Overview of the Renewable Energy Market in MENA Countries

/20th September 2016, RENEWABLE MARKET WATCHTM, IRENA, EY/, The renewable energy market in the MENA region is expanding rapidly, with a majority of countries announcing projects and setting policies to promote renewable energy development and number of initiatives undertaken to facilitate the deployment of renewable energy. According to the IFC, nearly $3 billion were invested in the Middle East and North Africa (MENA) region in 2012, 40 % higher than 2011 and roughly twice the amount invested in 2010. A growing recognition of these benefits is evident in the increasing amount of investment in renewable energy. It was estimated 10 that investment needs in the Mediterranean partner countries (MPC) would reach between EUR 7 and 21 billion 18 by 2020.

The total installed renewable power capacity in the Mediterranean partner countries (MPC) reached around 6.7 GW as of 2014. In terms of output, renewable energy in the region accounted in 2012 1919 for less than 4 % of final energy consumption in 2012, a stark contrast with an average of 19 % the rest of the world. Moreover, hydropower energy still accounts for an overwhelming majority of renewable capacity in the region, dominated by Egypt (2.8 GW) and Morocco (1.7 GW).

Wind energy is the most common source of electricity production besides hydropower, having expanded from 260 MW in 2006 to around 1,140 MW in 2014 installed primarily in Egypt (550 MW), Morocco (784 MW) and Tunisia (244 MW). In fact, wind development is common in the region. A good illustration of that is the 117 MW Tafila wind farm project in Jordan. This project is expected to be Jordan’s first RE independent power producer (IPP) with all the output generated to be sold to National Electric Power Company (NEPCO), under a 20-year power purchase agreement (PPA). The project is sponsored by EP Global Energy (EPGE), Inframed Infrastructure, and MASDAR Power.

Financing for the project is arranged by the International Finance Corporation (IFC), with participation from the European Investment Bank (EIB), the Export Credit Agency of Denmark (EKF), the OPEC Fund for International Development (OFID), the Dutch Development Bank (FMO) and Capital Bank of Jordan. Projects total costs are estimated at USD 250 million. Wind turbine prices have also been dropping and newer turbines have become more efficient especially in areas with low to medium levels of wind. The Levelized Cost of Energy (LCOE) of wind power is estimated similar to or slightly lower than the cost of the electricity produced from fossil fuels.

Solar energy comes third in terms of installed capacity but has seen the highest average annual growth in power generation: since 2008, the average annual growth rate of solar PV production was at least 112%, as a result of the region’s abundant solar radiation and continuously decreasing technology costs. CSP contributes also significantly to the growing share of solar energy in the region. As of 2014, construction is under way in Morocco (160 MW) and another 350 MW were awarded in beginning of 2015. LCOE of solar power is currently substantially higher than the one of fossil fuels (68% more for PV and 108% more for CSP), but will be more competitive in 2020 (18% lower in the case of PV and 3% higher in the case of CSP).

Biomass and geothermal energy are less used in the MPC with only few operations in Israel and Jordan, totaling around 30 MW of installed capacity.

Hydropower is the renewable energy source with the highest installed capacity. Indeed, Egypt has 2 800 MW of installed capacity, Morocco has 1 770 MW and Tunisia 66 MW. On the other hand, many sites eligible to hydro infrastructures are already in operation and the development potential is thus limited.

Policy deployment and target-setting are now a widespread phenomenon across the region, with all MPCs having defined renewable energy targets. By totaling the long-term plans of several governments in the region, it is estimated that these initiatives could result in 26.1 GW of additional renewable energy capacity in the MPCs by 2020 and up to 107 GW in the MENA region by 2030. This prospect should be facilitated by the continuous declining cost of renewable energy. According to IRENA23, solar PV module prices in 2014 were around 75% lower than their levels at the end of 2009, and installation costs for utility-scale solar PV plants have dropped by over 40 % since 2010 and are expected to fall by a further 25 % by 2020. However the development of renewable energy in the region does not come without challenges.

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

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