The Middle East and North Africa (Mena) region is gearing up for a renewable energy projects boom as governments strive to meet their 2020 clean energy targets. A new report by MEED Insight estimates nearly $200bn could be spent in the region on renewable power schemes over the next seven years.

Every state has adopted a 2020 renewable energy target, ranging from 42 per cent of generating capacity in Morocco to just 1 per cent in Dubai. To achieve these commitments, total installed renewable energy capacity will need to reach more than 54,000MW by the end of the decade. This compares with just 16,600MW installed today. At current prices, the 37,400MW new build requirement will necessitate investment of more than $190bn.

Renewables surge

The Middle East has been slow to adopt renewable energy. This is not particularly surprising given the region’s massive hydrocarbons wealth. However, over the past five years there has been a dramatic change in countries’ approach to the sector. Strong population and economic growth, the declining availability of oil and gas for power generation, a growing environmental awareness, and the desire to capitalise on technological trends to create local employment are pushing governments to adopt renewable energy strategies.

At present, most existing renewable capacity comes in the form of hydroelectric power plants with a total capacity of 15,200MW. Of the remaining renewable power capacity in the Mena region at the end of 2013, wind was by far the largest segment, totalling 1,038MW. Installed solar capacity, excluding the thermal elements on integrated solar combined-cycle schemes, stood at just 271MW.

This is set to change considerably in the years ahead, as governments ramp up investment in alternative power projects. It is estimated that more than half of the 37,400MW new-build capacity will be sourced from solar energy. Photovoltaic (PV) technology currently constitutes the majority of operating solar projects in the region. However, concentrated solar power (CSP) is gaining traction especially for larger schemes, and is expected to equal PV in terms of installed capacity by 2020. Solar energy is the main focus for investment in the GCC states where the wind profile is not as advantageous. In North Africa, solar and wind will be the two most important sources of alternative power.

The 2020 renewable energy targets are highly ambitious, however, and it is unlikely they will all be met. In the main, this is due to a lack of the right regulatory frameworks and fiscal incentives in most countries of the region. Financing is also a challenge. Without implementing policies such as feed-in tariffs and tax incentives, governments will struggle to attract investment in their renewable energy sectors.

This is already the case with most renewables schemes, with few moving to schedule. Bureaucratic, financial, technological and regulatory issues are the chief reasons for this, underlining the need for governments to take a cohesive, committed approach to sustainable energy.

Nonetheless, even if only half the target is achieved, this will still represent a significant step-up in investment in renewable energy schemes and mark a huge change in the region’s approach to power generation. Just as importantly, it bodes well for further development up to 2030.

The country with the most ambitious target is Saudi Arabia. It is aiming to install 23,900MW of renewables capacity by 2020 compared with almost nothing today. Of this, at least 10,000MW is intended to be in the form of solar energy, with the ultimate figure dependent on the procurement process. The initiative is being overseen by the King Abdullah City for Atomic & Renewable Energy (KA-Care).

The KA-Care programme is by far the most ambitious in the region and one of the biggest of its type in the world. However, the programme is already nearly a year late under the schedule proposed by its draft white paper published in early 2013, and there are concerns over when or if it will go ahead.

Egypt, Algeria and Morocco are the three states with the next highest ambitions. Egypt, which already has 3,370MW of installed renewables capacity, is looking to grow that fourfold to 12,000MW over the next seven years, primarily through the construction of wind farms, although solar will also play a role.

Morocco is perhaps the most advanced nation in the region in terms of solar energy development. Its first CSP project is off the ground and 200MW of additional solar power is under procurement, which when completed will give it the largest solar capacity of any state in the Mena region.

The Algeria renewables experiment remains stymied by political issues and accusations of corruption in the energy sector. Should it overcome these issues, the government has the finances and resources to deliver substantial uplift in its solar energy plans.

Economic diversification

For most Arab states, raising the contribution of solar power in the energy mix is only one part of the renewables drive. Increasingly, governments see the capacity push as nurturing new solar-related manufacturing, which will not only create much-needed employment, but also assist in economic diversification. To date, the largest investments have been in the first polysilicon plants in the Gulf, while in North Africa, the focus has been on PV panels manufacturing.

The rise of renewable energy is one of the most important global energy trends since the commercial development of crude oil

The rise of renewable power is one of the most important global energy trends since the commercial development of crude oil began more than 150 years ago. According to the Renewables 2012 Global Status Report published by the REN21 international policy network last year, renewable energy sources, including hydroelectric, already account for 16.7 per cent of global final energy use.

The Paris-based International Energy Agency (IEA) estimates that global electricity production from renewables will grow from 4,860 terawatt hours (TWh) in 2012 to 6,850 TWh a year in 2018, an increase of more than 40 per cent. Over the same period, total global renewable energy generating capacity is expected to grow from 1,580GW to 2,350GW, equal to 25 per cent of gross power generation. Longer term, Germany’s Siemens estimated in 2012 that the share of renewables, including hydroelectric ,will grow to 28 per cent of the total energy mix in 2030.

So far, the Middle East’s involvement in this trend has been limited. Interest in developing renewables has been muted until recently. There is practically no domestic political pressure for the adoption of sustainable energy.

In contrast, the priority for most governments has been to invest as quickly as possible in power generation capacity, which has led to a huge increase in hydrocarbons production volume and carbon emissions in the past 30 years. Only Jordan and Morocco lack significant hydrocarbon resources. The rest, for most of the recent past, have been content to use a growing amount of hydrocarbons in electricity production.

The main exception is Egypt, which has a long history of capitalising on renewable energy resources: it has substantial hydrocarbon reserves, but these are declining. Wind power has been on the country’s agenda for more than two decades.

Change is now coming, however. The main new factors encouraging the use of renewable energy are the growing efficiency of renewable power generation units and worries among leading oil producing countries that present trends in hydrocarbons use in electricity production are unsustainable and, in some countries, will start eroding export earnings. This is the motivation behind the renewables programme in Saudi Arabia. The desire to be seen to be conforming to global efforts to cut carbon emissions is a bigger issue for the UAE and, more recently, Qatar.

Another factor is the belief that renewable energy, and solar power in particular, could become a major source of export earnings, particularly for Mediterranean Middle East nations.

Development potential

Furthermore, the potential for renewable energy in the Mena region is considerable. It has an established hydropower system, significant wind resources, some of the highest solar irradiation levels in the world, as well as vast tracts of uninhabited desert to build capacity on.

The solar potential is particularly enormous. Technically, the region could meet its own and the rest of the world’s power requirements through solar energy: in Oman, studies have shown that CSP infrastructure covering just 0.1 per cent of its land mass would generate sufficient power to meet the sultanate’s annual electricity demand.

There is growing appreciation of the huge contribution sustainable power can play in the region’s energy mix. Coupled with the ambitious 2020 targets, the Mena region will become an increasingly important source of business for firms with expertise in developing renewables projects and technology in the coming years.

This is an excerpt from MEED Insight’s Mena Solar Power Market and Projects Report 2014. The 200-page research report provides a comprehensive overview, indepth analysis and forecasts of the solar power projects market in the Middle East and North Africa region. For more information, contact or telephone +971 (0)4 390 0436.