Libya on the Road to Decarbonisation: Investing in Renewable Energy and Green Hydrogen

Kilian Bälz and Hussam Mujally of AMERELLER in association with P&A Legal, Berlin/Tripoli, discuss one of the greatest issues of our time: how to tackle climate change. Specifically, renewable energy is the focus of this article.

Published on 15 September 2023
Kilian Bälz, AMERELLER, Chambers Expert Focus contributor
Kilian Bälz
Hussam Mujally, AMERELLER, Chambers Expert Focus contributor
Hussam Mujally

The Libyan National Oil Company (NOC) recently announced ambitious decarbonisation plans. For international investors, this opens new opportunities for investing in renewable energy and green hydrogen. Currently, Libya is heavily dependent on the hydrocarbon industry, with 97% of state revenue being generated through oil exports. However, with ample sunshine in the vast desert areas and excellent winds along the Mediterranean coast, the conditions for renewable energy production are somewhat ideal. Furthermore, the geographical proximity to Europe favours the export of green electricity. Libya is preparing to become an exporter of green energy in the post-hydrocarbon era.

Conflicting administrative competencies

Renewed interest in renewable energies has fueled the dispute over who is in the driver’s seat.

Traditionally, the key player in the Libyan electricity sector has been GECOL (the General Electric Company), a state-owned company established in 1984 and subject to the direction of the Ministry of Electricity. In 2007, the Authority of Renewable Energies (REAOL) was set up with the mandate to develop the renewable energy sector. From 2017, REAOL has been a government agency directly subordinate to the Council of Ministers.

“For a long time, plans to export green electricity from the North African sunbelt to Europe have been under discussion.”

Only more recently has NOC emerged as a player, with a pronounced political agenda to take the lead in developing renewables. This has resulted in a number of ad hoc projects, under which international oil companies have agreed to invest in renewable energy plants adjacent to conventional oil and gas projects. Both French Total and Italian ENI have announced respective projects recently. This is part of an initiative to prepare Libya for the post-hydrocarbon phase – and preserving NOC’s role.

From a financial and managerial point of view, NOC may be better placed to propel the development of renewable energy in Libya than GECOL and REAOL, which are both notoriously underfunded. However, so far NOC lacks a clear legal mandate.

The legal framework

Libya so far has no comprehensive legal framework governing the renewable energy sector. Implementing renewable energy projects requires navigation of a complex regulatory environment. Contrary to what occasionally is being alleged, the lack of a specific renewable energy law does not prevent the implementation of projects.

Laws that apply to renewable energy projects include the following.

  • Law 17/1984 establishing GECOL and Ministerial Decree Nr 426/2007 establishing REAOL delineate the administrative competencies in the renewable energy sector.
  • The Administrative Contracts Regulation 563/2007 governs tender proceedings and contracting with the public sector in general.
  • The Libyan Civil Code (1953) and Commercial Code (2010) govern general contractual and company matters.
  • The Decree 207/2012 Regulating the Activity of Foreign Enterprises in Libya regulates the activity of foreign companies in Libya.
  • The Investment Law 9/2010 and ancillary regulations establish a special (privileged) regime for “investment projects” that normally are used by investors in renewable energy.

Based on the existing laws, a patch-work regulatory structure can be designed, which will be project specific (and not based on a regulatory framework of general application).

Project structure

In practice, most projects are set up as investment projects under the Investment Law. This gives the Privatisation and Investment Board (PIB) a key role in approving the project.

In the absence of a specific renewable energy law providing for a pricing mechanism and interconnection with the grid, a power purchase agreement (PPA) is considered the baseline document for all renewable energy projects.

“The global trend towards decarbonisation has put pressure on oil-rich countries such as Libya to reposition themselves for the coming times.”

The PPA normally provides a comprehensive contractual framework for projects and regulates the technical specifications including the allocation of the project land, the connection to the grid, the offtake of the electricity produced by the project, and the purchase price.

If the project is established under the Investment Law, land use can be secured through a long-term usufruct right. In addition, the project can benefit from the tax exemptions available to investment projects. There is no general tax exemption for renewable projects and neither REAOL nor NOC have the authority to grant any tax exemptions.

Exporting green electricity to Europe

For a long time, plans to export green electricity from the North African sunbelt to Europe have been under discussion. However, regulatory challenges and the lack of an interconnection between Libya and the European grid were major impediments. Furthermore, an infamous domestic power shortage made the idea of exporting electricity politically less appealing. The global trend towards decarbonisation, though, also has put pressure on oil-rich countries such as Libya to reposition themselves for the coming times.

In June 2023, the governments of Libya and Malta singed an MoU for the export of green electricity with the aim of helping Malta to become climate neutral. This, in addition to the plans to foster domestic green hydrogen production, could be the cornerstone for a new role of Libya as a green energy exporter in the post-carbon era. Of course, a number of issues remain to be resolved. For instance, how “green electricity” will be defined and how a respective certification process can be established.

It goes without saying that both the transmission lines to Europe as well as a domestic green hydrogen infrastructure will require hefty investments. The Libyan NOC, as an institution that has many decades of experience in capital-intensive energy investments, certainly has the financial and managerial capabilities to propel this process.


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