Value Chain Analysis of Solar Energy Technologies in Tunisia
(French: Analyse de la chaîne de valeur des technologies relatives à l’énergie solaire en Tunisie)
A pro-active industrial policy that encourages the production of technologies related to solar energy should accordingly focus on solar technology and its opportunities. In fact, there is a certain potential for solar energy technologies to contribute to industry development and employment effects. The recently finalised study “Energy efficiency and renewable energies in Tunisia - Job, qualification and economic impacts” has quantified the effects of introducing renewable energies (photovoltaic, wind, solar thermal) across the entire value chains in Tunisia. The result is that equipment installation and after-sales services represent by far the most job-intensive part of the value chain within the solar branch. Impulses and priorities for the development of a solar energy industry in Tunisia must, therefore, be set carefully taking into consideration budgetary constraints and the question how to maximise socio-economic effects such as employment and national value added. It is therefore the objective of this study to analyse the capabilities and interests of Tunisian enterprises in solar energy technologies component manufacturing. The guiding question of the study is: Which priorities are reasonable for Tunisia in the support of component manufacturing in the field of solar energy in the short term?
Value chain analysis with focus on component manufacturing: market and industry structure, manufacturing requirements and risks as well as socio-economic effects
PV
The global PV market has - until 2011 - shown high growth rates. In 2011 more PV capacity was added to the grid than ever before. However, the largest market is still Europe and the market demand in the MENA region strongly depends upon governmental projects. PV promotion schemes such as feed-in-tariffs, the key success factor of PV market development in Europe, have recently been cut dramatically in several countries. On the other hand, these support strategies are still missing or are in an early stage in MENA countries. First PV module production facilities have already been installed in some countries in the MENA region and even in Tunisia the first PV module production facility was opened in late 2011. Upstream PV manufacturing, i.e. poly-Si, wafer, cell and thin film production processes require high technical know-how, experience, considerable scale as well as high investment costs. Downstream (module and BOS component) manufacturing, on the other hand, has generally lower entry barriers. However, given the current overcapacity, a drastic price decline and the lack of a regional MENA market, an entrance into these value chain steps in Tunisia could involve considerable entrepreneurial risks. Generally speaking, employment effects are higher at the downstream part of the value chain (engineering, construction, installation, operation & maintenance create around 5-14 jobs per MW) than at the upstream part (component manufacturing creates around 3.5 jobs per MW). 80% of engineering, construction and installation and even 100% of planning takes place locally. However, most electric devices are currently being manufactured locally (70%), by this contributing to the local value added and employment effects; their import quota is expected to sink to only 10% in 2030.
CSP
The global CSP market is still at an early stage and no specific CSP technology can currently be identified as the leading future technology. Parabolic trough is today still the most proven and bankable technology, although central tower and linear Fresnel are accompanied with opportunities such as lower production costs or higher efficiencies. However, investment costs are expected to decline for all CSP technologies in the near future. Leading CSP component and service providers are currently located in Europe and the US, which have supplied most components for existing Integrated Solar-Combined Cycle System (ISCCS) plants in MENA, as CSP companies in the entire region are still rare. In Egypt, key components of the CSP solar field have already been supplied by Egyptian companies, however, most parts of the solar field are still provided abroad. Components like mirrors, mounting structures, tracking systems and receivers have to be adapted particularly to local environmental conditions in the future, however, this requires high expenditures for R&D activities. Experiences from leading CSP markets have further shown that public support and R&D activities are key success factors for the development of an industry. In the MENA region first CSP pilot projects have been developed combined with fossil fuel power plants, however, the regional installed CSP capacity is still low compared to leading markets; and feed-in-tariffs as well as strong national strategies are missing in most countries. The early stage of promising central receiver and linear Fresnel technologies opens particular entrepreneurial opportunities for early movers. First parabolic trough pipeline projects in Tunisia open windows of opportunities for early movers, however, their realisation is still uncertain. CSP offers higher job effects in downstream activities (8 jobs per MW) than in upstream activities (3.5 jobs per MW). Most jobs can be created in civil works (5-7 jobs per MW), whereas component manufacturing creates between 0.4 and 1.5 jobs per MW. The Tunisian import quota of electric devices is as low as 30%, and is expected to decline to 10% in 2030. Planning will also play an important role in Tunisia in the future.
SWH
Solar water heater systems such as flat-plate or vacuum-tube collector systems, which are proven and reliable technologies, are already an economic alternative to fossil fuel-based ones. In sunny climates, simple thermosiphon with either vacuum-tubes or flat plate collectors prevail. More sophisticated systems are needed for multi-familiy houses, industries or colder climates. Market prospects for SWH systems in sunny climates are good. China and Israel have shown that the technology can be financially competitive and deployed without long-term financial support. In North Africa, markets for SWHs were expanding in Egypt, Morocco and Tunisia. A market up-take of applications for process heat is especially possible in the well-developed European solar markets. However, achieving dynamic SWH markets for the processes of heat applications in the MENA region and in Europe requires a package of measures to build confidence in the market as well as in the capacitie in the whole value chain. SWH components are relatively easy to produce and require low investments. However, Tunisian enterprises face certain risks regarding the production of collectors and SWH systems: rising material costs, quality issues and policy-driven markets. Manufacturers of solar collectors have more and more automated the production and optimised the manufacturing. Cost reductions in manufacturing are enormous and correspond to a learning curve of 15%. However, material costs have almost eaten up cost digressions in production. The quality of SWHs needs to be further improved and guaranteed. In order to export to European markets, Tunisian industry has to comply with European standards, e.g. with the Solar Key Mark Label. Besides, markets have been created with the help of political support: incentive programmes determine the size of the market in Europe and the MENA region. Planning and installation is the most job intensive value chain step (2.4 jobs/1000m2), whereas component manufacturing accounts for 1 job/1000m2. The proportion of imported machines is expected to decline in the future from 70% to 40%. Measure systems and controls will remain 100% import products even in the future. However, installation, commerce and planning are up to 100% national services. In downstream stages (defined as supply, installation and operation & maintenance) job effects are almost three times larger, with 2.8 jobs created per 1000 m2. Tunisian manufacturers import 70% of their machines. 100% of all gauges and controls are imported. However, there is a local content of 100% in installation, construction, planning and commerce.
Tunisia’s potential in solar component manufacturing: situation actuelle d’industries et composants solaire à fort potentiel current situation of industries and solar components with high potential
SWH
In Tunisia, the industrialisation of the solar thermal technology is reinforced by the existence of an mature market and industry. The commercial activities of the companies involved range from the manufacturing of components to planning and installation of systems for residential and commercial use, thus covering the entire value chain. However, export is limited to the MENA region. Tunisian industrialists also need support to obtain international certifications and to develop an R&D activity to deal with the regional and global competition, notably China (cost competitive) and Europe (quality competitive). As the survey of enterprises has demonstrated, the necessary human resources, know-how and the level of international are available in Tunisia. The survey of enterprises also identified deficiencies at the level of quality control. On the whole, it can be stated that Tunisia has a strong industrial and technologic basis as well as a good incentive system for SWH.
PV
The photovoltaic market in Tunisia has not yet passed the embryonic phase of its development. Indeed, all existing productions lines are lines of manufacturing modules which are installed for a short time. However, they are provided with modern and semi-automated equipments to allow for some flexibility at the level of component assembly. A certain degree of automation is, nevertheless, necessary to increase the level of efficiency and integration of the production of certain components (including glass, films, back sheets, junction boxes and cells) which are currently imported. The global photovoltaic market is currently in a phase of consolidation and has many uncertainties in demands of volume and growth. The existing production capacities (upstream) in Asia constitute an entrance barrier, notably with respect to costs, for new entrants. Although there is little expertise in manufacturing photovoltaics in Tunisia, cabling and metal industries are well developed. According to officials interviewed, these industries have no chance to integrate into the photovoltaic market due to the absence of a reliable system of incentives. Among other weaknesses revealed, there is a lack of qualified labor and a weak connection between R&D and industry. The consolidations that know the photovoltaic sector at a global scale force international actors to seek new business opportunities and new markets. Its high intensity of sunlight and its proximity to Europe put Tunisia in an attractive position, put into place through support measures.
CSP
The analysis of the local potential of manufacturing solar components in Tunisia shows that the industry of CSP technology is still not established. No production line for CSP components exists in Tunisia and few market actors are currently able to manufacture their components. These observations have revealed large gaps particularly in terms of technical expertise at all levels (industry, construction, research), human expertise and R&D. Consequently, it is only in the long term that CSP could be a valid option for the Tunisian industrial structure. As opposed to photovoltaics, global CSP markets are of small importance and project development activities involves high risks for investors. However, Tunisia is a destination with a theoretically high potential for CSP plants, due to its favorable geographical conditions (level of sunshine, proximity to Europe).
Recommendations and action plan
SWH
Considering current market conditions, industry competition, entrepreneurial risk and technological maturity of each solar technology, SWH appears as the most promising technology in terms of local manufacturing and employment effects for Tunisia in the short term. Besides an existing good coverage of the value chain in Tunisia, the PROSOL system has created an attractive market. Almost all components are important for Tunisian manufacturers: solar collector, reservoir (solar industry), glass processing (glass industry), mounting system (mechanical and metal processing industry). As a restriction one must say that measurement and control systems are expected to be imported even in 2030. Also downstream activities are worth fostering as on the one hand they create even jobs than downstream activities. On the other hand, it is, due to a sharp rise in material costs, important to reduce costs along the whole value chain with a special attention to the level of installation, for example, in order to reduce overall system costs. Interventions should concentrate on reinforcing product quality, strengthening the domestic market, establishing export opportunities. Therefore, the action plan contains e.g.: the incentive system should be improved, e.g. regarding transparency and quality controls, to sustain and/or stimulate local market growth, accelerate the establishment of a system of quality control of SWH, establish a support program for product certification targeting manufacturers.
PV
PV , at the same time, is not only much less represented in the Tunisian industry landscape, but the global industry is currently facing a major consolidation and uncertain market development. However, given Tunisia’s favourable geographic positioning (i.e. high solar irradiation) and an existence of related industries, PV may present selected opportunities. Given the lower rate of jobs created and high entry barriers along the upstream part of the value chain, priority should be put on the development of downstream activities. The latter requires a substantial local market stimulated by incentives. Some components offer a certain potential for Tunisian manufacturers in the short term: modules (solar industry); mounting system (mechanical and metal processing industry); connectors, electrical components (electrical and electronic industry). With regard to job effects in component manufacturing, priority should be given to electric devices. Interventions should aim at (a) establishing a local market; (c) Supporting downstream activities (b) training and development (for downstream activities) + connection of industry abd R&D (Inverter&Elektrik, cell R&D). To this end, the action plan prioritizes measures such as setting ambitious deployment goals; update PROSOL-ELEC and attract FDI; R&D inverters, regulator/controller, supports, cables.
CSP
The market and industry for CSP are virtually nonexistent in Tunisia. The fact that CSP technologies have not yet reached maturity and the resulting high R&D and high investment efforts present high entry barriers for Tunisian manufacturers. Since no CSP component is currently manufactured in Tunisia, the approach to detailed actions should be preceded by a general discussion on energy policy agenda in Tunisia. Like for downstream activities, PVpresents a higher potential to create jobs and local value added. In addition, capacity building is required within government institutions, industry and in the educational system (e.g. universities). Da man nicht weiß, welche Technologie sich durchsetzen wird, ist es wichtig in den Bereichen R&D und Hochschulbildung in alle Richtungen offen zu bleiben. Since one does not know which technology will prevail, it is important to remain open in all directions in the areas of R&D and higher education. Over a very short term period, mirrors and support structures as potential option depend on the market development. In the short term, an industrial policy focus could be put on the electrical and electronic industry (connectors, cables) (until 2030 the import quota decreases to 10%). At the same time, the suggested energy policy scenarios foresee a CSP capacity of 110 MW in 2016, 330 MW in 2020 and 460 MW in 2030. This corresponds to a relatively modest annual rate of installation and the, the high risk for companies and the lack of local expertise, presents a challenge to attract investors.
Considering these conclusions, recommendations concerning the establishing of capacities are given with regard to governmental and industrial organisations. External expertise is required. It can be acquired through international organisations or by attracting FDI. While installing CSP parks can generate job creation, it should be expected that the effects on employment related to the manufacturing of components will be felt only in the medium to long term, due to the associated risks. Three topics: only little short-term industrial policies make sense, strengthening of institutional capacity especially, attracting direct investments.
Therefore, the action plan contains: Assess global trends, technological alternatives and the risks generated by the local integration of CSP activities, establishing a monitoring mechanism of CSP technologies through R&D.
