MENA needs $200bn investment in renewable sector in the short term
Dubai, UAE - The Middle East and North Africa (MENA) region is embarking on an unprecedented programme to develop renewable energy, with more than 67GW of clean energy projects at various stages of the design and study stage, according to Renewable Energy in MENA Region 2017 report released by business intelligence service MEED. MEED estimates that this will require investment upwards of US$200bn, in addition to the expansion and upgrading of existing networks to facilitate the extra capacity.
The pipeline of renewable energy projects will increase further in the next five years as governments seek to meet the rapidly growing demand for power through implementing ambitious renewable energy programmes, according to a press release issued by MEED.
Unsurprisingly due to the region’s significant hydrocarbon reserves, the Middle East has been slow to adopt renewable energy. However, this has started to change significantly over the past five years, the report said.
The dramatic fall in the cost of photovoltaic (PV) solar has resulted in regional utilities launching some of the world’s largest solar projects, which have been supported by the submission of record low tariffs.
In the 12 MENA countries covered by the report, total installed generating capacity in 2015 was 271,761MW, with just over seven per cent of this coming from renewable energy capacity. However, the vast majority of this capacity is hydropower, with only Morocco in North Africa and Abu Dhabi and Dubai in UAE having commissioned solar projects with capacities greater than 100MW.
This is set to change significantly in the coming years, with the record-low tariffs being achieved for utility-scale renewables projects throughout the region changing the perceptions of governments and utilities towards renewable energy. From almost an absence of renewable energy ten years ago, almost all of the 12 countries analysed in the report have some form of renewable energy targets.
A key driver behind the push for energy diversification in the MENA region is the sharp growth in demand for gas. With increased efficiency and lower emissions than other fossil fuels, gas has become the favoured fuel for power generation across the region over the past two decades. While new alternatives such as nuclear and coal are being explored and a handful of projects being implemented across the region, renewable energy is quickly emerging as the preferred alternative to conventional oil and gas fired plants.
The report added the fall in oil price has resulted in an increased drive for private sector participation in the region’s utilities markets. The move towards the independent power producer (IPP) and independent water and power producer (IWPP) model has enabled some of the largest international developers to bid competitively and submit some of the lowest prices in the world for renewable energy projects.
While much of the focus of the region’s renewables market to date has been on large-scale utility solar and wind projects, if the region is to achieve some of its most ambitious long term goals the successful deployment of small-scale renewable initiatives is quite vital, according to MEED’s report.