Renewable energy deployment in the MENA: a regional overview

The MENA (Middle East and North Africa) region is characterised by a large availability of fossil fuel reserves, albeit unevenly distributed among the countries, and a high potential of renewable energy (RE) use, especially solar power. Although countries present large differences in terms of economic status, political conditions and resource availability, a shift towards clean energy production is gaining momentum across the MENA region. A prominent factor influencing this trend, in addition to the rising concerns about climate change, relates to the continuous drop in costs for solar energy production. Thanks to this growth in competitiveness, solar photovoltaic (PV) has become the most convenient source of energy for off-grid systems. Countries are not only investing on REs out of environmental concerns: especially for net importing countries without oil reserves, clean energy deployment is a means to achieve energy security, energy independence and long-term social and economic benefits.

Throughout the region, in 2014 total non-hydro RE amounted to roughly 2 GW in terms of installed capacity, while projects with an aggregate capacity of 2,5 GW are currently underway and another 2,5 GW are under tendering process. Growth in renewable energy capacity is strictly correlated to the improvement of the conditions that facilitate clean technology diffusion. These conditions are influenced by numerous factors, including:

  • the country’s policy framework (the commitment to develop RES through action plans and supporting policies);
  • the country’s institutional capacity (the ability to formulate RE policies and support RE projects);
  • the power market structure (the suitability of the power market to RE generation);
  • the attractiveness for investors and the level of public financial support.

 

MENA chart
Figure 1. Installed capacity in top performing MENA countries, 2010-2014. Own elaboration based on IRENA’s data.

 

Thanks to a large growth in non-hydro RE capacity experienced in the past three years outpacing every other Arab state (Figure 1), renewables in Morocco now cover around 11 percent of the country’s total installed capacity. Ambition is high since Morocco intends to provide 42 percent of installed electrical power from renewable sources by 2020. The 19 to 32 percent GHG emission reduction target that the country announced in its INDC confirms that Morocco is willing to take the lead towards an economic transition in the region. Features stimulating RE growth in the country are a power market that allows for private participation in electricity generation, a solid policy framework and strong financial support to private investments. Yet there is room for improvement in relation to small-scale distributed RE production, which is not as encouraged as for utility-scale projects, and private investment outside the government competitive bidding processes, which needs more regulatory certainty and transparency.

Due to its favourable conditions for RE deployment, Jordan managed to funnel a significant volume of private investments into RE projects, whose aggregate capacity in the pipeline by the end of 2014 accounted for 400 MW. This anticipates a steep rise in installed capacity, which amounted to less than 20 MW in 2014. A net metering scheme for distributed solar PV, a reform of energy prices, an unbundled electricity sector and various supporting policies are among the features that encouraged investments.

In several Arab countries the pace of RE growth is undermined by the presence of an unfavourable market structure that precludes private RE generation due to the existence of state monopolies. Some countries, such as the United Arab Emirates (UAE), have appealing conditions for investors but lack supporting policies and a suitable market structure. Others, such as Palestine and Tunisia, developed attracting RE policies but need to establish the conditions to make them effective and to ensure private participation in the market.

Another key factor enhancing RE growth relates to the efforts of energy-dependent countries like Morocco, Tunisia, Jordan and Egypt to progressively reduce energy subsidies. A characteristic feature in the Arab region, energy subsidies impose a heavy burden on public finances and distort the market discouraging the uptake of renewable technology. Phasing out energy subsidies can spur the growth of renewables while reducing the public deficit, and is a measure particularly apt for net importers for whom energy security is a top priority.

 

This article was first published under ICCG International Climate Policy and Carbon Markets series, issue n.36, accessible in pdf format.

(Image: Solar panels cleaning at Ain Beni Mathar Power Plant, Morocco. Photo credit: Dana Smillie /World Bank on Flickr)