Power projects push forward despite pandemic

27 September 2020
In spite of the sharp shock from Covid-19, power project activity picked up rapidly as the first half of 2020 drew to a close

The Covid-19 pandemic had a severe impact on the Middle East and North Africa (Mena) power sector in the first half of 2020. 

The lockdowns introduced to stop the spread of the virus led to a decline in power demand due to depressed commercial and industrial activity.

Spending halted as concerns about the fiscal impact of the crisis grew, causing the value of power project contract awards in the region to fall to $5.9bn in the first half of the year, down 9.9 per cent on the same period in 2019. 

After such a turbulent time, the second half of the year has come as a great relief.

As the recovery from the Covid-19 recession gathers pace, the outlook for the regional power projects market is incredibly strong.

Despite the sharp shock from the pandemic, power projects, particularly renewables, moved ahead in the second quarter of 2020. These included:

> UAE: Abu Dhabi’s Emirates Water & Electricity Company signed a power purchase agreement (PPA) for the planned 2GW Al-Dhafra solar independent power project (IPP). A team comprising France’s EDF and China’s Jinko Solar submitted a world-record-low offer of $1.35 cents/kWh for the project.

Abu Dhabi National Energy Company (Taqa), meanwhile, confirmed that the planned 2,400MW Fujairah F3 IPP had reached financial close.

In Sharjah, waste management company Beeah announced plans to convert the 47-hectare Al-Saja landfill into a 42MW solar farm, while in Dubai a 25-year PPA for the 900MW fifth phase of the Mohammed bin Rashid solar park was signed. It reached financial close in September.

> Saudi Arabia: Riyadh issued a request for proposal to 49 firms for four solar PV projects in round three of its National Renewable Energy Programme. Bids are expected in the second half of 2020. Thirty-seven companies, meanwhile, submitted expressions of interest in the privatisation of the 2.6GW Ras al-Khair desalination plant, the world’s biggest desalination facility. 

> Kuwait: The government announced plans to pursue the 1.5GW Al-Dibdibah solar photovoltaic plant as an IPP.  

As the recovery from the Covid-19 recession gathers pace, the outlook for the regional power projects market is incredibly strong

The total value of Mena power and water awards in the first six months of 2020 was about $10.5bn, according to MEED Projects, down about 21.4 per cent on the same period in 2019, which saw some $13.4bn of awards.

In the first quarter of 2020, before the impact of Covid-19 was felt, Mena power sector contract awards increased by 43.4 per cent over the same period last year, to reach $4.4bn. The increase in value was primarily due to the transmission and distribution sector, in which awards rose by 77.4 per cent, while awards in the generation sector remained fairly constant.

The effect of Covid-19 was felt more acutely in the second quarter of 2020, when contract awards fell by more than 80 per cent – the downslide was contributed mostly by the generation sector, in which the total award value declined by 98 per cent.

REPORTMena Power Sector Outlook 2020

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Grid modernisation

The drive to upgrade ageing electricity grids to improve efficiency underpinned the rise in power transmission and distribution contract awards in the first half of 2020.

This trend is expected to continue, as major transmission and distribution companies anticipate rising renewable energy penetration in the grids over the coming years.

Privatisation initiatives, as in the case of Oman Electricity Transmission Company, could also provide a further impetus for modernising grids through the adoption of digital solutions, which enable automated asset performance management, among others.

MEED’s base-case scenario for power project contract awards in the Mena region in 2020 sees half of the power sector contracts being tendered in July 2020 being awarded in the second half of the year, resulting in about $15bn of power contacts awards in 2020. About the same as in 2019. 



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