- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.
In recent years, renewable energy has reached the top of the policy agenda in the Middle East and North Africa (MENA) region, mainly motivated by the need for diversification of energy supply sources. Despite the fact that each country in the region has its own unique reasons for adopting renewable energy, many MENA countries began to consider increasing the share of renewable energy in their energy portfolio as a way of reducing their high dependence on fossil fuels and increasing energy security to meet increasing electricity demand.
The majority of MENA countries have scaled up their renewable energy investment predominantly in wind and solar, which they believe will offer market maturity as well as more advanced technologies. A strong renewable energy resource base, greater interest in this sector, and growing energy-intensive industries and industrialization have all contributed to renewable energy becoming a focal point for financiers. It has become evident that the competitive costs of using oil at subsidized costs for power production weigh more in costs on the economies of energy producing MENA countries compared to renewable investments for power generation.
One of the most significant policy challenges that the region faces is how to tackle increasing electricity demand in the years to come. Per capita, electricity consumption has been rising in the region for decades and surpassed that of some advanced economies with good track records for energy efficiency measures. Under these circumstances, MENA countries have the opportunity to green their economies, increase electricity supply resiliency and diminish susceptibility to oil price shocks. Other benefits of MENA countries increasing renewables share in their energy mixture would be in diversifying their energy supply sources as well as working towards achieving climate change mitigation promises.
Considering the wind and solar-intense landscape worldwide, most MENA countries fall into the Sun Belt that offers great conditions for solar and wind projects. The region’s solar insulation level is one of the highest in the world with 6.5 kilowatt-hours/m2 daily.
As of 2015, the total installed renewable capacity in the Arab countries of MENA alone equaled 14 gigawatts (GW). Within this portfolio, with a 150 percent increase in capacity, 3 GW of capacity was produced from wind and solar. Among the many MENA countries, Morocco took the lead with an impressive scale-up of its renewable installation. Just between 2012 and 2016, wind capacity increased from 300 megawatts (MW) to approximately 800 MW, and by the same token, solar capacity increased from 35 MW to almost 200 MW.
Egypt installed 200 MW of wind power to its Red Sea coasts, and since 2014, as part of the Egyptian rural electrification program, a total of 100 MW of solar PV was installed. In the same way, Jordan, the United Arab Emirates (U.A.E.), Kuwait and Qatar have also installed both solar PV and wind. These developments have been achieved over the short term, but long-term targets and projects announced in recent years in the MENA region also reflect a much brighter future for the renewable sector, particularly for wind and solar PV.
Under Vision 2030, Saudi Arabia aims to build another 9,500 MW of renewable capacity and aspires to begin large-scale solar manufacturing in the country to further utilize and harness more energy from the sun. Kuwait and the U.A.E. have also declared quite ambitious targets. The U.A.E. hopes to develop another 5,000 MW of solar PV and wind capacity up to 2030. Similarly, Kuwait plans to enlarge its solar PV and wind energy capacity to 4,500 MW. Although the projected volumes appear low given the region’s spiraling energy demand, it is still nonetheless significant and ambitious.
Seemingly, there are many reasons that MENA countries pursue a higher percentage of renewable energy in their energy portfolio, however, a number of serious impediments stand against achieving these targets. The state monopoly over power generation in the region is still quite high, and technical capacity required to enhance sectoral capacity is still too low. Above all, oil and gas subsidies in the region are so high that they crowd out other sectors in gaining a foothold. The grid infrastructure in the region is outdated and needs detailed upgrading. Additionally, the very high level of humidity and dust in many MENA countries is another barrier to lowering potential renewable investment.
Financial costs are another major stumbling block that needs to be addressed. It is noteworthy that capital costs rather than operational costs make up the greater proportion of renewable investment decisions, which inevitably leads to the importance of gaining finance for potential projects. Other than upfront costs for installations, the risk element also affects the overall capital costs of projects.
Rapid demographic growth, along with increasing energy intensity and economic development, has contributed to the wide-scale deployment of renewables in the MENA. Nevertheless, ongoing unrest in the region together with low oil prices and numerous technical challenges are among the major challenges that jeopardize renewable momentum taking the lead in the years ahead. Despite the high political risk perception and certain complications, the sector trends suggest that the growth pattern of renewable energy in the region is still robust.
As long as policymakers in the region persist in creating an investment-friendly environment, the share of renewable energy in the electricity mix will continue to grow.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy