Scatec Secures 25-Year PPA for 120 MW Solar Plant in Tunisia

Scatec, a leading renewable energy company, has signed a 25-year Power Purchase Agreement (PPA) with the Tunisian government for a 120 MW solar plant. This landmark deal underscores Tunisia's commitment to transitioning from fossil fuels to renewable energy sources, aligning with its broader energy transition goals. The project is expected to bring significant economic and environmental benefits, positioning Tunisia as a key player in the renewable energy landscape.

Economic and Environmental Benefits

The 25-year PPA for the 120 MW solar plant offers several key economic and environmental benefits that align with Tunisia's broader energy transition goals.

# Economic Benefits

1. Cost Savings and Competitive Pricing:
- The project is expected to provide energy at a competitive price, making renewable energy a cost-effective alternative to fossil fuels. As stated by Terje Pilskog, the CEO of Scatec, "This pure renewable energy project succeeded and was among the most competitive in price," indicating that renewable energy can be as cost-effective as fossil fuels, especially in regions with abundant solar irradiation like Africa.

2. Job Creation and Economic Growth:
- The development and operation of the solar plant will create job opportunities, both during the construction phase and for ongoing maintenance and operations. This aligns with Tunisia's goal of increasing private sector-led job creation and economic opportunities.

3. Reduced Energy Subsidies:
- By reducing the reliance on imported fossil fuels, the project will help lower the cost of energy subsidies, which have been a significant burden on the government's fiscal deficit. As of 2022, public debt stood at 79.8 percent of GDP, and the debt servicing cost reached 3 percent of GDP in the first half of 2023. Reducing energy subsidies will help alleviate this financial strain.

4. Attracting Private Investment:
- The successful implementation of this project can attract more private investment in the renewable energy sector, as it demonstrates the viability and profitability of such ventures. This is crucial for Tunisia, where two-thirds of the renewable energy program are expected to be carried out by the private sector.

# Environmental Benefits

1. Reduced Emissions:
- The solar plant will contribute to reducing greenhouse gas (GHG) emissions, helping Tunisia meet its nationally determined contributions (NDCs) under the Paris Climate Agreement. As of 2022, only 3% of Tunisia’s electricity was generated from renewables, and the transition to renewable energy is key to improving environmental sustainability.

2. Energy Independence:
- By increasing the share of renewable energy in the electricity mix, Tunisia can reduce its dependence on imported natural gas, which currently meets approximately 48% of its energy needs. This will make the country less vulnerable to the price volatility of international commodity markets.

3. Export Opportunities:
- The project will also allow Tunisia to explore the production and export of green electricity and green hydrogen, contributing to the GHG emission targets of the Maghreb and Europe. This aligns with Tunisia's goal of becoming an energy exporter and leveraging its renewable energy potential for economic gain.

Alignment with Tunisia's Energy Transition Goals

The economic and environmental benefits of the project align with Tunisia's broader goals of sustainable development, as outlined in its nationally determined contributions (NDCs) under the Paris Climate Agreement. The transition to renewable energy will not only reduce emissions but also create economic opportunities and improve the affordability of electricity for households and businesses.

# Increasing Renewable Energy Capacity

The 120 MW solar plant will significantly contribute to Tunisia's goal of reaching 35% renewable energy in the electricity system capacity by 2030, and 100% by 2050. This represents 75% of Tunisia’s commitments in terms of reducing GHG emissions.

# Diversifying Energy Sources

The project supports Tunisia's ambition to diversify its energy sources, moving away from a heavy reliance on fossil fuels to a more sustainable and resilient energy mix. This diversification is crucial for achieving energy independence and reducing macroeconomic risks.

# Promoting Sustainable Development

The economic and environmental benefits of the project align with Tunisia's broader goals of sustainable development, as outlined in its nationally determined contributions (NDCs) under the Paris Climate Agreement. The transition to renewable energy will not only reduce emissions but also create economic opportunities and improve the affordability of electricity for households and businesses.

Comparative Analysis with Regional Projects

The 25-year PPA structure for the Kenhardt project in South Africa is notable for its duration and the competitive pricing it offers. This PPA structure is part of the Renewable Energy Independent Power Producer Programme (REIPPPP) launched by the South African government in 2011. The Kenhardt project, which includes 540 MW of solar power and 225 MW/1,140 MWh of battery storage, is one of the world’s largest hybrid solar and battery storage facilities. The power will be sold under a 20-year PPA with Eskom, the national utility company, which is slightly shorter than the 25-year PPA structure mentioned.

Comparatively, other renewable energy projects in the region also benefit from long-term PPAs. For instance, the Grootfontein project in South Africa, which totals 273 MW of solar power, will be sold under 20-year PPAs. Similarly, the Kalkbult plant, situated in the Northern Cape region, holds a 20-year PPA with Eskom. These PPAs provide a stable revenue stream for the project developers, ensuring long-term viability and profitability.

Implications for Long-Term Viability and Profitability

The implications of a 25-year PPA structure are significant. Firstly, it provides a longer period of revenue certainty, which is crucial for attracting investment and ensuring the financial sustainability of the project. Secondly, it allows for better planning and management of the project's lifecycle, including maintenance and potential upgrades. Thirdly, it aligns with the long-term goals of renewable energy development, as it ensures a steady supply of clean energy over an extended period.

Conclusion

The 25-year PPA for the 120 MW solar plant in Tunisia offers significant economic and environmental benefits that align with the country's broader energy transition goals. These benefits include cost savings, job creation, reduced emissions, energy independence, and the potential for exporting green energy, all of which support Tunisia's ambition to become a leader in renewable energy in the region.