With a cumulative score of 1.39, Algeria ranks number 63 among emerging markets and number 92 in the global ranking.
- Emerging markets
- Middle East & Africa
1.74 / 5
0.63 / 5
1.07 / 5
Net-zero goal and strategy
Algeria does not have a long-term strategy for net-zero emissions.
Nationally Determined Contributions (NDC)
Algeria submitted its Nationally Determined Contribution (NDC), which is a country’s plan to help achieve the goals of the 2015 Paris Agreement, to the United Nations Framework Convention on Climate Change in 2016. The country aims to reduce greenhouse gas emissions 7% by 2030 compared with anticipated levels in a business-as-usual scenario. With financial and technical support from the international community, this could rise to 22% by 2030 versus a business-as-usual scenario.
Fossil fuel phase-out policy
Algeria does not have a fossil fuel phase-out policy.
Algeria in February 2020, as part of its 2020 Five Year Development Plan, set a target for 16 gigawatts of renewables by 2035, with a mid-term goal of 4 gigawatts by 2024. This change underlines Algeria’s renewed focus on building out its gas capacity. This target is ambitious due to the current share of 2.7% of renewable’s installed capacity.
After limited success, the country’s feed-in tariff was replaced with tenders in 2018. Three auctions have been launched so far, the first in 2018 for a total of 150 megawatts (MW) of solar for projects with a capacity range of 10-50MW, the second in June 2019 for 50MW of PV used for hybrid projects in the country’s south, and the third and biggest one is on it’s way with a total capacity of 1,000 MW divided into capacities between 50 and 300 MW per unit. There is no net metering policy in place.
During the first five years of renewable projects (as they are being set up), companies stand to benefit from exemptions or reduced rates on customs duties and other taxes and fees. For example, equipment, machinery, materials and services imported, or purchased from the local market, are exempt from value-added tax (VAT).
Power prices and costs
Retail electricity rates are relatively low by virtue of the country’s rich gas resources. Average commercial and residential rates were revised for the first time in recent years 2020-2021, increasing from 4,370 Algerian dinar ($31) to 4,578 dinar and from 4,370 to 5,340 dinar, respectively.
Algeria’s tariffs vary depending on the time of day (categorized as normal, peak and night-time) and consumption amount (less than 500 kilowatts; 501 and 1,000 kW; 1001 and 4000kW and more than 4,000 kW).
Algeria liberalized the power market, opening it up to independent power producers (IPPs) in 2002, but state-owned utility company Sonelgaz continues to dominate the market. Its position is ensured by its access to the country’s abundant gas reserves.
The Sonelgaz group is the sole authorized retailer of power on the country’s three grids. However, consumers are free to procure their own electricity through self-generation or direct power purchase agreements (PPAs). Increasingly cheap solar technology, the high cost of diesel generation and unreliable grid power have created a favorable environment for small-scale renewables. As of October 2022, IPPs produce 13% of Algeria’s electricity.
Most renewables capacity in Algeria consists of small-scale PV installations of around 15-20MW. However, as a leading producer of natural gas and liquefied natural gas, the country also has renewable energy and energy efficiency programs that promise to expand its other energy resources and support sustainable development from 2021. Finance has been lackluster for several reasons, including a national focus on developing new gas plants while modernizing the existing power fleet. A development plan over 2018-2028 outlines grid upgrades and investments over that period.
Further, a US Trade and Development Agency technical assistance grant will help the Algerian transmission system operator plan the development of an automated distributed control system that will allow it to integrate renewable energy from solar and wind sources into its network.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Algeria is a market that has great potential for energy investment, given the rapid growth in peak demand in the past two years (from 14,714 MWp in 2020 to 16,224 MWp in 2021). However, its renewables auctions were not popular with investors due to the several delays and cancellations on tenders. Further, stringent local content rules, restrictions on the involvement of foreign actors and uncertainties around access to finance also deterred foreign investment.
Algeria in 2020 started to shift its stance to welcome foreign investment by revising a number of regulations, for example, by allowing foreign entities to own a majority stake in projects in non-strategic sectors (the main strategic industries are energy and pharmaceuticals). Investors in PV projects must still meet some local content requirements, including using equipment manufactured in Algeria (largely solar panel and assembly structures). They must also have Algerian state-owned renewable energy company Shaems (jointly owned by state-owned gas giant Sonatrach and power utility Sonelgaz) as a shareholder in the project company. These measures may provide the required balance between allowing greater flexibility for international investors to operate in Algeria, while ensuring some knowledge transfer and local participation in projects.
However, local content requirements were not the only barriers for doing business with Algeria. As the sole authorized offtaker, Sonelgaz is in poor financial shape. By August 2021, the company had recorded 207 billion dinars in debt, an increase of 243% since 2018. The lack of renewables PPAs (and visibility on past PPAs) make it difficult to gauge the risk of payments to IPPs running into arrears and due to high taxes, Algerian banks remain reluctant to back clean energy undertakings. Oil and gas sector lobbying and power price subsidies have worsened the challenges faced by renewable projects. Algeria is particularly dependent on gas export revenues, as well as on oil. New fossil fuel generation capacities have long operating lifetimes, which could create new path dependencies in the energy system.
Lastly, the political instability within the leadership and governance landscape of the energy sector in recent years has undermined Algeria’s ability to build long-lasting commercial partnerships and weakened its capacity to deliver its objectives. Sonatrach is an instrument of political power that has become over the years the main “cash cow” of the country’s leaders. A series of corruption scandals has affected its governance and its ability to operate (it has seen eight chief executives in 10 years).
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
The proposed 2022 Budget Law includes taxes on several economic activities and on the imports of widely consumed goods that have long been subsidized by the government – such as oil. Having a more expensive oil price can incentivize EV implementation.
Algeria aims to convert internal combustion engine (ICE) vehicles to 1.1 million liquefied petroleum gas (LPG) vehicles and 11,000 compressed natural gas (CNG) buses and vehicles by 2030 as part of its plan to plan to transition away from hydrocarbons to renewable energy, including in the transport sector. For electric vehicles, there are no specific incentives mentioned, but nearly 100 Naftal (a Sonatrach subsidiary) service stations were equipped with EV charging stations by the end of 2021.
Algeria has also placed new import curbs on second-hand ICE vehicles that are more than three years old, and diesel-powered car imports are strictly prohibited.
Fuel economy standards
Does the country have a fuel economy standard in place?
Algeria aims to avoid more than 30 million metric tons of carbon emissions from the building sector, according to its national energy efficiency program. That will be achieved through innovative technologies like solar water heating and the thermal insulation of 100,000 homes per year. In addition, the distribution of 10 million energy efficiency lamps and switching to light-emitting diodes (LEDs) will lead to savings of 7.2 and 20 Mtoe, respectively.
Energy efficiency policy
Does the country have a national energy efficiency plan?
Energy efficiency policy
Are there minimum energy performance standards for buildings?
Energy efficiency incentives
Is there access to loans or grants for energy efficiency measures (i.e. Wall or loft insulation or double glazing)?
Algeria has in place a national energy efficiency program, created in 2016. There are also energy performance standards. For example, typical household appliances, such as air conditioning units, refrigerators, heaters, lamps and televisions, are labeled with energy ratings.
Finally, a National Agency for the Promotion and Rationalization of Energy Use (APRUE) program encourages the use of solar water heaters through a subsidy of as much as 45% of the overall cost of the installation.