MEED shines the spotlight on power policy changes

01 October 2019
Few industries are undergoing such high levels of investment and transformation as the Middle East and North Africa region’s power sector
New MEED report provides a country-by-country review of the Mena power sector with in-depth analysis on supply and demand, projected investment, the role of the private sector and the search for alternative energy. Download sample pages

With about $30bn a year of capital spending on major projects, the power sector is one of the most reliable providers of business and investment opportunities in the Middle East and North Africa (Mena) region.

At the end of April 2019, about $451bn-worth* of power generation and transmission projects were planned or under way in the Mena region. Saudi Arabia leads with $127.1bn-worth of power project contracts planned or under way. GCC countries overall have a combined share of about $187.1bn, or 42 per cent of the total project net value in the Mena region.

In North Africa, Egypt has $64.5bn-worth of pipeline projects, as the power sector moves ahead with ambitious nuclear and clean energy initiatives.

Subsidy cuts

Exciting new opportunities and challenges are being created by the remarkable programme of energy reforms that are transforming the sector. Sustainability and energy efficiency are the driving forces behind radical shifts in policy such as the removal of energy subsidies.

The subsidy cuts are being introduced to reduce the financial burden on the state and to encourage consumers to curb their usage, thereby lowering the speed at which new capacity needs to be built.

Procurement models are changing too, with renewed interest in privately developed utility projects to spread the cost of building new capacity over a longer period.

A much broader privatisation trend is also emerging, whereby governments are looking to sell off assets and unbundle generation, transmission and distribution. This will provide short-term windfalls for cash-strapped governments, but in the long term will lead to a more efficiently run power sector.

Mena Power SectorMEED estimates that installed power generation capacity will need to increase by about 40 per cent on the 297,367MW of available power in 2016 to meet the forecasted demand by 2025. In addition to growing demand from rising populations, sizeable capacity additions will be required to power major energy and industrial schemes as the Gulf’s major oil companies seek to boost their downstream and petrochemical sectors as part of economic reform programmes.

Faced with a shortage of readily available gas supplies, nearly all Mena countries are now procuring or planning solar and wind projects. The dramatic fall in the cost of photovoltaic (PV) solar has resulted in regional utilities launching some of the world’s largest solar projects, which have been supported by the submission of record-low tariffs.

Renewable energy represented almost 6.7 per cent of the total installed generation capacity in the Mena region in 2018. The majority of installed renewable capacity comes from hydroelectric power, at around 19GW, or 76 per cent of the total. By 2025, however, solar power is forecast to account for about 37 per cent of the total power produced by clean energy sources.

The first contract under Saudi Arabia’s renewables programme was awarded in 2018, with the groundbreaking for the 300MW Sakaka PV solar project taking place in late November. Then in January this year, Riyadh launched a new target to install 58.7GW of clean energy by 2030, one of the most ambitious renewable energy programmes in the world.

The UAE, meanwhile, continues to pioneer the development of clean energy in the Gulf. Following the commissioning of the world’s largest single-site solar project in June, Abu Dhabi has already initiated the procurement process for an even bigger 2GW PV project.

In Dubai, progress continues on the remaining 600MW of the third phase of the Mohammed bin Rashid solar park, with work set to begin soon on the fourth phase – the first concentrated solar power capacity at the park.

Regional utilities are also pushing ahead with projects to develop nuclear and coal-fired plants to diversify fuel sources and boost energy security. As the UAE prepares to commission the Arab world’s first nuclear plant in 2020, work will begin shortly on Egypt’s first nuclear power project at El-Dabaa. As with renewables, Saudi Arabia is the market that international nuclear firms are looking towards to provide opportunities in the atomic energy sector in 2019.

*Figure includes the gross estimated budget of all projects at the execution and pre-execution stages

This article is an excerpt from MEED’s MENA Power Sector Outlook 2019 report. Buy it here

  • • Quantify future market sizes with supply and demand forecasts
  • • Track project opportunities and planned investments by the government and private sector
  • • Understand the strategy of each country and how projects are procured and financed
  • • Access power project rankings of top projects, contractors and project sponsors
  • • Gain insight into alternative power projects, including nuclear

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