Algeria

The World Bank estimates Algeria’s nominal GDP at $287.03 billion as of 2025. This high economic output relative to its population, estimated at 47 million, translates to a GDP per capita of $6,107 - among the top 10 highest in Africa. This economic activity is largely driven by hydrocarbons, particularly natural gas. Algeria holds the second largest natural gas reserves in Africa, estimated at about 160 trillion cubic feet, and produced about 10 billion cubic feet of gas per day in 2024, the highest in Africa. Oil production has also ranked highly in Africa despite a natural slow decline from peak levels in 2005. Oil production in 2024 was estimated at over 1.174 million barrels per day. Together, oil and gas contribute 14% to Algeria’s GDP, 83% of exports and 47% of budget revenues (2019 - 2023 average). This concentration makes Algeria's energy sector central to both the country's fiscal stability and its geopolitical importance.

Since 2022, Algeria has become an increasingly important supplier of natural gas to Europe as European countries have sought alternatives to Russian gas. While this creates opportunities for earning the much needed foreign exchange to strengthen the economy, this dependence also creates two major economic challenges. The first is the vulnerability of the economy to price shocks in the international oil and gas markets. The second is the constant battle between exports and domestic gas supply for electricity generation. Navigating these challenges becomes the focus of Algeria’s energy strategy through the sustenance of hydrocarbon production to keep export revenues high and the expansion of renewable energy to diversify energy sources.

Algeria’s electricity consumption reached 1,546.3 kWh per capita in 2023, about half the global average but well above most African countries, reflecting near-universal electricity access (99.7%) and a relatively developed energy system. The country's electricity sector is overwhelmingly dependent on natural gas, which accounted for about 98% of electricity generation in 2023, while hydropower, solar and other renewables together contributed only around 2%. This heavy reliance on gas is not a true reflection of the country’s significant renewable energy potential. About 80% to 85% of Algeria is covered by the Sahara desert which exposes it to intense sunlight and favourable wind conditions. The country’s solar and wind power potential are estimated at 13.9TWh/year and 35TWh/year respectively.

As of 2025, Algeria had only about 446 MW of installed renewable capacity across solar, wind and hydropower. To accelerate deployment, the government has revised its National Renewable Energy Programme, targeting 15 GW of installed renewable capacity and 27% of electricity generation from renewables by 2035. This push has resulted in progressive investments in renewable energy with 2.6 GW of renewable energy under construction as of the end of 2025. Green hydrogen also makes a play in the country’s strategy through the national green hydrogen roadmap, with plans to produce up to 40 TWh annually by 2040 for both domestic use and export.

Putting these together, Algeria’s energy mix is faced with a different kind of challenge when compared with many other countries in Africa. The country currently generates 0.26TWh of electricity on a daily basis and only consumes about 0.23TWh which translates to a surplus of 0.03TWh making the country a net exporter of electricity. On the surface level, this sounds like a positive but combined with other positives, a different perspective begins to emerge. Its immense gas reserves have attracted a lot of investments into gas power plants with current installed capacity estimated at about 24.19GW. However, government revenue and foreign exchange depends on the exports of gas which creates a trade-off between gas for domestic power production and gas for exports. Analysts predict that at current rates, Algeria will have to completely forego hydrocarbon export revenues to supply growing domestic power demand. Therefore, its push for increased renewable energy capacity is not to increase energy access which already sits at a high 99.7%. It is to diversify its energy mix to reverse the looming downward curve in government revenue from gas exports. With its already high energy access, there is also a risk of an increase in surplus energy and without an evacuation route for the surplus power, these plants stand the risk of underutilisation. Through the Medlink project, a 2GW subsea cable system connecting Algeria to Italy, the country’s strategy is to expand its electricity export potential to not only ensure projects are running efficiently but also to expand its sources of foreign exchange.