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Jordan bit hard by energy crisis

headlights on a dark highway

In the long run, Jordan hopes to find oil sale and natural gas reserves large enough to reduce its dependence

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April 4, 2013 10:59 by



“If you don’t have enough generation, you have to manage demand. One quick solution is energy efficiency in transport and electricity, where load consumption is high,” said Khaled Irani, an energy consultant and former energy minister, estimating efficiency steps could save $1 billion.

Other measures are painful. The government is considering a new power rationing scheme for this summer, to cope with an expected influx of tourists on top of over 460,000 refugees from Syria who have fled the civil war there.

The government also plans to raise electricity tariffs this summer, a step which could help to curb demand growth while easing the losses of the technically bankrupt state-owned electricity firm, National Electricity Production Co.

Reducing the losses at NEPCO, which piled up debts of $2 billion after it was forced to pay independent power producers for energy generated from costly diesel and heavy fuel, are a key performance criterion in Jordan’s 36-month standby loan deal with the IMF.

IMPETUS FOR INVESTMENT

The disruption of Egyptian gas flows, which once generated 80 percent of Jordan’s electricity, raised the cost of producing a kilowatt of electricity by as much as 600 percent. Gas flows were hit first by sabotage conducted by armed Egyptian militants or bandits, then by bottlenecks within Egypt’s gas industry.

But the disruption has created an impetus for Jordan to invest in renewable energy projects which, while they will not end the crisis in the short term, appear increasingly feasible.

Among the first to emerge was Shams Maan, an equity partnership between Jordan’s Kawar Energy, U.S. firm First Solar and Italy’s Solar Ventures to build a 100 megawatt solar plant in the southern town of Maan at a cost of $300 million.

Hanna Zaghloul, the project’s chief executive, said the government would now pay 16.9 U.S. cents for a kilowatt hour of electricity from solar technology, compared to around 24 cents for electricity from heavy fuel and 28 cents from diesel.

“That’s why renewable energy is feasible for the government these days,” Zaghloul said.

A year ago parliament passed a renewable energy law setting a tariff structure for grid connection. The government is soliciting expressions of interest by April 11 to build a $120 million, 75 MW solar plant at Quwaira in southern Jordan; at least a dozen international firms have submitted proposals to build this and other solar projects.

Jordan’s ability to proceed with such projects has been given a boost in recent months by a $5 billion fund contributed by wealthy Gulf states to support its development amid regional instability.

The fund may also help finance construction of a $100 million liquefied natural gas terminal that is expected to be ready by the second half of 2014 and receive gas supplies from Qatar.

Meanwhile, Jordan plans to build a strategic reserve of 100,000 tonnes of oil to increase its critically low stockpile, currently at just three weeks of supply.



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