Focus switches to renewables

06 February 2014

The potential massive build-up in alternative energy capacity in the region will provide a much-needed boost to the renewables industry

Governments across the region have set ambitious targets for renewable energy to contribute to their energy mix by 2020, and a new report by MEED Insight estimates that if these are to be met, some 37,400MW of capacity will need to be added over the next seven years. At current prices, this could cost up to $190bn.

While it is likely many of the targets will be missed, the potential massive build-up in renewable power capacity in the Middle East and North Africa region over the next decade will provide a much-needed boost to the sustainable energy industry.

For technology providers and developers of solar and wind power projects, the region will sustain a pipeline of work. The anticipated surge in project activity is all the more important for international firms as it comes at a time when the industry is slowing down in Europe.

For technology providers and developers of solar and wind power projects, the region will sustain a pipeline of work

This slowdown offers broader lessons for the Middle East. It follows a huge build-up of renewable energy capacity made possible by state aid and other incentives to meet ambitious targets. In Germany particularly, a flood of alternative energy schemes has entered the market, driving up electricity bills as the cost of subsidies are passed on to consumers. The financial incentives and excess capacity have also created market distortions that have had a knock-on effect on the profitability of traditional power producers. Several European countries are now looking to phase out or cut subsidies for the renewables sector as a result.

It shows that governments need to strike an efficient balance when it comes to defining regulatory frameworks and introducing fiscal incentives to spur the growth of the renewables industry. Power demand is rising rapidly, meaning new capacity is essential, but the implications of the sharp difference between peak consumption during the summer months and the winter trough will require careful consideration.

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