Challenges about Renewable Energy Deployment in MENA Countries

/11th December 2016, RENEWABLE MARKET WATCHTM/, The MENA region is blessed with all the natural resources necessary for a vibrant renewable energy sector: Lots of sunshine, strong winds and, in a few places, powerful rivers. According to World Bank estimates, the region receives between 22 percent and 26 percent of all solar energy striking the earth. This translates to a potential for solar energy per square kilometer per year equivalent to the energy generated from 1 to 2 million barrels of oil. MENA’s solar potential is considered to be exponentially higher than that of all other renewable resources combined, and is even thought to be enough to meet the current global demand for electricity.

In addition to solar, the MENA region also has significant wind potential. Wind speeds in countries such as Morocco, Egypt and Tunisia are amongst the highest in the world and the potential for wind energy in Egypt alone is estimated to be several thousand MW.

Major challenges for renewable energy generation in MENA region could be summarized as follows:

Grid capacity: Insufficient transmission grid capacity is often cited as a major challenge to the mass roll-out of renewable energy. It is estimated that countries in the MENA region would have to spend over $30 billion in the next five years to ensure that sufficient grid capacity is available to support their ambitious capacity expansion plans, including renewables. In addition, countries in the region would need to develop mechanisms to support energy balancing, and implement smart grid systems to ensure that renewable energy can be effectively integrated with conventional sources of power.

Political uncertainty: Heightened political uncertainty and political crises in a number of countries in the region have adversely impacted investor confidence and foreign direct investment. Reduction of this uncertainty is essential to ensure that the ambitious investment targets can be met.

Availability of resource data: Lack of reliable, site specific wind and hydrological resource data in a number of countries makes it difficult to estimate energy output over the long-term, increasing the overall economic uncertainty of projects. Widespread wind measurement campaigns would help reduce uncertainty and encourage interest from the private sector.

Capital intensity: Up-front capital costs (per unit of installed capacity) for renewable energy technologies such as wind, solar, and hydro tend to be higher than comparable installation costs of thermal power, with the differential being particularly high in the case of hydropower plants. However, operating costs for renewable energy tend to be considerably lower over the long-term.

Policy and regulatory framework: Despite the large scale renewable energy initiatives that have been launched by some countries in the region, the requisite regulatory framework is often lacking. This regulatory inadequacy, which could range from the absence of an independent regulator to the lack of effective tariff or net-metering mechanisms, continues to be a major deterrent for investment in renewable energy. What complicates matters further is the fact that the true cost of electricity production using fossil fuels is not clearly understood, either by the general public or even policy makers in some instances. This often results in misleading conclusions due to inappropriate comparisons between end-user tariffs, cost of subsidized hydrocarbon-based generation and the cost of renewable energy. Developed markets that have seen a large scale deployment of renewable energy have benefitted from a transparent, well-defined legislative framework, a prerequisite for private sector investment.

Environmental and social issues: Renewables can have some adverse environmental and social implications. Wind farms are often criticized due to their potential impact on migrating and resident bird species, and bats. Hydropower plants are also frequently subject to debate due to the substantial human resettlement required in the case of many large projects, as well as the potential ecological impact on the area. The process of advanced planning and ensuring that sufficient backup capacity is available to generate power at short notice.

More information about solar PV power market in MENA region you may read here: MENA Photovoltaic (Solar PV) Power Market Outlook 2016 - 2015