Powering ahead: Capacity increases are set to help the country deal with rising demand

The biggest contract in the history of the Algerian power sector was signed in September 2013 by US multinational General Electric (GE) and Société Algérienne de la Production d’Electricité, the production subsidiary of state-owned Sonelgaz. It provided for delivery of the equivalent of around 70% of the generating capacity Algeria has in place at present and promised long-term cooperation that could result in a strong domestic equipment production sector. The outcome of an international tender in February 2013, the contract provides for turbines, generators and control systems to equip six giant combined-cycle gas turbine (CCGT) plants. The plants are to be sited at Mostaganem, Naama, Jijel and Djelfa, and at Kais and Oumache in the provinces of Khenchela and Biskra, respectively.

IN A HURRY: GE spoke of over 8000 MW of capacity, Sonelgaz officials of 8400 MW, but a 10-year plan published by Sonelgaz in June 2013 suggests that aggregate available capacity will be 8070 MW. The timing is tight: the plants in question must come on-stream in single-cycle mode (using the 24 gas turbines only) in 2015, moving to combined-cycle operation with the installation of 12 steam turbines in 2017. For the equipment and associated services, GE will receive €1.45bn.

Sonelgaz specialist subsidiaries Transmex, Inerga and Etterkib will provide transport, construction and installation services. However, financial and technical offers in an international tender – involving 14 hopefuls, with bids opened in July 2013 – put Chinese-led consortia as front-runners for Jijel, Kais and Djelfa, with the Turkish-Greek Gama-Metka consortium preferred for Naama and Biskra, and Samsung for Mostaghenem. The total price tag is expected to be €4.2bn. The contract comes on the back of a €610m deal signed in October 2012 for delivery of 24 trailer-mounted aeroderivative gas turbines, with a combined capacity of 528 MW, of which 16 (352 MW) were in service at F’krina and M’Sila by mid-2013. The remainder are due by the end of the year.

CAPACITY: With installed capacity at under 6500 MW in 2003, Algeria has bolstered its generating sector in the last decade. Some 6000 MW of new capacity had entered service by mid-2012. A recent addition was Shariket Kahraba Hadjret En Nouss, a 1227-MW CCGT plant that came on-stream in 2008 and is the only conventional power plant in Algeria with a major foreign stake: it is 51% owned by a consortium of Abu Dhabi’s sovereign wealth fund Mubadala and Canada’s SNC-Lavalin, which also built and operates the plant.

In 2012 came Terga, another CCGT plant built for a consortium of Sonelgaz and hydrocarbons heavyweight Sonatrach by France’s Alstom and Egypt’s Orascom Construction Industries. Also in the pipeline – from which it emerged in early 2013 – was another Sonelgaz-Sonatrach CCGT venture, the 1131-MW Koudiet Eddraouch (SKD), for which the engineering and construction consortium comprised GE and Iberdrola. GE was no surprise because it has a track record of over 40 years in Algeria. Turbines supplied by it over the years were producing 55% of the country’s electricity at the time of the September contract, while 2008 had seen it win a €380m service contract designed, among other things, to improve turbine efficiency.

MORE COMING: As of mid-2012, laying aside renewables plans and SKD, additional gas-fired capacity of 4592 MW was slated to come on-stream between 2013 and 2016 – with another 6000 MW assumed in the six following years. The former included two Sonelgaz-owned 1200-MW CCGT plants due on-stream in 2016, whose construction was awarded to a Daewoo-Hyundai Korean consortium in the second half of 2012, with Siemens chosen as the turbine supplier in June 2013. Gas turbine plants at Aïn Djasser and Labreg (546 MW between them) had already been assigned in July 2011 to Italy’s Ansaldo, another Algeria veteran, which also got the contract for 660 MW of single-cycle capacity at M’Sila in the Hassi Messaoud region in November 2012. There was also 445 MW of gas turbine capacity at Boutlelis, near Oran, which GE won in consortium with France-based Cegelec in June 2012. However, by August 2012 it was clear that this was not going to be enough, and the 2013-17 Emergency Plan was drawn up. The six new CCGTs – in themselves representing more than a doubling of medium-term plans – were part of this. Additional gas turbine capacity was also envisaged, but shorter-term measures were involved as well.

CONSUMPTION: The problem was that consumption was rising very quickly. Per capita consumption in Algeria was not too high by North African standards, let alone those of countries on the northern side of the Mediterranean. Its 1091 KWh per person in 2011 – according to the World Bank – put it well ahead of Morocco (826), Nigeria (149) and Ghana (334). However, it was well behind Libya (3926), Egypt (1743), Tunisia (1297) and Spain (5598). Yet growth has been strong. Unusually high for an economy at Algeria’s stage of development, the penetration rate of electricity supply had reached 98.7% by 2012, thanks in part to a government-financed rural electrification programme that connected over 322,000 rural households between 2001 and 2011, and raised their total number to over 1.19m. Low-voltage (LV) customers as a whole – predominantly households – numbered some 7.38m at the end of 2012, up 56% on 2000. LV consumption had been rising still faster in those 12 years, by 147% to 23.11 TWh, compared with 108% and 43.15 TWh for consumption as a whole.

The last two years have seen an acceleration. Electricity consumption rose by 9% in 2011 and 11% in 2012, and this was caused by various factors. For instance, Algeria’s multiplying desalination plants: electricity consumption in the water sector rose from 452 GWh in 2009 to 1606 GWh in 2012, a jump of 255% in three years to 3.7% of national power consumption. Above all, the rising consumption is down to households. Almost 325,000 LV customers were connected in 2012 alone. And “ordinary” LV customers (roughly the household category) used 16% more electricity in 2012 than in 2011, accounting for 47% of total consumption and two-thirds of consumption growth. Much of this can be ascribed to increasing use of air conditioning.

Moreover, peak consumption has been growing faster than overall consumption. Annual peak load on the Northern Interconnected Grid (Réseau Interconnecté Nord, RIN) rose from 4617 MW in 2000 to 6572 MW in 2007, and hit 9777 MW in August 2012. That was not just an increase of 14% on 2011’s peak, but also an understatement of demand: the figure reflected load-shedding in the face of demand of 10,363 MW.

Peak demand in July and August 2012 overall was 18% up on 2011, leading to systematic pre-emptive load-shedding by the system operator at morning and evening peaks. The situation has not been helped by the fact that much of the electricity produced (54.1 TWh in 2012) does not reach the consumer. Transmission losses in 2011 were 4.8%, which is poor by world standards. Distribution losses in 2012 were around 20%, with breakdowns on the distribution networks as well as load-shedding contributing to power cuts.

SONELGAZ: State-owned Sonelgaz dominates the electricity segment and handles the local distribution of Algerian gas. With more than 53,000 permanent employees in 2012, Sonelgaz runs electricity and gas distribution via four regional subsidiaries. It manages the national power and domestic gas grids through subsidiaries Société Algérienne de Gestion du Réseau de Transport de l'Electricité and Société Algérienne de Gestion du Réseau de Transport du Gaz, respectively.

Sonelgaz is also 100% owner of two-thirds of Algeria’s mainly gas-fired generation capacity. Aside from some in-house capacity owned by players like Cevital, it is a partner in the other third, mostly with state-owned hydrocarbons giant Sonatrach – though with foreign partners involved in some cases. The partnerships are independent power producers but their output is sold to Sonelgaz under long-term power purchase agreements, while prices generally are decided by the Electricity and Gas Regulatory Commission, an independent regulator. No privatisation is planned. A brief experiment with foreign direct investment seems to be over, as do joint ventures with Sonatrach, so solving the sector’s problems is now down to Sonelgaz.

URGENCY: Sonelgaz has moved quickly, meeting the demands of the summer peak in 2013. For the RIN alone, in less than a year it completed rehabilitation of 548 MW of old gas turbine capacity and acquired 543 MW of mobile gas turbines. Its distribution subsidiaries have improved, too: installation or replacement of almost 7250 transformers has cut the number of outages by 60%, year-on-year. The summer also passed without major load-shedding and it has also helped that SKD is on-stream – its delay had been part of the problem in 2012. While the RIN’s peak load has risen – hitting 10,464 MW on August 8 – it has done so by only 7%, and to a level roughly equal to peak demand in 2012, with available capacity now at over 11,500 MW.

However, official forecasts see peak load in 2014 rising by anything from 12% to 20%, to 11,720 MW and 12,557 MW, respectively. What was scheduled before summer 2014 – 1550 MW, including 500 MW of rehabilitation and 400 MW of photovoltaic capacity, as well as gas-fired units at Labreg and Ain Djasser – is not sufficient. In August 2013 Sonelgaz found itself tasked by the Ministry of Energy and Mining with putting in place, by the following summer, an additional 2238 MW, including major gas-fired units at Boufarik, Hassi R’Mel and Biskra, and yet more mobile gas turbines.

Added to that are the demands of the south, the 26 isolated southern grids (Réseaux Isolés du Sud, RIS) and the In Salah-Adrar-Timimoun axis (Pôle In Salah-Adrar-Timimoun, PIAT) in the south-east. Rehabilitation, mobile gas turbines and diesel generators added to 139 MW and 54 MW, respectively, to available capacity for the summer 2013, raising the totals sharply to 391 MW and 243 MW. Another 238 MW is due on-stream in the RIS and a further 102 MW in PIAT, respectively, compared with local 2013 peak demand of 232 MW and 208 MW.

With production capacity grabbing the headline figures, those for grid plans are no less remarkable. With total transmission grid length at the end of 2012 standing at just over 23,800 km, Sonelgaz’s 10-year plan envisages over 27,000 km of lines (including 1765 km of rehabilitation) being put in place over that period, and sees 20,700 km of this coming on-stream by 2016.

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The Report: Algeria 2013

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