Power policy

Jordan’s National Energy Strategy foresees the country generating 14% of its energy from renewable sources by 2030. The plan, launched earlier this year, follows on from the country’s 2020 strategy, which aimed for 10% renewables in energy by 2020. Jordan is expected to achieve the 2020 target. More than 31 renewable energy PPAs have either been signed or are in process of being signed with National Electric Power Co. (Nepco). This translates to a round of 1,531 megawatts of renewable energy projects; 619 megawatts of these are wind and 912 megawatts solar PV. By the end of 2019, the country had installed a total of 1,559 megawatts of renewable energy projects, 573 megawatts of which were net metering or wheeling. Jordan has completed two full direct rounds of proposals, and PPAs for the third round of renewable-energy tenders are being finalized. The government suspended the program to give time to Nepco to complete a new power-sector plan reviewing the technical feasibility of integrating a larger share of renewables. This suspension applies to all renewable-energy projects above 1 megawatt. Also, the country has canceled the feed-in-tariff policy for the next few years. Accelerated depreciation has been established but is only in place for equipment not imported. Jordan will import some wind/solar equipment, but there is also a subsidy available for renewables manufacturers sourcing equipment locally. And the import-tax reduction is available under the Renewable Energy Law for both locally manufactured and imported materials. In addition, equipment used in the construction of renewable energy power plants is exempt from sales tax and custom duties.

Jordan’s policies have helped it become a regional leader in renewable energy over the last five years. Still, the auction freeze, combined with the less-ambitious 14% renewable energy target for 2030, mean the decade ahead for Jordan’s renewable sector could be slower than the last.

Power prices and costs

Power prices for consumers in Jordan are subsidized. Commercial consumers have traditionally paid the highest prices. They subsidize residential consumers, agriculture, and hotels. Jordan also has two types of tariff: day and night energy. This has led to a rise in behind-the-meter projects, with 351 megawatts of small-scale PV net metering installed by the end of 2019 and around 222 megawatts of wheeling projects. State utility National Electric Power Co. (Nepco) remains heavily indebted due to years of high-priced fuel imports. In January 2020, Nepco confirmed its debt amounted to 5.5 billion dinars ($7.8 billion), costing 120 million dinars a year to service.

The European Bank for Reconstruction and Development (EBRD) provided Nepco with a $265 million long-term loan in 2018 and has been working with the state-owned utility on financial forecasting and risk management. Electricity prices have been raised in the last years in an attempt to narrow the deficit. These price hikes have not been welcomed by consumers, with activists calling for the government to review electricity tariffs.

Wind and solar have been the focus of renewable investment to date, with $2.6 billion of utility-scale solar and $1.4 billion of wind financed as of the first half of 2020. Traditionally, international development banks have provided financing for renewable projects, but an increasing number of domestic banks and private equity funds are active in the market. As such, financing for renewable projects in Jordan is well established, and the process of securing finance is less onerous than elsewhere in the region.

Power market

The share of renewables in power increased rapidly from less than 1% in 2014 to around 10% in 2018. It is expected to reach over 20% by the end of 2020. Jordan’s National Energy Strategy calls for the power mix to include 31% of renewables by 2030. To reach this, Jordan wants to increase its renewable energy capacity to 3,200 megawatts by 2030, up from 1,559 megawatts at the end of 2019. Capacity additions will slow down in the coming years as the government has suspended auctions until state-owned Nepco completes a new energy-sector development plan.

Distinct bodies exist in the sector for production, transmission, and distribution. There are separate companies for generation and distribution, while transmission is the responsibility of Nepco. There is no wholesale generation market, and Nepco purchases all generated electricity. Nepco has a template wind and solar PPA that currently exposes them to energy compensation. Jordanian power prices are not market-driven as generators cannot sell directly to the distributors and the government subsidizes tariffs.

Doing business and barriers

The government continues to foresee a considerable increase in power demand despite a slowdown over 2016-2018 linked to slower economic growth. The government expects high population growth combined with an expanding commercial and industrial sector to boost power demand to 19,701 gigawatt-hours in 2030, from about 17,672 in 2020. The majority of Jordanians live in the north of the country, around the capital Amman, and 99.9% of the population have access to power. Further renewables growth will be challenged by the financial commitments Nepco has with fossil-fuel generators. Whilst growing renewables generation is reducing fossil fuel power-plant run hours, Nepco is still bound to pay fossil-fuel generators in full through take-or-pay PPAs.

Grid constraints are one of the key barriers to renewable energy integration in Jordan. The government froze renewable energy tenders in 2019, to allow for Nepco to review the feasibility of integrating more renewables into the system. Easing transmission constraints, through the Green Corridor Project, will go some way to rectifying the problem. A 900-megawatt transmission expansion will boost the connection capacity from the renewables-rich south to the demand centers in the north.

Local content requirements could prove to be another sticking point for renewable-energy developers in Jordan. A 35% local content requirement was proposed in Jordan’s last renewable energy tender, with tariff prices supposedly reflecting the degree of localization. Although the solar sector in Jordan is well established, there are no major wind component manufacturers in Jordan. All equipment used in renewable energy projects is exempt from import and sales tax. The National Energy Strategy also provides a 100% exemption from income tax over 10 years for independent power producers generating renewable energy.

EV market

The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage.

EV policy

The government has yet to implement any substantial policy support in the sector and the EV market remains at an early stage.

Buildings market

Jordan still does not guarantee loans or grants available for energy efficiency buildings measures.

Buildings policy

The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.