The Government Provides Protection for Electricity Companies at the Expense of Renewable Energy

"We got ourselves into a trap." This is how Osama Al-Fayez describes his experience with installing a solar energy system at his home. "Despite being a simple employee, I managed to pay JOD 3,000 ($4230) to install the system in order to save on my home electric power bills, but the opposite happened."

The government imposed a levy of JOD 2 ($2.8) on every kWh of power produced from renewable energy. The tax, part of a fee that came into effect on April 1, applies to households only, and is not applicable to the economic sector, hence, excluding factories, banks, commercial enterprises from paying any form of tax on their generated green energy.

Al-Fayez said the government does not really encourage our individual efforts to transition to solar energy, and he explains that had he known that he was supposed to pay a fee for the energy he generates for his household use, he would not have installed solar panels in the first place. The government "cheats citizens by claiming it encourages renewable energy and then it imposes a tax".

Alaa Al-Youssef had a similar experience. As he was struggling with rising monthly electricity bills, he sold his vehicle two years ago, and with the money he installed a renewable energy system to power his home at the cost of JOD 2,900 ($4100). "I saw people transitioning to renewable energy, but we were all cheated into it," he said. He kept his subscription with the national electricity grid as he said he might need to complement his energy needs in winter days, at a cost of JOD 20 to 50 per month. With the tax on renewable energy, his electricity consumption costs will be the same in the summer and winter. "What is the benefit of renewable energy, then?"

Al-Youssef wonders about the reasons why the state encourages that people transition to renewable energy by facilitating soft bank loans for this purpose arguing that it is a clean energy.

In Jordan, there are 400 companies working to install renewable energy systems. 130 of those are based in the north of the country , 90 percent of the total specialize in the housing sector. With the imposition of the JOD 2 tax/per KWh generated, demand for renewable energy systems has dropped to almost zero, leaving around 10,000 employees (administrators, technicians, engineers and workers) and thousands of contractors (drivers, day laborers, suppliers and fresh graduates) without work.

Rami Freih, spokesman for the Renewable Energy Companies Association, criticizes the imposition of the JOD 2 tax per KWh. He says renewable energy for households represented only 20 percent of the total renewal used in Jordan in 2020, the equivalent to what one mall consumes without paying the tax.

Denied Subsidies

Freih says the subsidized electricity cost (that is a reduced rate as the government pays part of the bill) applies only to those consuming 3.6 kWh volume and below. Those wanting to harvest more renewable energy and maintain their subscription to the national grid pay an unsubsidized fee of JOD 0.12 per kWh, alongside the fixed JOD 2 per kWh.

Freih argued that renewable energy systems were not economically feasible. "If someone installs a 5 or 10 kWh system, it will not cover their monthly consumption; they will have to shore up their power needs through their national grid subscription at a higher and unsubsidized rate,” he said. "It is better to get rid of the renewable energy system and apply for the subsidized rate that the government started applying from April."

The number of homes using renewable energy systems in Jordan reached 35,000, more than 80 percent of them will get the subsidized rates if they use the electricity grid. The remaining 20 percent of these system owners will pay the unsubsidized rate if they tap into the national grid at a rate of JOD 0.12 per kWh.

The head of the Energy and Mineral Resources Regulatory Commission, Hussein Al-Laboun, justifies the imposition of the JOD 2 tax, saying that installing a renewable energy system is still very economical for any citizen "We encourage their installation by consumers spending JOD 200 on their electricity. With solar energy, that bill could be reduced to JOD 20-30,”.

Renewable solar energy systems though, fail to produce at their full capacity during cloudy winter days, their owners would naturally need to tap into the electricity grid, Al-Laboun explains. This requires grid operators to put on line backup stations as owners of renewable energy systems do not accept spending any time without power, he adds. "All of this come at a cost."
Al-Laboun explains also that:

Increasing the Number of Renewable Energy Subscribers and Total Darkness

If the number of renewable energy system subscribers reaches two to three million, the electricity grid must be technically capable to accommodate the extra input to the grid, Al-Laboun said. That requires additional investments in the grid, and the Energy and Mineral Resources Regulatory Commission is studying with third-party advisors how to increase storage capacity coming on line through renewable energy. During Eid Al-Fitr earlier this year, renewable energy systems had to be disconnected from the grid as it did not have the capacity to accommodate their extra input.

The head of Parliament's Energy and Mineral Resources Committee, MP Firas Al-Ajarma, says he believes that imposing the JOD 2 tax came as citizens are considered "the weakest link." This, he adds, “is proof of the failure of those in charge of the energy sector, as they are imposing restrictions on the owners of renewable energy because they fear a repetition of last year’s blackout."

Al-Ajarma adds, "It is a contradiction that the JOD 2 tax was only imposed on small producers/consumers and not on major projects that were granted permits to generate 50 MW, and the income from this tax annually does not exceed JOD 3 million, a sum considered trivial in terms of the state budget."
Al-Ajarma submitted a question on the matter to the government but has not received a response.

Licensing Solar Panels faces Complications

Environment Minister Muawieh Al-Radaideh said the JOD 2 tax was imposed by the Ministry of Energy and Mineral Resources; the Ministry of Environment encourages the use of clean energy as it helps reduce the nation's carbon footprint while preserving the environment and nature.

Dr. Dureid Mahasneh, chairman of board of EDAMA for Energy, Water and Environment, said any tax on renewable energy is a tax on the environment. He also pointed out to complications related to licensing that obstruct the instalment of solar panels, which he blamed on government and electricity companies’ interests to maintain their income from selling energy through the grid. "This amounts to shortsightedness in terms of imposing taxes at the expense of clean environment and the future development of renewable energy” He adds.

The procedures for submitting an application for installing solar panels, according to the media spokesman of the Irbid Electricity Company, Alaa Al-Karaawi, requires "an application to the electricity company, which may reject it on technical grounds due to the lack of compatibility of the connection to the grid that may harm applicants themselves or others who live nearby."

After the approval, Al-Qaraawi says, "the contracted company may install the solar panel system and connects it to the household electricity breaker. The electricity company later inspects the system and connection points to ensure their proper operation and to calculate energy input and output."