Revolutionary Leasing Concept Sets a Precedent

Thanks to Jordan’s energy strategy, the national market for renewable energies has been very much characterized by government support in recent years. A renewable energy law came into force in 2012, which gives priority to feeding green electricity into the Jordanian grid and sets technology-specific feed-in tariffs. Moreover, both international and local companies can submit bids for projects under identical terms and conditions.

With Fichtner’s help, the responsible Ministry of Energy & Mineral Resources (MEMR) has already completed two EPC projects and two tender rounds, referred to as “Direct Proposal Submission Rounds”, for photovoltaic and wind power plants with a total capacity of over 600 MW. With our support, the expansion of renewable energies is now moving into the next phase. In a third round, a further 300 MW will be added to the energy mix. Solar plants with a capacity of 200 MW in Ma’an and a wind farm with an additional 100 MW in the south of the country are planned.

Following a tendering process to select the developers by the end of 2018, the projects are now scheduled to be completed by 2021. According to projections, more than 1,600 MW of PV capacity comprising 1,018 MW from direct proposals and the rest from EPC, wheeling and small-scale projects as well as 715 MW of wind power capacity exclusively from direct proposals will be connected to the Jordanian power grid by 2021.

Capacity increase not without its challenges

However, this large expansion of capacity in renewable energy sources with a capacity utilization of less than 4 GW does give rise to some problems. For example, volatile power generation by renewables intensifies ramp rates and frequency fluctuations. In Jordan, load fluctuations at a rate of 400 MW/min and more are expected in the near future. At present, these are managed by resorting to costly spinning reserve or by power transfer via the transmission link to Egypt. But with an increasing share of renewables in the system, more economical alternatives are needed.

Against this background, MEMR has decided to integrate electrical storage systems into the grid, which has several advantages:

• Ramping control of load and regenerative power plants
• Cutting operation of conventional power plants in the inefficient part load range as is required for the provision of spinning reserve
• Short-term shift of the otherwise curtailed power generation by renewables to peak load times
• Relieving substation loading at peak times
• Supplying reactive power for voltage regulation

So far though, the state-owned transmission system operator and sole offtaker, NEPCO, has no experience of operating an industrial-scale battery storage system. There were also concerns about the capacity aging and lifespan of this system.

A model pilot project on a PPP basis

For this reason, we advised MEMR to first undertake a pilot project for electricity storage on the basis of a public-private partnership (PPP) project. The ministry thus contracted us to conduct a corresponding feasibility study, prepare a design, develop a tender strategy, and coordinate procurement.

After in-depth analysis of the existing electrical system and projections, the team decided to invite tenders for a first 30 MW/60 MWh battery storage project to be implemented under a storage service agreement. This means that NEPCO will be able to lease the storage capacity from a private company that would develop the storage system similar to an IPP project. This revolutionary concept of flexible storage use and bankable fixed and variable remuneration is the first of its kind and is intended to serve as a model for future installations in the MENA region.

A concept with prospects

We already encountered great market interest in the prequalification phase. Of the 41 companies that the tender documents were released to, 25 managed to qualify. After completion of the procurement phase, we expect the storage facility to come on stream in 2019.

Once implemented, it will be the largest electricity storage project in the region and one of the first in the world to be developed under this pioneering leasing concept. What’s more, a similar project can readily be implemented elsewhere, which offers a promising prospect especially to other countries that have little experience in the operation of battery storage systems or limited financing possibilities.

February 2020