Supportive Regulations Crucial for Development of Tunisian Electricity Sector, Finds Frost & Sullivan Political turmoil and economic slowdown create market uncertainty amid escalating demand for electricity
CAPE TOWN, South Africa, Sept. 19, 2013 /PRNewswire/ -- The development of the Tunisian electricity sector depends on the introduction of favourable regulations that support private sector involvement and renewable energy generation. Significant investments in power infrastructure are also essential as economic development, improving living standards, intensive use of air conditioning, and increased activities in the construction sector during summer escalate the demand for electricity.
New analysis from Frost & Sullivan (http://www.energy.frost.com), Strategic Overview of the Tunisian Electricity Industry, finds that the market earned revenues of $1.35 billion in 2012 and estimates this to reach $2.68 billion in 2020. The industry remains dominated by the vertically-integrated power utility, Societe Tunisienne de l'Electricite et du Gaz (STEG).
Tunisia's electricity industry is heavily dependent on imported fossil fuels, mainly natural gas. To offset the rising costs of buying and subsidising natural gas, the government is looking for opportunities to diversify its energy mix and implement energy-efficient solutions. In fact, the government has set an ambitious goal of generating 30 percent of its energy from renewable sources by 2030.
"Although the development of renewable power is still in its infancy and is curbed by subsidies to conventional energy, it will gain acceptance by 2030 with the implementation of sustainable policy frameworks," said Frost & Sullivan Energy and Environmental Research Analyst Celine Paton. "This will foster private sector participation in energy generation projects."
There is currently a project in place to modify the Tunisian electricity regulatory framework, but the political crisis has slowed down the process as national priorities have shifted towards implementing measures to enhance greater social cohesion.
The political uncertainty – caused by the Arab Spring protests and the consequent change of regime – makes it difficult to predict which power projects will go ahead as scheduled. Foreign investors prefer adopting a wait-and-see attitude. Moreover, given the weak financial situation of the STEG and the high capital expenditures required for renewable power generation projects in particular, it is most likely that these programs will not be given priority in the short to medium term.
"This challenge is likely to recede after the country creates a new government following the presidential elections this year," noted Paton. "Along with a stable political environment, the creation of an independent energy regulation agency will be vital to restart projects, especially if Tunisia wants to play a role in regional power integration and start exporting electricity to Europe."
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