Tunisia : a national energy efficiency policy

Nejib OSMAN, 2012

Collection Passerelle

Progressively, energy efficiency has become one of the main pillars of the country’s energy strategy. Indeed, with the increase in energy prices in 2004, Tunisia has strengthened its energy efficiency policy by implementing an ambitious program covering all relevant sectors and focusing on three tools, namely: institutional arrangements, regulatory framework and financial incentives.

The objective of this article is to provide an overview of the energy efficiency policy in Tunisia while highlighting the positive impacts of this policy.

Levers of the energy efficiency policy

The institutional framework

The Tunisian energy efficiency policy is based on the strengthening of the institutional framework, with the creation of the National Agency for Energy Management (ANME)¹ in 1986. ANME is a non-administrative public institution under the supervision of the Ministry of Industry, whose mission is to implement the State’s policy in the field of energy management.

The scope of intervention of ANME includes all initiatives and actions aimed at improving the level of energy efficiency and diversifying energy sources, such as :

• The coordination and the execution of the national programs of energy control.

• The realization of prospective and strategic studies, in particular those relating to the mitigation of greenhouse gas emissions related to the energy sector.

• The elaboration of indicators related to the field of energy management.

• The elaboration of the inventory of greenhouse gas emissions in the energy sector.

• Management of the National Energy Management Fund (FNME) as an incentive mechanism to support energy management actions.

• The proposal of the legal and regulatory framework related to energy management.

• Granting fiscal and financial incentives.

• The preparation and execution of awareness, information, education and training actions.

• The support to the research and development and technical demonstration.

• The support to the development and the influence of the industry of the energy control encouraging the investment in this sector.

The legal and regulatory framework

The proactive policy of Tunisia in the field of energy efficiency has also resulted in the enactment of new laws and the adoption of regulations expressing both the support for investment in this field and the interest attached to energy management as a priority axis of the country’s energy policy.

It is in particular of :

• The promulgation of a new law on energy management ², which was crucial for the strengthening of existing programs and the initiation of new important programs such as cogeneration, energy certification of household appliances, the organization of the activity of Energy Service Establishments, etc.

• The promulgation of a law on the creation of an energy management system ³, which has evolved into a National Energy Management Fund (FNME), providing extra-budgetary public support and contributing to the change of scale in the volume of investments dedicated to energy management. It is a support mechanism, in particular through the granting of subsidies for investment actions aimed at rational use of energy and the promotion of renewable and alternative energies.

• Law No. 2009-7 of February 9, 2009 came to supplement the law No. 2004-72 of August 2, 2004, giving added value to energy management actions and opening the way, for any institution or group of institutions, to the independent production of electricity from renewable energy and cogeneration for its own consumption ; with the right to sell the surplus of electricity generated by the Tunisian Electricity and Gas Company (STEG) ⁴.

Financial incentives and lines of credit

To encourage investment in major energy management projects, Tunisia has opted for public incentives through the FNME and the involvement of financial institutions through the mobilization of lines of credit.

The National Fund for Energy Management

Law 2005-82 is an important step in the choice of an extra-budgetary resource for financing public support for energy management investments. This law created the FNME whose objective is to provide financial support for actions aimed at rationalizing energy consumption, promoting renewable energy and energy substitution. This fund is managed by ANME and is fed by taxes from the first registration of tourist cars in a Tunisian series and from the import or local production of air conditioning equipment. The FNME grants direct financial aid. The eligible actions are :

• The energy audit.

• Demonstration projects (pilot).

• Program contracts: intangible and tangible investments.

• Cogeneration.

• Energy efficiency in the fisheries sector.

• Engine diagnostic benches.

These direct aids granted by the FNME are complemented by tax benefits:

• The application of minimum customs duties and suspension of VAT (Value Added Tax) on equipment and products used for energy management and which have no locally manufactured equivalent.

• Suspension of VAT on capital goods and products acquired locally that allow for energy savings.

Lines of credit

To support the energy management program and encourage investment in energy efficiency, two lines of credit have been set up:

• The French Development Agency (AFD) has set up the program of Support to the energy management line (ALME), by granting a line of credit of 40 million euros, aimed at improving the energy efficiency of Tunisian companies, the dissemination of the use of renewable energy as well as the contribution to the reduction of air and water pollution.

• The World Bank (WB) has established a line of credit of 45 million euros, dedicated to energy management for the benefit of industrial and cogeneration projects, with technical assistance to the benefit of sub-project holders and key players in the energy management in industry.

The European Union has also granted Tunisia a grant of 16 million euros to strengthen the financial resources of the FNME and 2 million euros for the improvement of the line of credit AFD.

The energy efficiency program

Since 2005, Tunisia has opted for an acceleration of the energy efficiency policy with an ambitious program based on multiple actions :

• The mandatory and periodic energy audit.

• Prior consultation on energy-consuming projects.

• The use of energy service companies ⁵ (ESCO).

• Cogeneration.

• Labeling of household appliances to indicate their level of consumption.

• Large-scale distribution of low-energy lamps (LBC).

• Thermal regulation of buildings.

• The rational use of energy in public lighting.

• Diagnosis of car engines.

• Urban travel plans for large cities.

• Energy substitution.

The flagship actions of ANME have focused on program contracts, the dissemination of LBC and cogeneration.

Program contracts, an effective measure for the industrial sector

Program contracts are a main activity of the energy efficiency policy. After the energy audit, establishments belonging to the industry, transport and tertiary sectors must sign a program contract to carry out energy saving actions. These establishments receive a bonus of 70% of the cost of the audit and a grant representing 20% of the cost of the investment.

The greatest effort has been made in the industry sector. Over the period 2000-2011, 566 program contracts were signed in the industry sector.

The balance of achievements highlights the importance of energy savings and financial gains generated by the program contracts in industry. Indeed, the cost of toe saved is estimated at 152 dinars (76 euros), while the return on investment is about two years over the period 2004-2010.

The energy efficiency actions in industry have been achieved through the institutional, regulatory, technical and financial support provided by ANME, which has established a structure dedicated to energy efficiency in industry (Energy Efficiency Program in Industry-PEEI)

Over the period 2005-2010, the FNME has granted 27 million dinars (13.5 million euros) to support investment related to program contracts in industry. The time of return on investment for the Tunisian state is estimated at six months.

Efficient lighting

The use of lighting has experienced a regression in growth rate from 7.7% per year between 1984-1989 to 2.8% between 2004 and 2009. This regression is explained in particular by the high penetration of low energy lamps (LBC). The rate of household equipment with LBCs rose from 4% in 1999 to 26% in 2009.

The LBC promotion program launched by ANME led to a decrease in power demand of around 294 MW (Megawatt) in 2010. In the tertiary sector, the number of LBCs reached 1.3 million in 2010. The sales of LBCs have particularly affected hotels, health care facilities, offices and retail. The cumulative energy savings generated by the sales of LBCs in the tertiary sector avoided a call for electrical power of about 96 MW in 2010.

Cogeneration

To accelerate the energy efficiency program, ANME created in 2005 a Cogeneration Task Force whose main objective is to promote cogeneration. The main tasks of this Task Force are

Task Force are to :

• Identify a cogeneration portfolio and assist project developers in carrying out feasibility studies.

• Facilitate the financing of the investment costs and the access to the two lines of credit (AFD and WB).

• Encourage project developers to take advantage of the subsidy granted by the FNME (20% of the investment cost).

In 2011, the cumulative installed capacity reached 36.6 MW⁶.

Impacts of the energy efficiency policy

Decrease in the growth rate of energy demand and penetration of natural gas

Primary energy consumption increased from 4.5 Mtoe (million toe) in 1990 to 7.9 Mtoe in 2011, an average annual growth of 3%. Between 1990 and 2000, primary energy consumption grew at an annual rate of 4%, this rate was reduced to 1.6% between 2000 and 2011.

The structure of consumption has undergone a notable change with an increase in the share of natural gas and a decline in petroleum products. The penetration of natural gas began in 1995 with the commissioning of the first combined cycle ⁷for electricity generation. This trend accelerated in the mid-2000s with the development of the transmission network for industrial, service and residential consumption. The share of natural gas increased from 26% of primary energy consumption in 1990 to 54% in 2011.

Decrease in energy intensity

Over the period 1990-2011, primary energy consumption grew by 3%, while GDP grew by 4% over the same period.The disconnection between economic growth and energy consumption has resulted in a decrease in energy intensity. The disconnect between economic growth and energy consumption has resulted in a decline in energy intensity. This decline can be explained by a combination of several factors :

• The orientation of the Tunisian economy towards sectors with high added value and low energy intensity, particularly the tertiary sector. Sectoral changes have played an important role in the decline of energy intensity during the 1990s.

• The improvement of the efficiency of power plants with the introduction of the combined cycle in 1995 and the use of a second combined cycle in 2001.

• The development of the energy efficiency program played a significant role in the decrease in energy intensity during the 2000s.

Over the period 1990-2011, energy intensity decreased by 1.6% annually. During the first period 1990-2000, energy intensity recorded an annual decline of 0.7%, this decline intensified to 2.5% per year between 2000 and 2011. The acceleration of the decrease is due to a real change of scale in the energy efficiency policy with the implementation of two programs, namely the three-year program of energy management 2005-2007 and the four-year program of energy management 2008-2011.

Strengthening the energy efficiency policy: a necessity for Tunisia

Despite the efforts made in energy efficiency, the national energy balance has shown a deficit of about 1 Mtoe in 2011. Given the limits of national energy resources, this deficit is likely to worsen in the coming decades. Tunisia is called to further strengthen its energy efficiency policy in order to act on energy demand.

Several arguments militate today in favor of this reinforcement: the reduction of energy dependence on fossil fuels, the improvement of energy security, the creation of jobs, the reduction of the import of fossil fuels, the improvement of the balance of payments and the reduction of greenhouse gas emissions.

To make the most of the energy efficiency potential, the following actions are recommended :

• Develop a regional energy efficiency strategy and create regional and local structures to implement programs tailored to the specific conditions in each region.

• Establish a Monitoring, Reporting and Verification (MRV) system for the various energy efficiency program actions.

• Intensify action on energy demand across all relevant sectors with a particular focus on electricity demand.

• Integrate social action, in particular a specific energy efficiency program designed to reduce fuel poverty in disadvantaged areas.

• Broaden the intervention of the FNME at the level of priority actions such as the building sector.

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