Relevant resources and references

Topic	Details
Key facts	Jurisdiction: Civil Law Languages: Arabic, Tamazight, French
Population	44 million
Gross national income (GNI) per capita	GNI per capita: USD3,310 (2020)
Business environment	2021 Index of Economic Freedom: 162 of 180 2020 Corruption Perceptions Index: 104 of 180 2019 UN Development Programme Human Development index: 91 of 189
Profile	Algeria is a country in North Africa, part of the Maghreb region. It is bordered to the east by Tunisia and Libya, to the south by Niger and Mali, and to the west by Mauritania, the Western Sahara and Morocco. It is bordered to the north by the Mediterranean Sea.  The economy has developed strongly in recent years, mainly due to the rise in oil and gas prices and high demand in the sector.  Algeria remains dependent on this oil windfall, which accounts for up to 85% of its exports. With the significant fluctuation in commodity prices, the risk of weakening the country's public finances remains high. Algeria is betting on infrastructure development to get the country back on track after more than a decade of serious political unrest in the 1990s. Construction of highways, dams, power plants and seawater desalination projects are some examples of the infrastructure built over the last few years.

Electricity industry overview

In 2017, 71,470 GWh of electricity was generated in Algeria.

This was comprised of:

• 10,074 GWh from thermal steam (14,09%);
• 31,009 GWh from thermal gas (43,39%);
• 29,508 GWh from combined cycle (41,29%);
• 71 GWh from hydraulic (0,01%);
• 286 GWh from diesel (0,4%);
• 21 GWh from wind (0,029%); and
• 500 GWh from photovoltaic solar (0,70%). 

Electricity laws

In the early 2000s, institutional reforms brought about significant changes in the electricity and gas distribution sector in Algeria. They led to the promulgation of Law 02-01 of 5 February 2002 relating to electricity and gas distribution through pipelines, the main objectives of which were reorganize the national electricity and gas distribution market by recommending:

• A restructuring of the operator;
• The separation of electricity and gas activities;
• The opening up of electricity production and energy marketing activities to public and private investors in order to promote the emergence of benchmark competition;
• The modernization of the public service and the improvement of the performance of operators in the sector; and
• A consumer protection framework. 

In order to ensure the effective implementation of these new reforms, Law 02-01 provided for the creation of a national regulatory authority whose main missions are:

• Monitoring and control of public services;
• Advising the public authorities on the organization and operation of the electricity and national gas markets;
• Determining the remuneration of operators;
• Determining the pricing of energy products (electricity and gas) for end consumers; and
• The supervision and control over the laws and regulations relating to it. 

The establishment of the Electricity and Gas Regulatory Commission (CREG), whose Management Committee was set up on 24 January 2005, was intended to ensure the conformity of the implementation of the transformation process of the electricity and gas sector with the provisions of Law 02-01.

Generation and distribution

Generation

The national production fleet is made up of power plants owned by Société Algérienne de Production de l'Électricité (SPE), and Shariket Kahraba wa Taket Moutadjadida (SKTM), which are subsidiaries of Sonelgaz, as well as companies in partnership with Sonelgaz:

• Kahrama Arzew, which came into service in 2005;
• Shariket Kahraba Skikda "SKS" which came into service in 2006;
• Shariket Kahraba Berrouaghia "SKB" (Médéa) which came into service in 2007;
• Shariket Kahraba Hadjret Ennouss "SKH" which entered into service in 2009;
• SPP1 which entered into service in 2010;
• Shariket Kahraba Terga "SKT" commissioned in 2012; and
• Shariket Kahraba de Koudiet Edraouch "SKD" commissioned in 2013. 

In 2017, generation was comprised of: 

• SPE (67%);
• SKD (6%);
• SKT (6%);
• SKH (6%);
• SKTM (6%);
• SKS (4%);
• SKB (3%);
• Kahrama (2%);
• SPP1 (1%). 

Distribution

The development program for electricity generation and transmission is accompanied by the reinforcement of the distribution network to ensure the reliability of the supply and distribution of electrical energy and guarantee a better quality of service.

At the end of 2017, the total length of the national electricity distribution network was 328,996 km.

Renewables law

Despite the enactment of Law No. 04-09 of August 14, 2004, on the promotion of renewable energies in the framework of sustainable development, no concrete governmental decision to promote renewable energies has been taken since.

Renewable industry overview

In 2018, Algeria's energy mix was composed approximately of 1% liquid petroleum gas (LPG), 20% oil products and 79% gas.

Despite the establishment of a national programme dedicated to the development of renewable energy, the program's implementation schedule was never followed. Out of all the pilot projects totalling the 110 MW planned, only three projects were carried out, with a total capacity of 36.3 MW:

• The Hassi-Rmel hybrid plant (gas and solar thermal), with 25 MW of concentrated solar power (CSP) (commissioned in 2011);
• The 1.1 MW photovoltaic (PV) solar plant in Ghardaïa, including all four PV technologies, with and without solar tracking (commissioned in 2014); and
• The 10.2 MW wind power plant in Kabertène (Adrar), comprising 12 wind turbines with a rated power of 850 KW each (commissioned in 2014).

Between 2015 and 2018, power plants were installed mainly in cities located in southern Algeria (Adrar, Illizi, Tamanrasset, Djelfa, Laghouat) for a production capacity of 343 MW.

In 2019, the Commissariat aux Energies Renouvelables et à l'Efficacité Energétique (CEFERE) was created by Executive Decree No. 19-280 of 20 October 2019 on the creation, organization and operation of the Commission for Renewable Energy and Energy Efficiency.

The CEFERE is responsible for contributing to national and sectoral development of renewable energy and energy efficiency.

The energy transition in Algeria can be achieved if certain issues are tackled:

• The identification of the components to be manufactured locally inducing heavy investment; 
• Technology transfers in the field, particularly with regard to the local manufacture of strategic equipment;
• The creation of schools and specialized institutes for engineers and technicians specialized in conventional or renewable energies;
• The establishment of strategic partnerships; 
• Transparency in project implementation; and 
• Enhancing the credibility of institutions.

Incentive measures

The Ministry of Energy has adopted a series of support measures aimed at the development of grid-connected renewable energies, through the establishment of a favorable legal framework and a National Fund for Energy Management, Renewable Energies and Cogeneration, CAS n°302-131 (FNMEERC) which is fed annually by 1% of oil royalties and the proceeds of certain taxes (such as 55% of the tax on flaring activities).

The legal framework, put in place in 2013, during the first phase of the launch of the national renewable energy development program was based on a Feed-in Tariff mechanism, which is less and less used in developed countries.

This system guarantees renewable energy producers benefit from tariffs that give them a reasonable return on their investment over a 20-year eligibility period.

The additional costs generated by these tariffs will be borne by the FNMEERC as diversification costs.

In this context, the executive decree n°15-319, amended and completed, setting the modalities of operation of the CAS 302-131 was published in December 2015.

Also, other incentive measures are planned. These include:

• Acquisition and provision of eligible land for the establishment of renewable energy plants;
• Support in the entire permit acquisition process;
• Identification of the renewable energy potential of the country’s eligible administrative regions;
• Construction of pilot projects in each sector;
• Creation of bodies and entities for the approval and control of the quality and performance of components, equipment and processes relating to the production of electricity from renewable sources and/or cogeneration systems; and
• Support, through a recruitment and training plan for technicians, by professional training institutes and the association of universities and national research bodies in the research and training of engineers.

By 2019, renewable energy assets included 24 power plants with a total capacity of 354.3 MW.

This renewable energy park consists of 23 photovoltaic plants with a total capacity of 344.1 MW and one wind power plant with 10.2 MW.

Sonelgaz and its companies in partnership (see Electric overview above) are the major entities in charge of establishing new renewable energy projects.

The Law No. 16-09 of 03 August 2016 on investment promotion is the main legislative instrument governing foreign investment in Algeria.

The National Agency of Development of Investment (ANDI), created by article 6 of the ordinance n°01-03 of August 20th, 2001, modified and supplemented, is a public administrative establishment, endowed with the moral personality and the financial autonomy, in charge, in coordination with the administrations and the concerned organizations, of:

• the registration of investments;
• the promotion of investments in Algeria and abroad;
• the promotion of territorial opportunities;
• facilitating business practices, monitoring the formation of companies and the implementation of projects;
• assistance, help and support for investors;
• information and awareness-raising for the business community; and
• the qualification of projects, their evaluation and the establishment of the investment agreement to be submitted for approval to the national investment council.

A new law on investment promotion in Algeria is currently in the works.

Algeria signed the Paris Agreement on 22 April 2016 and ratified the agreement on 20 October 2016.