Foreword Tunisia has enormous solar potential with its significant global horizontal irradiation, improved investment framework, and highly educated and skilled talent pool to support the ambitious Plan Solaire Tunisien. However, until now, the country has fallen short of the intermediate targets that it set itself. More so now than ever, the focus is on how to achieve the objectives of the Plan Solaire Tunisien and drive the Tunisian energy transition forward. The SolarPower Europe Global Markets Workstream launched in March 2018 to identify new avenues for business and cooperation globally and contribute to the global energy transition. Since its creation, the workstream has continued to grow and now comprises 150 experts from more than 70 countries, with a significant portfolio of investment reports on emerging markets around the world. This report builds upon the first edition on solar investment opportunities in Tunisia. This update contains the latest economic and political developments in the country, and updated figures for Tunisia’s new solar capacity, electricity tariffs, and energy mix. Moreover, the recommendations have been updated to take into account the changing dynamics of the Tunisian energy sector.
Energy geography Tunisia has an abundance of energy resources. Alongside its potential for solar and wind power, it also possesses natural reserves of oil and gas. Tunisia’s traditional reliance on these natural reserves to fulfil its energy needs is coming under increasing strain with energy production shrinking markedly (nearly a 40% decrease since 2010) and demand increasing (power consumption is growing at a rate of 5% annually). This has led to Tunisia becoming largely dependent on imported energy. In 2021, approximately 98% of Tunisia’s electricity was generated from natural gas, of which 45% was imported, predominantly from Algeria (MIME, 2021).
Demographics Tunisia has a population of over 11.9 million inhabitants with a median age of 32.8, the oldest in the region (25.5 for North African countries and 31.0 for the world), and with a lower-than-average population growth of +1% in 2021 (compared to the African average of 2.6%). Tunisia had a population density rate of 77 people/km2 in 2021. Most of the population lives in urban areas (70%) but the rate of urbanisation has slowed markedly over time (1.4% in 2021 against 3.7% in 1990). In parallel, the urban population growth rate is stagnating (-0.1% in 2021). This can be explained by the combined effect of low annual population growth (+1% in 2021) and the low fertility rate (2.2 births per woman in 2020). Most of the population is concentrated along the Mediterranean coast, particularly in the regions of Ben Arous, Nabeul, Sousse, Sfax and Tunis.
Electricity market Energy and electricity sectoral overviews Tunisia has a wealth of energy resources at its disposal. Historically, it has relied predominantly on its natural reserves of oil and gas to supply domestic its energy demand and serve its export market. However, over the last decade, the energy production of Tunisia has strongly decreased, while demand for energy within the country has continued to increase. Between 2010-2019, the primary energy demand increased approximately 16%, whilst production dwindled by 43%. This resulted in Tunisia transitioning from a largely energy independent country (95% energy independent in 2010) to relying predominantly on neighbouring countries, such as Algeria, to supply its energy needs (49% energy independent in 2022). This energy deficit, coupled with the Tunisian Dinar’s (TND) depreciation has had a significant impact on the country’s current account balance.
The increasing dependence on imported energy has led to policymakers seeking to exploit Tunisia’s enormous solar potential. The country is endowed with an average global horizontal irradiation of around 1,850 kWh/m2/year. The overall horizontal solar irradiation exceeds 1,900 kWh/m2/year in the southern half of the country and is more than 2,045 kWh/m2/year in the region of Tataouine. In addition, despite surging manufacturing and transportation costs, utility-scale solar PV remains the least expensive option for adding new electricity capacity in terms of LCOE, even more so amid rising natural gas and coal prices.
In the wake of the 2020 COVID pandemic, Tunisia updated its 2009 Plan Solaire Tunisien (PST), further strengthening the role of renewable energy and energy efficiency, making them a key part of the country’s recovery plans, and seeking to reduce fuel imports and improve energy independence. Overall, by 2030 Tunisia aims to reduce primary energy demand by 30%, while increasing the share of electricity production from renewable energy to 30%, thanks to 3.6 GW of incrementally installed capacity – to be achieved with investments up to € 3 billion (IRENA 2021). These targets were further updated in July 2022, when the Ministry of Industry, Mines and Energy revised the national targets for renewable energy, increasing the share of renewables in energy production to 35% by 2030.
Thanks to interconnections between the two countries, Tunisia buys part of the surplus produced by Algerian power plants, with an exchange threshold of 200 MW . Tunisia also has interconnections with Libya, which has comparatively better infrastructure, though it may have been neglected for some time due to conflicts. A 600 MW interconnection (project ELMED) between Tunisia and Italy is being developed and should be completed by 2027 , financing agreements have already been signed by the Tunisian Government and the World Bank and the relevant studies were concluded in 2021 (STEG, 2022). Extensions of existing and planned connections (with Italy, Algeria and Libya) are also being considered. Developing interconnections with neighbouring countries and Europe is considered a key factor by Tunisian authorities and STEG to enable higher shares of solar and wind generation in the electricity mix.
In May 2022, the Tunisian energy minister, Naila Nouira announced that three tenders totaling 2 GW of renewable energy capacity would be published. The size of the tender is intended to reduce the reliance on imported Algerian gas (Reuters, 2022). However, currently this tender is still awaiting publication. The total investment for the three tenders is projected at US$ 1.6 billion. The tenders are reported to include several 100 MW solar PV projects (enerdata, 2022).
Recommendations For Tunisian policymakers Despite efforts to contain the fiscal deficit, the economic situation remains fragile, and policymakers should look to solar as a key driver of job creation and a more resilient economy. Tunisia is heavily dependent on fossil fuels, relying mainly on imported gas to meet the primary energy demand. The increase of renewables in the energy system would make the Tunisian economy more resilient and able to cope with global fluctuations in commodities. Furthermore, renewable energies offer the undisputed advantage of being rapidly deployable, cost-effective and environmentally sustainable, providing consumers with fast, affordable and clean energy. Over the past decade, Tunisia has been resolutely committed to an energy transition strategy based on the development of renewable energies, a sector with high potential for the direct and indirect creation of stable jobs. The country must continue to build a comprehensive and stable regulatory framework, with particular attention to the secondary legislation in order to make it fully and promptly enforceable.