE projects on national level (grants, bonds, soft loans, RE funds, ect..) 7. Lack of rules and legislation for quality assurance, standardization and certification of all renewable energies components and systems. 8. Lack of expertise of the consultants and lack of credible ESCOs with an adapted financing mechanism.
country with tax and financial incentives. Egypt was the first Arabian and African country to sign the OECD Declaration on International Investment and Multinational Enterprises. Egypt is the number one destination for FDI in Africa.
Opportunities
1. Logistical Advantage for Biodiesel Production. 2. There are many investment opportunities and projects (over 40 projects proposal for CDM) 3. The depletion of national oil resources will encourage the Egyptian Government to develop RE. 4. There will be an expansion of public and private investment in R&D, highlighted by the fact that the share of high-technology exports, as a percentage of total manufactured exports, amounted to more than 0.6% 5. The presence of international high pressures and
9. Inadequate
information/expertise. Inadequate information, awareness and promotion among potential public and private users.
Threats
1. Egyptian government could delay the formulation and passage of a bill on renewable law. 2. The contribution of RE in the energy balance remains limited due to a lesser competitiveness of renewable energies than conventional ones. 3. The destabilizing impacts of Chinas huge trade
surpluses.
4. An inadequate institutional and administrative skill
institutional commitments to reinforce the use of renewable energies and the reduction of CO2 emissions.
6. The opening of the Energy market and the
at managing, co-coordinating suitable Energy policy.

5. The
and
implementing energy
processes of liberalization the Egyptian Government has already put into action.
bad opportunities.
perception
of
renewable
6. The confirmation of the ability of the ESCOs to
enter the energy market with sufficient capability to design and implement a range of efficiency improvements
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3.4 INVESTMENT OPPORTUNITIES

The government of Egypt undertook important Reform measures which have played a key role in improving the Egyptian, Arab and foreign investment, in addition to instigate and sustain high levels of growth and employment creation. As a result, there was the increase in the number of newly established companies as well as the expansion of companies already in operation. Investment under the free zone system and investment zones system is one of the most important types of investments, because they provide investment incentives and guarantees that encourage investments and attract foreign direct investment (FDI). Moreover, free zones provide taxation and customs exemptions. Besides, investment zones, which are a recently devised system, give investors a package of facilitations; thus strengthening the national economy, increasing average Egyptian exports, and creating job opportunities. Although renewable energy is a quite virgin market in Egypt, it is an attractive investment opportunity because of the countrys strategic location and the governments commitment to increase its renewable energy output. Egypt has an abundance of land, sunny weather and high-speed wind, which are the main resources for the three renewable energy sources: wind, solar and biomass. In 2008, the New Renewable Energy Act (NREA) created a new policy framework that promoted an investorfriendly system and encouraged foreign as well as private sector involvement. To meet its target of 20 percent of energy from renewable sources by 2020, Egypt plans to use $300 million in concessional financing from the fund, combined with financing from the World Bank Group, the African Development Bank, bilateral development agencies, private sector and other sources to spur wind power development and introduce clean transport options. Under business-as-usual conditions, Egypt could face a 50 percent increase in greenhouse gas emissions from 2007 levels in the electricity sector alone. Electricity and transport contribute over 70 percent of the greenhouse gas emissions in the country. National Development Plan and EEHC plans indicate what share of the thermal plant would be steam turbine and what would be combined cycle gas turbine. The plans foresee a persistence of the present role of fossil fuels. Gas will be the favourite and dominating fuel, while oil will continue to be used in its current role as a balancing fuel to ensure that export commitments for natural gas can be met. Developments in fuel markets could possibly change this consideration, but gas and oil prices are strongly linked and it is likely that gas will have a dominant role. The possibility of new hydro going forward is severely limited, moreover, within the next 20 years, a largescale solar development is not a significant possibility because there is no national target or road map and the Mediterranean Solar Plan envisages less than 1 GW of capacity within the period (Minister, 2008). It is much more important the potential role for wind. Egypt hopes to change its scenario by realizing a 7200 MW wind power capacity by 2020, cutting vehicle emissions in heavily populated regions through improved public transportation systems and making industry more energy efficient. These foresee a potentially very large expansion from the current 310 MW to 5,000 and 10,000 MW in the next 20 years. Such plans will be implemented through a right coordination with natural gas planning. The major impact in the future development of Egypt and other countries in North Africa, could be the use of their excellent wind and solar resources to generate electricity for export to the European Union via a Mediterranean ring or an undersea cable (Minister, 2008). Egypt is interested in RE electricity, because it may qualify for European renewable incentives, which are currently far more valuable than carbon credits under the Clean Development Mechanism (CDM) of the Kyoto Protocol. In order to develop such opportunities, major new electricity transmission infrastructure would be required, along with agreements governing the eligibility of electricity generated. Both will represent the major unprecedented challenges. Egypts trade of electricity is low (2006 saw net exports of 0.3 per cent of Egypts generation (IEA, 2006a) with a slight increase to 0.45 per cent in 2007/08).
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Incentives Given to Renewable Energy Projects. - Concluding long-term agreements (20-25 years) with private sector companies in the Renewable Energy Sector to cover their cost of production and return on investments. - Exempting renewable energy equipments from customs and tariffs. - The technology behind PV applications is expensive, yet savings in network construction and free land offerings compensate the high setup cost. Here the most important investment opportunities proposed from National Development Agency GAFI: Biomass Plant in Qena Governate There are plans to develop a 15-MW biomass plant in the governorate of Qena, where sugarcane is extensively cultivated. Its bagasse (refuse) can be processed into electricity. The US$ 22 million investment would require 135,000 tons of feedstock per year and would create employment for 40 workers in plant operation and maintenance. There is also a biomass technology project under development for a prototype plant, in cooperation with academic institutions such as the University of Arizona. The Egyptian government is also considering a project, in cooperation with the Italian government, that would use solar PV technology to supply power to rural areas. A solar-thermal combined plant, which combines solar power and cycle islands to produce a total 150 MW, is currently under development and was due to be completed by mid-2009. Wind Turbine Manufacturing The Egyptian government is seeking to develop selective wind turbine components to serve the increasing demand of local and regional markets. The goal is to start by manufacturing turbine towers and blade facilities for the local market (large enough to supply 400 MW yearly), then to supply products to the emerging North African and Middle Eastern markets. The blade-manufacturing project alone requires an estimated investment of US$ 59 million, while the tower industry is estimated at US$ 147 million per year and will provide employment for 400 workers. The blade industry itself would be a highly valuable export commodity, as Egypt has the supporting logistical infrastructure to export the blades to its neighbouring countries. According to NREA: - In 30/5/2009, a presidential decree had been announced to allocate 292.4 thousand feddans in West Suez Gulf for the establishment of wind stations with a maximum height of 120 m and will be offered by usufruct. - In 17/9/2009, another presidential decree has been announced to allocate lands in Beni Sueif, Menia, and Assiut with a total area of 1.5 million feddan. The land is for the establishment of wind stations with a maximum height of 150 m and will be offered by usufruct. Wind Power In 2009, 65 MW of wind power was added in Egypt, bringing the total installed wind farm capacity to 430 MW at the end of 2009. Thanks to the Egyptian governments commitment to develop the countrys renewable energy potential and successful international cooperation, Egypts renewable energy market has gained momentum over the last two decades. The New & Renewable Energy Authority (NREA) was set up in 1986 with the objectives to assess the countrys renewable energy resource and to investigate technology options through studies and demonstration projects. Another aim of NREA has been to introduce mature technologies to the Egyptian market and to support the activities of the domestic industry. Since the 1980s, a large-scale grid, connected wind farm projects, have been planned and implemented in Egypt. In 2009, 65 MW of wind power was added, bringing the total installed wind capacity to 430 MW at the end of 2009. An excellent wind resource Egypt enjoys an excellent wind regime, particularly in the Gulf of Suez, where wind speeds average reach 10 m/sec. Egypt cooperated with Denmark to develop a wind atlas, published in 1996, for the Gulf of Suez west coast. In 2003, a detailed wind atlas for the same area was issued, concluding that the region can host several large scale wind farms. The atlas was expanded to cover the entire country in 2005 and to establish the meteorological basis for the assessment of wind energy resources all over Egypt. The atlas indicates that
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large regions of the eastern and western deserts of the Nile River and parts of Sinai have annual wind speeds average of 7-8 m/s. Egypt has large deserts and abundant land mass, the majority of which is only scarcely populated. These areas are well suited to host renewable energy projects, both to increase the countrys share of renewable energy as well as to export excess energy to Europe. Large areas with high wind power potential are already earmarked on the west of the Gulf of Suez, as well as the eastern and western deserts of the Nile River banks. Land use agreements for these areas will be signed with qualified wind farm developers. In addition, the Egyptian national grid is extensive, providing over 99% of the population with modern electric energy services. Currently, grid connected renewable energy projects enjoys priority in dispatching. In February 2008, the Egyptian Supreme Council of Energy approved an ambitious plan to produce 20% of total electricity from renewable energy sources by 2020, including a 12% contribution from wind energy. This translates into more than 7,200 MW of grid-connected wind farms. The plan gives enough room for private investors to play a major role in realising this goal. In order to achieve its ambitious renewable energy target, the Egyptian government has earmarked 7,600 square kilometers of desert land for implementing future wind energy projects. All permits for the land allocation have already been obtained by NREA. A draft for a new electricity act was published in 2008, and is still undergoing consultation with stakeholders. This draft aims to reflect the ongoing market reforms and to strengthen the regulatory agency. It includes articles supporting renewable energy through encouraging private investment in the sector. In addition, it guarantees third party access and priority dispatch for renewable electricity. No progress on this act was made in 2009. Polices to foster an increasing wind contribution in the Egyptian electricity mix consist of two phases. Phase I will use a competitive bids approach, through international tenders requesting bids from the private sector to supply energy from renewables. The financial risk for investors is reduced through guaranteed long term Power Purchase Agreements. Tender documents for the prequalification of the competitive bids were issued in May 2009, and 34 offers were received by the August deadline, including both domestic and foreign wind turbines companies. 10 developers have been shortlisted. Phase II will introduce a feed-in tariff, taking into consideration the prices achieved in Phase I. GULF of EL ZAYT An area north of Hurgahda in the Gulf of El Zayt has an excellent wind regime and was dedicated for developing wind energy projects. In addition to 5 MW already operating, there are currently about 720 MW in various phases of development in cooperation with Germany, the European Investment Bank, Japan and Spain. For the first 120 MW, an environmental impact assessment is currently being finalised and is scheduled to be published in March 2010. Another 200 MW IPP wind farm is planned in cooperation with MASDAR of the Abu Dhabi Government. BUILD-OWN-OPERATE (BOO) WIND Farm Project at GULF of EL ZAYT In May 2009, the Egyptian government floated an international tender for a wind farm at the Gulf of El Zayt. In cooperation with the World Bank, it invited private international and local developers to submit their prequalification documents for the first competitive bid to build a 250 MW wind farm. The sale of the rights for this wind farm will be for a build-operate-own (BOO) operation, which means that the developer will be responsible for the planning, construction and operation of the wind farm. The power produced will be sold to the Egyptian Electricity Transmission Company (EETC) under a 20-25 year Power Purchase Agreement (PPA). Egypts Central Bank will guarantee all financial obligations of the EETC under the PPA. All renewable energy equipment will be exempt from customs duties, and the projects will benefit from carbon credits through the Clean Development Mechanism. Following the tender, 34 offers were received and a short list of 10 qualified developers was announced at the beginning of November 2009. The bidders will compile their final bids to be submitted in early 2011. The wind farm is scheduled to be operational at the beginning of 2014. An environmental impact assessment, which will also include a bird migration study, will be prepared by NREA in cooperation with international consultants, and financed by the German Kreditanstalt fr Wiederaufbau (KfW). The experiences gained through a series of competitive bids for private wind energy projects will pave the way to develop a commercial framework for wind energy in Egypt.
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Giza North Power Project In June 2010, The World Banks Board of Executive Directors approved a loan in the amount of $ 600 million for Egypt to support Giza North Power Project. According to World Bank, the project will support the Government of Egypts power sector investment plan to meet the growing electricity demand in the country and ensure access to reliable supply of power all prerequisites for sustaining economic growth and achieving the countrys social development agenda. The project will be owned and operated by the Cairo Electricity Production Company (CEPC), a subsidiary of Egyptian Electricity Holding Company (EEHC). The World Bank is currently involved in assisting the Government of Egypt to attract private investment in traditional and renewable power generation technologies and to implement the countrys ambitious program for scaling up the development of wind and solar power plants. The objective of the Giza North Power Project for Egypt is to contribute to improve the security and efficiency of electricity supply by adding a new generation capacity based on the most efficient thermal power generation technology. Key performance indicators include the installed capacity of the plant; electric energy generated annually by the power plant; and the ratio of thermal efficiency of the plant versus the average thermal efficiency of the existing fleet of plants in the base year. The Giza North power plant is an important addition to the capacity of Egypts power system to provide electricity and thus help sustain economic growth and social development. Egypt clearly needs the projects capacity as the existing fleet of generation plants is insufficient to maintain reliable supply of power, given that demand is expected to keep increasing under all reasonable economic development scenarios. There are three components in the project. 1. The investment part of the proposed project comprises development and construction of a 1,500MW combined cycle gas turbine (CCGT) power plant at Giza North near Cairo. The plant will use natural gas as the main fuel and light diesel oil as a back-up. The plant will be owned and operated by the Cairo Electricity Production Company (CEPC), a subsidiary of EEHC. 2. The power plant will include two 750-MW modules, each module consisting of two 250-MW gas turbines (with an electricity generator for each turbine), two multi-pressure heat-recovery steam generators (HRSG), and a 250-MW steam turbine driving an electricity generator. Step-up transformers and a switchyard are also included in the project, with a number of other auxiliary systems. The specific project components include the following2: (i) four 250 MW gas turbines; (ii) two 250 MW steam turbines; (iii) four heat recovery steam generators (HRSG); (iv) water systems including cooling water, condensate system (deaerator, condenser, etc.), feedwater heaters, service water and waste water treatment; (v) electrical system including transformers and switchyard; (vi) auxiliary systems including diesel generator, uninterruptible power supply (UPS), compressed air, fire protection, heating-ventilating and air conditioning (HVAC), etc.; (vii) distributed control system and instrumentation; (viii) the implementation of the Environmental and Social Management Plan (ESMP) including environmental monitoring equipment; (ix) civil works; (x) engineering and project management services including design, procurement, construction supervision, commissioning, testing and start-up; (xi) wrap-up insurance. The project will include transmission lines to connect the plant to the national transmission grid, and gas pipeline to connect the plant to the gas pipeline system for fuel supply. 3. The technical assistance associated with the project includes the following components: (a) Support for promotion of private sector investment in electricity generation, including the process of selecting private developer for the IPP at Dairut (already announced by the government); (b) Development of a power sector strategy for the power sector for the next 7-10 years, focusing on attracting additional private investment (beyond the Dairut IPP) and associated tariff and other policies to facilitate efficient financing of investment needs; and (c) Support for promotion of energy efficiency. 4. The Techincal Assistance activities will be completed during the first two years of project implementation and financed through a combination of trust funds, Bank budget, and borrowers contribution.
The list of project components to be refined during project appraisal

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The project will be implemented between 2010 and 2014. Implementation arrangements will be by CEPC Cairo Electricity Production Company. The technical assistance components will be implemented at the level of Minister of Energy for private investment and power sector strategy and through an interministerial coordination group for energy efficiency. Transmission line, connecting the power plant with the national transmission network, will be implemented by EETC - Egyptian Electricity Transmission Company. Construction of the natural gas pipeline to connect the plant to the gas network will be the responsibility of the regional gas supply company.
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3.5 SUCCESS STORIES

SIEMENS For 109 years, Siemens has been active in Egypt, where it holds leading positions in its Industry, Energy and Healthcare Sectors, while Siemens IT Solutions and Services functions across all three Sectors. About 40 high voltage substations and a recently completed 3,035-MW gas turbine plant from Siemens are ensuring the reliability of the countys power supply. In Egypt Siemens scored its major successes in energy sector. Egyptian Ministry of Electricity and Energy awarded Siemens two contracts for air insulated switchgear (AIS) turnkey projects. The first substation (220/22kV, 2x125 MVA) is located in EL-Zafarana, while the second substation (66/11kV) is in EL-Sail in Upper Egypt. The goal of these projects is to increase the capacity of electricity and to ensure a reliable supply to Egypts transmission and sub transmission network. Two other turnkey substation projects were also signed with the Ministry of Electricity and Energy for gas-insulated switchgears (GIS). The first substation (220/66kV) is located in El-Atf and the other substations (220/66kV, 2x125 MVA) are in Samalout and Naga Hamadi. Siemens signed a four-year-long operating plant service agreement with East Delta Electricity Production Company for six SGT5-2000F gas turbines in the Damietta Power Station. The Oil & Gas Division signed a contract with Burullus Gas Company for the supply, erection and commissioning of two SGT-400 turbines with cogeneration technology in Burullus. Through its Power Generation business, Siemens provides the energy to power Egypt towards a bright and sustainable future. Today the company generates approximately 40% of Egyptian installed thermal power capacity, supplying electricity around the country by delivering highly reliable and durable turbines to power plants in locations such as Ataka, Damietta, Cairo West, Shoubra El Kheima, Sidi Krier and Ayoun Moussa. In addition, the group was awarded contracts to supply, erect and commission eight gas turbines with a total output of 2000 MW for the Combined Cycle Power Plant projects in Nubaria, Talkha and El-Kureimat. The history of Siemens in Egypt dates back to 1901, when Siemens opened its first technical office in Cairo. The companys long-term commitment to Egypt was under-scored in 1992, when Siemens Limited was established to handle all Siemens sales and service activities in Egypt. Since October 1998, Siemens Limited has been a consolidated Regional Company, with the goal of further expanding and strengthening Siemens' business relations with Egypt. On October 1st, 2008, Siemens Limited changed its legal form to become Siemens S.A.E. During the past 109 years, Siemens has developed into a long-term, reliable and committed partner with Egypt. Siemens is a key collaborator and supporter of education reform through the Egyptian Education Initiative (EEI), a reference Public/Private Partnership (PPP). HYBRID SOLAR PLANT IN KURAYMAT Egyptian general contractor Orascom Construction Industries, together with German technology company Flagsol GmbH, a subsidiary of Solar Millennium AG, is carrying out the design and construction of the first parabolic trough solar field in Kuraymat, south of Cairo, with the plant due for completion in summer 2010. The hybrid power plant, with an output of 150MW, uses both natural gas and solar thermal energy. The location of the hybrid power plant is ideal. It is on the banks of the Nile 95 kilometres from Cairo and it has an annual direct-normal irradiation of over 2.400 KwH per square metre. It comprises high annual direct normal irradiation, flat land, access to natural gas, cooling water and connection to the grid. Solar energy from a parabolic trough solar field can be integrated with a combined cycle to increase the efficiency even further and to decrease the already low emissions. This is accomplished in an integrated solar-combined cycle system (ISCCS). The setting up of hybrid energy centres is gaining momentum, i.e. combining two renewable resources abundant in a particular area. ITALGEN Italcementi Group Italgen is an electricity generator and distributor trading on the international market. Italgen S.p.A. was established in 2001 with the aim of enhancing the energy-related assets of Italcementi Group. Italgens sustainable projects of international development are actually focusing on the construction of wind farms in some areas of the Mediterranean basin and in Eastern Europe, including Egypt, Morocco and Turkey. In Egypt at Gulf El Zeit and in Morocco at Laayoune, Italgen is committed to building two wind farms with a capacity of 120 and 50 MW respectively. The Gabal El-Zeit Project on the Red Sea coast is a US$ 880 million wind park to develop within 2010. The project investor Italgen, a subsidiary of Italcementi Group, is
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currently conducting a feasibility study on the project, which may be developed in cooperation with foreign partners. When the plan comes into operation, it will generate an output of 350 GWh per year, and it will cut carbon dioxide emissions by 500,000 tons per year. The plant is expected to employ up to 40 workers for plant maintenance, in addition to more than 100 workers in the construction of the wind farm. The ZAAFARANA WIND PARK Project is a German, Danish, Spanish and Egyptian joint venture operating since 2001. Located 120 km south of Suez on the Red Sea, the park currently boasts a capacity of 80 MW and will have a total output of 160 MW once completed. The project is being built progressively in three phases: Nordex, a German wind generator manufacturer, realized the first phase of the project, while joint bidders Vestas Deutschland GmbH and ABB New Ventures are undertaking the second and third extension phases. The final phase is valued at around 75 million. Vestas GmbH is a subsidiary of the Vestas Wind Systems A/S group, the global market leader in wind generator manufacturing. The companys main areas of activity include wind generator development, production, sales, marketing, installation and servicing. Vestas customers benefit from the company's global experience and a closely-knit network of sales and service stations. A Vestas unit is designed to operate for twenty years, which means that long-term support guarantees are an important factor. Spanish WIND TURBINE MANUFACTURER GAMESA will install 280 turbines in the farms second phase. The value of Gamesas contract is estimated to be 280 million, making Gamesa the largest wind turbine supplier in Egypt, with a 400-MW capacity. Altogether, the wind park will be feeding an anticipated 300 GWh per annum into Egypts national grid, while saving more than 180,000 tons in CO2 emissions. EL SEWEDY CABLES has launched a wind energy group to build turbines in Egypt in line with the government's plan to increase renewable energy use and expect sales of 434.6 million Euros ($584 million) by 2011. El Sewedy Cables created the SWEG - Sewedy Wind Energy Group buying a 30 percent stake in Spanish wind energy equipment manufacturer M.Torres Olvega for 40 million Euros. The group will be able to provide all the products that are required to build a wind farm: turbines, blades and towers. In particular the largest Arab cable maker has established two companies, which aim at working in the field of wind energy, they are: - SWEG, which is the unit responsible for the production of wind tribune components and wind farms implementation. SWEGs industrial compound includes: (1) Wind turbines assembly factory with 240 MW production capacities. (2) Wind towers production factory that reaches 300. (3) Wind tower Rotor blades production factory is expecting to double the capacities of its three factories within 5 years as per the company's business plan. The surplus capacity of the towers and blades factory will be exported to Africa, Middle East and Europe. - SIAG Elsewedy Towers (SET) is a joint venture between SIAG Schaaf Industrie Aktiengesellschaft, a leading German steel manufacturer, and Elsewedy Cables. The new tube tower plant is the first major investment outside the European continent for SIAG. It also represents an important step for wind power on the African continent. As for Elsewedy Cables, the new project is a strategic move towards providing complete solutions in the wind energy branch, including towers, wind turbine generators, blades, and turnkey solutions for wind farm projects. Wind energy resource assessment and development With its 230 MW installed capacity wind farms, Egypt beats all other African and Middle East countries in grid-connected wind power generation. Since the late 70s, Egypt started considering the use of RE when several bilateral and multilateral agreements were signed and implemented, to explore the potential for RE use. RE resource assessment studies were conducted and confirmed the great wind potential of the Gulf of Suez. The results stimulated worldwide interest in developing further studies, along with implementing pilot and field-testing projects. The success of these projects, coupled with the elaboration of a Wind Atlas for Egypt, allowed the country to grow towards large-scale commercial utilization. It was of equal importance the willingness of developed countries, which already have an advanced record in wind resource utilization and its equipment manufacture, to cooperate with Egypt and offer adequate financing facilities from the beginning, particularly to compensate for the higher cost of RE compared to
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conventional energy and enable wind power projects development. These countries are Germany and Denmark, followed by Spain and Japan. The development of large-scale grid-connected wind farms has had several benefits for the country, either directly or indirectly, including: saving of natural gas and oil, contributing to capacity building and the transfer of know-how, protecting the environment through the use of clean energy, contributing to develop remote desert areas, and stimulating local manufacture (of about 25%) of wind project material. The Energy Efficiency Labelling (EEL) for household appliances. The Energy efficiency label is what consumers actually see when they go to purchase an appliance. It provides consumers with information to make aware choices, encourages manufacturers to improve the energy performance of their models, and encourages distributors and retailers to display efficient products. Egypt has already developed and issued three standards (together with its corresponding labels) for three electric appliances, namely refrigerators, air conditioners, and washing machines. The Egyptian Government succeeded in obtaining a fund for the establishment of an accredited energy efficiency-testing laboratory to support the national energy efficiency standards and labelling program. The energy efficiency testing laboratories for washing machines and refrigerators were completed and ready for testing in 2005. However, the air conditioners laboratory only became operational during late 2006.
Co-funded by the EU
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Annex I List of Tunisian Actors and Contacts

Al-Karim HSSQ Group (AL KARIM) - El Menzah, Tunisia Office Location: Villa 12 Rue Emir Abdelkader El Menzah Tunisia Villa 12 Rue Emir Abdelkader El Menzah 2078 Tunisia Tel. +216 71 767 064 Fax +216 71 233 164 website http://www.mbendi.com/orgs/1415/e685.htm BRITISH GAS Ltd Imm Ben Abdallah, Les Berges du Lac, Tunis, 1053, Tunisia Tel. (+216) 71 862 088, (+216) 71 862 117 fax, http://www.bg-tunisia.com DIAR Tournes 5, Rue Tazarka Ville Megrine coteaux Tel. (+216) 71433934 Fax (+216) 71426046 www.diartounes.com.tn Energy & Environment Engineering (3E) Espace de Tunis,Bloc E 4me & 5me tages Rue 8011 Montplaisir 1073 Tunis,Tunisie Tl + 216 71 902 007 - Fax : +216 71 904 182 www.engineering-3e.com ENI Spa Exploration & Production Eni Tunisia B.V. (Filiale) Residence "H" Maghrebia Assurance Berges Du Lac - 2045 - Tunisi tel. (0031) 20 5707100 Gas & Power Trans Tunisian Papeline Company Limited. Centre Urbain Du Nord - Boulevard 7 Novembre - 1082 - Tunisi www.eni.com ENOVE 28, rue 8601 Zone Industrielle de la Charguia 1, 2035 Tunis Carthage, Tl: (+216) 71 207 100 Fax : (+216) 71 207 79 E-mail : enove@groupebismuth.com - www.groupebismuth.com/enove Ministry of Industry and Energy - General Directorate for Energy (DGE) Immeuble SAADI, tour AB,Appt 26 - 1082 El Menzah IV Tunis. Tunisie Tel: + 216 71 230 503 Fax: + 216 71 230 513 Website: www.tunisianindustry.nat.tn National Agency for Energy Efficiency (ANME) 3, r. 8000 1073 Montplaisir Tunis Tel. 71 90 69 00 71 90 57 23 Fax: 71 90 46 24 Email: boc@anme.nat.tn Website: www. www.anme.nat.tn National Environment Protection Agency (ANPE) 15, R 7051 Centr Urbain Nord , Cit Essallem 1082 Cit Mahrajne Tunis Tel. 71 23 36 00 71 75 33 54 Fax: 71 23 28 11 Email: b.o.c.anpe@anpe.nat.tn National Oil Distribution Company (SNDP)
Co-funded by the EU
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AV. Mohamed Ali Akid, Cit Olympique 1003 Cit Khadr (Tunis) Tel. 71 70 32 22 71 70 72 22 Fax 71 70 43 33 Email: boc@agil.com.tn Website : www.sndp.com.tn Socit Tunisienne dElectricit et du Gaz (STEG) 38 rue Kamel Ataturk 1080 Tunis BP 190, 1080 Tunis Cedex, dpsc@steg.com.tn Tel: (+216) 71 341 311 - Fax: (+216) 71 330 174 (+216) 71 349 981 (+216) 71 341 401 website http://www.steg.com.tn Website: www.steg.com.tn TechSol Rue des usines, Z.I. SIDI RZIG, 2033 Megrine, Tunisie Tel. (+216) 71433299 Fax (+216) 71425988 www.tecno-sol.com Tunis International Centre for Environmental Technologies (CITET) BD YASSER ARAFAT 1080 TUNIS CEDEX TUNIS TEL 71 20 64 82 71 20 66 46 Fax 71 20 66 55 - 71 20 66 42 Email boc@citet.nat.tn Tunisian Company of the Oil Activities (ETAP) av. Majida Boulila 3000 SFAX SFAX Tel. 74 40 24 77 74 40 24 76 Fax: 74 40 24 78 Email: etap-sfax@tunet.tn Website: www.etap.com.tn Tunisian Refining Industries Company (STIR) Zarzouna Raffinerie BP 45/46 - BIZERTE Tunisie Tl. :+216 72 592 744 Fax : +216 72 590 457 E-mail :stir@stir.com.tn website: www.stir.com.tn VARAT TUNISIE Z.I. Route du Bac 2040 Rades-Tunisie Tel: (+216) 71 44 85 25 - Fax: (+216) 71 44 98 82 E-mail : info@varat-tunisie.com - website: www.varat-tunisie.com
Co-funded by the EU
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Annex II - List of Egyptian Actors and Contacts

- Academy of Scientific Research and Technology (ASRT) 101 Kasr Al-Aini Street 11516 Cairo, Egypt Tel: +20 227921267 - 227921266-227921265 Fax.: 27921270 \Post: 11.516 E-mail :info@asrt.sci.eg sito web http://www.asrt.sci.eg - Arab Office for Youth and Environment (AOYE)
3A Masaken Masr Leltaameer Zahraa El-Maadi St., Zahraa El-Maadi, Cairo, Egypt.
2 Magless El Shaab Cairo, Egypt. Tel: +20 25161519/245 - Fax : +20 25162961 E-mail: aoye@link.net - Website: www.aoye.org - ASET - Arabian Solar Energy & technology Co. 11, Rue Sherif Cairo Egypt Tel. +20 23936463 Fax +20 23929744 www.asetegypt.com - Atomic Energy Authority 3 Ahmad El Zomor St., El Zohoor Dist., Nasr City, Cairo, Egypt. Children Village P.O. , P. Code 11787 Tel.: +20 22876033 - 2875924 Fax: +20 22876031 - Arabian Solar Energy & Technology Co. (ASET) 11 Sheriff St. Downtown, Cairo, Egypt Tel. 2002 23936463 - 012-7323890 Fax 0220 23929744 website: http://www.asetegypt.com/ - BIC for Electronics Environment and Energy 9 Marouf St. Downtown, Cairo, Egypt Tel. +20 225798334 Fax: +20 225744057 - City Pulse - Trade & Marketing CO. 20 Road N 213, Degla Maaidi El Cairo Egypt Tel. +20 22521078 Fax +20 225212076 Website: www.cpsolarenergy.com - Egyptian Electricity Holding Company (EEHC) Tel +20 224030681 fax: +20 224031871 sito web: www.egelec.com email: isatseehc@yahoo.com - Egyptian Gas Holding Company (EGAS) Al Nasr Road, Abbas Al Akkad Street Nasr City P.O. Box 8064 Cairo 11.371 Egypt Tel: +20 2-2405-5801 +20 2-2405-5802 +20 2-2405-5803 +20 2-2405-5804 Fax: +20 2-2405-5876 Email: egas@egas.com.eg Sito web: www.egas.com.eg - Egyptian Environmental Affairs Agency (EEAA) 30 Misr Helwan El-Zyrae Road, Maadi, Il Cairo, Egypt Tel. +20 225256452 Fax +20 225256490 Email: eeaa@eeaa.gov.eg - Ewbsite: www.eeaa.gov.eg - Egyptian Energy Service Business Association (EESBA) 21 Giza Street, Nile Tower, Giza, Egypt PO Box 265 Orman
Co-funded by the EU
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Tel +20 235723020 35736030 Fax +20 235737258 - 35723855-35681014 Email: eba@eba.org.eg website: http://www.eba.org.eg/ - Egyptian Solar Energy Society (ESES) P. O. Box: 487 Dokki, Egypt Tel: +20 23452850 Fax: +20 25561236 - Egyptian Solar Energy Society New Maadi - Il Cairo - Egypt Tel.: +20 25194376 Fax: +20 25194358 website http://www.solaregypt.com - Egyptian Solar Energy Systems Company (ESESC) 11 Gameat El Kahera St. Giza, Giza; Egypt Tel. +20 235714538 - 012-2453119 Fax: +20 235714538 Tel./Fax +20 2-35714538 02-35737813 website : www.egyptsolar.net - Exact Co. For Battery Productions 35 El Gazayer St. New Maadi, Cairo, Egypt Tel. +20 2-27030611, 02-2703054402-2703654 902-27040297 - Federation of Egyptian Industries (FEI) 1195 Corniche El Nil. Il Cairo, Egypt Tel. +20 225796590/1/2 Fax +20 225796694 Email info@fei.org.eg website: www.fei.org.eg - General Egyptian Petroleum Corporation (EGPC) Indirizzo di contatto: 4th St. no. 270, fuori la Palestina St; settore 4, New Maadi, Cairo, Egypt Tel: +202-706 5345 +202-703 1438/9/40/41/42 Fax: 202-706 5359 website: http://www.oilegypt.com - General Organization for Industrialization, (GOFI) 6 Khalil Agha St. Garden City, Cairo; Egypt Tel: +20 227940677, +20 227940678 - IMF 17 A Yehia Ibrahim St. Zamalek, Il Cairo, Egypt Tel. +20 227369239 website: www.imfgroupegypt.com - MEET Plot 71, Sixth Industrial Zone, Giza, Egypt Tel.: +20 (2) 38290146 / 38290148 - Fax: +20 (2) 35365665 / 38290147 www.meet-egypt.com - Middle East Engineering & Telecommunications (MEET) Plot 71, Sixth Industrial Zone, Sixth of October City, Giza. Egypt Tel. +20 10 0070284 Fax: +20 10 0070001 Email Info@MEET-Egypt.com website: www.MEET-Egypt.com - Ministry of Electricity and Energy (MOEE) Ramsis St. Abbassia , Cairo. PO Box 222 Tel. +20 22616317-22616514 Fax 22616302 Email: Hyounes@moee.gov.eg website www.moee.gov.eg
Co-funded by the EU
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- Ministry of Environment (MOE) 30 Misr Helwan El-Zyrae Road, Maadi "Behind Maadi Sofitel Hotel" Cairo, Egypt Tel . +20 225256452 Fax +20 225256490 Email eeaa@eeaa.gov.eg Website: www.eeaa.gov.eg - Ministry of Petroleum and Mineral Resources (MOP) Ahmad Al Zamer Street 8th District, Naser City P.O. Box 7109 Cairo Egypt Tel:+20 2-2670-6401 +20 2-2670-6402 Fax: +20 2-2670-6419 +20 2-2670-6427 email: contactus@petroleum.gov.eg Website: www.petroleum.gov.eg - MISR America Group For Investments 215, El Hegaz St., - Heliopolis El Cairo Egypt Fax: +20 22406008 http://company-index.egypt.com/en/misr-america-group-for-investments.html - New and Renewable Energy Development and Utilization Authority (NREA) Ext. of Abbas El-Akkad St , Hay El-Zohour (P.O. Box: 4544 Masakin Dobbat Elsaff, El-Hay El-Sades) Nasr City, Cairo Tel.: +20 2 2725891 Fax: +20 2 2717173 reic@nreaeg.com Website www.nrea.gov.eg - National Investment Bank (NIB) 18 Abdulmajid Al Remaly Street Bab Al Louk Area P.O. Box 11.589 El Cairo Egypt Tel:+20 2-2794-1336 +20 2-2794-4903 Fax: +20 2-2794-1080 http://www.zawya.com/cm/profile.cfm/cid1000842/NationalInvestmentBank/ - OLYMPIC Group IDEAL, Ramsis Street Extension, Nasr City, Cairo, Egypt. Tel :(+202) 24880-880 Fax:(+202) 24880-888 www.olympicgroup.com - SIEMENS 55, El Nakhil and El Aenab Street Mohandessin, Cairo Egypt Tel.: +20 2 33333 660 - Fax: +20 2 33333 661 www.siemens.com.eg - Solar Energy & Environment Technology (SE) 151 st. No. 4 - Maadi - Il Cairo - Egypt Tel. : + 20 22750 7076 Tel. / fax: +20 22378 5402 Website: http://www.solaregypt.com - SunPower Company Sun Power Solar System Products 17 Vittorio Emanuele S. Semouha, Alessandria; Egypt Tel. +20 34272517
Co-funded by the EU
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The full study Investment Opportunities in the Tunisian and Egyptian Energy Sectors and abstract thereof was carried out by Euroconsult scarl, Enna.
This publication has been produced with the support of the Invest in Med programme financed by the European Union. The contents of this publication are the sole responsibility of ASEM and can under no circumstances be regarded as reflecting the views of the European Union.
Copyright Invest in Med / ASEM 2011. Tous droits rservs pour tous pays. Copyright Invest in Med ASEM 2011. All rights reserved for all countries.
Co-funded by the EU
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STUDY INVESTMENT OPPORTUNITIES IN THE TUNISIAN AND EGYPTIAN ENERGY SECTORS

Investment opportunities in the Tunisian and Egyptian energy sectors

The European Union

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Energy context in the Mediterranean Region

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Recent events and new opportunities

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Regulations of imports and foreign investment

Investment opportunities in the Tunisian and Egyptian energy sectors

Foreign investment regulations.

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

The repatriation of profits.

Industrial zones and economic activity parks

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Regulatory and legislative framework

Investment opportunities in the Tunisian and Egyptian energy sectors

Beginning of the 80s: creation of A.M.E.

1985-1989: lawful bases of the control of energy

1990-1993: to upgrade the regulation framework

From 1993 to nowadays

Investment opportunities in the Tunisian and Egyptian energy sectors

Tax and financial incentives

National Fund for Energy Conservation (FNME)

Investment opportunities in the Tunisian and Egyptian energy sectors

New FNME subsidies and ceilings

Investment opportunities in the Tunisian and Egyptian energy sectors

2.2 RENEWABLE ENERGY SITUATION Energy context

Energy balance evolution 2006/2009 (Mtep)

8,4 7,4 6,9 7,5 7,7 7,9 8,1 7,2

Investment opportunities in the Tunisian and Egyptian energy sectors

Primary Energy Balance 2006/2008

Natural Gas Renew able energies Crude oil

Natural Gas Renew able energies Crude oil

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Investment opportunities in the Tunisian and Egyptian energy sectors

Sales Electricity HT-MT by Economic Sector (GWh)

Agricultural pumping Transport Tourism Services Sous-total 2 Total

452,200 515,200 268,00 640,900 708,700 2.585,000 6.685,700

396,300 466,900 249,100 630,000 668,800 2.411,100 6.402,500

364,600 437,700 239,000 618,900 638,100 2.298,200 6.123,000

Renewable energy resources and potential

Investment opportunities in the Tunisian and Egyptian energy sectors

Industrial and commercial infrastructure of the solar thermal sector

Investment opportunities in the Tunisian and Egyptian energy sectors

Industrial and commercial infrastructure of the wind energy sector

Investment opportunities in the Tunisian and Egyptian energy sectors

Industrial and commercial infrastructure of the photovoltaic sector

Energy and Environmental impacts

Investment opportunities in the Tunisian and Egyptian energy sectors

Unit MW m3 MWc MW Mtoe MtoeCO2

2010 310 280.000 3,5 30 1,3 3

2020 1130 950.000 8,5 50 6,7 15,7