Jordan turbocharges distributed solar drive

28 September 2016
With the new metering directive, Amman has created better conditions for developers, says Marc Norman

In Jordan, the combination of high solar yields, plummeting photovoltaic (PV) solar plant costs and steep electricity prices is facilitating explosive PV solar growth, particularly in distributed generation. This has given rise to some interesting opportunities for solar project developers in the commercial and industrial electricity consumer market segment.

Amman has issued a new directive abolishing a historical 5MW limit on the nameplate capacity of renewable energy plants connected to the grid for net metering. Plant capacity will now be subject to the approval of the transmission company or the distribution company based on an assessment of the grid at the given location.

There is no cap on the amount of electricity the plant may feed into the grid. However, the transmission and distribution companies are only required to pay an annual amount of up to 10 per cent of the consumer’s annual electricity usage, at a kilowatt hour (kWh) rate of 0.12JD (16.93 cents) for solar, 0.095JD for hybrid resources and 0.085JD for other renewables resources, subject to a 15 per cent uplift if the plant is of Jordanian origin.

Power costs in Jordan

Due to Jordan’'s hydrocarbons scarcity, and dependence on energy imports, the country'’s electricity generation and distribution costs are cripplingly high: about 0.157JD a kWh in 2014, according to Jordan’'s sole transmission firm, the National Electric Power Company (Nepco). Against this backdrop, and given subsidies for many small electricity consumers, the rates charged to commercial and industrial consumers are particularly high.

For instance, 1 kWh supplied by Nepco or any distribution firm costs a high-consuming telecoms company 0.3JD. To put things into perspective, the winning tariffs of the government’s 2015 tender to procure four 50MW PV solar projects ranged between 0.043-0.054JD. While several market participants questioned the sustainability of these tariffs, it remains startling that the lowest bidder is able to provide power to Nepco at a rate 85 per cent lower than what the state firm would charge a high-consuming telecoms operator.

Like in other emerging markets, the pendulum in Jordan has swung far beyond grid parity, and the business case for consumers to adopt distributed solar, and renewable energy more widely, has become extremely compelling.

With the issuance of the new net metering directive, Jordan has created even better conditions for the continued development of distributed solar and other renewables projects. The race is on for developers to secure deals with the most bankable and highest paying power consumers.

Marc Norman is a lawyer at US-based Chadbourne & Parke, and focuses on project finance and acquisitions in energy, mining and infrastructure in emerging markets

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