Renewable energy is seeing mixed for tunes in the Arab world. Energy-importing countries and the UAE will continue to accelerate the development of their renewable-energy sectors. They will continue to rely on supporting policies to press ahead, while energy-exporting countries lag behind, Arab Petroleum Investment Corporation (Apicorp) said in its Energy Research issued this month. The region has received some of the lowest renewable-energy prices awarded globally for both photovoltaic (PV) and wind power; and with some of the best resources in the world, renewables have great potential in the Arab world. But this needs governments to rise to the challenge and improve the regulatory environment to attract investment in one of the fastest-growing energy markets, the report noted. Over the past decade, several Arab countries have announced ambitious renewable-energy targets. With power demand across the region expected to grow at 9.9% a year until 2020, governments are keen to increase the share of renewables in the power mix. A shortage of gas and, in some countries, increasing reliance on liquid fuels, a key product for export, have also added to the urgency of energy diversification while environmental concerns increase. But progress has been mixed, as net energy importers and net energy exporters face different realities. To support their renewable sectors, countries such as Jordan and Egypt introduced feed-in tariffs (FiTs), tax exemptions, and power-purchase agreements (PPAs). On the other hand, energy-exporting countries have done little to incorporate renewables, as they continue to rely on cheap-to-extract conventional sources to meet rising electricity demand. Falling technology prices have given some countries an opportunity to move towards increasingly cost-competitive renewable energy, while government support, like in other parts of the world, will be instrumental in driving the growth of renewables in the region. Reliance on fuel imports to meet domestic demand and a rising import bill has pushed Morocco and Jordan to diversify their energy sources. In Morocco, the government's target of 2GW of solar and 2GW of wind power by 2020 is on track. Current wind capacity is over 750MW. The large increase in wind capacity over the past two years is attributed to the startup of the 300MW Tarfaya wind project in 2014. The project is a joint venture between GDF Suez and Nareva Holding and was financed by local banks. As for solar, the 160MW NOOR-1 concentrated solar power (CSP) is anticipated to be commissioned early this year while NOOR-2 and NOOR-3 are expected to add a combined 350MW in 2017. Upon completion, NOOR will become the largest CSP project in the world. The multi-billion dollar project is financed by international development agencies including the European Investment Bank (EIB) and the African Development Bank. Jordan's commissioning of the 117MW Tafila wind project in the second half of 2015 was a milestone for the kingdom. The project had an estimated cost of $287m and was financed by the International Finance Corporation (IFC), EIB, and other international institutions. As for PV, the country is expected to exceed its target of 600MW by 2020. Capacity of 200MW is expected to come on line by the end of 2016 and an additional 300MW by the end of 2017. These projects were also financed by various international institutions and banks. More recently, Masdar, in the UAE, announced that it will build a 200MW PV plant for the Ministry of Energy and Mineral Resources but no details have been provided. The UAE has shown a serious commitment to developing solar energy. The 100MW Shams CSP plant has been operational since 2014 in Abu Dhabi. The cost of the project was $600m and was financed by international banks including BNP Paribas, National Bank of Abu Dhabi and Mizuho. On the other hand, Masdar's ambitious Nour project, which aims to develop 300MW of PV, continues to face delays. In Dubai, the 13MW Phase I of Dubai's solar park was completed in 2013. The 200MW Phase II has been awarded and will come on line in 2017 while Phase III is in the tendering process, with plans to bring 800MW on line by 2020. The Dubai Electricity and Water Authority is in charge of developing renewables in the emirate and aims to have 7% of Dubai's generation from renewables by 2020. Additionally, Dubai introduced net-metering in 2014 to promote small-scale solar in the residential sector. By 2030, Dubai will require all rooftops to have solar panels as part of a strategy to generate 75% of electricity from solar by 2050. Egypt was able to achieve $50/MWh for onshore wind (which has been beaten by Morocco in January 2016). The price in the ACWA bid is equivalent to that for a combined cycle gas turbine (CCGT) at around $2.70-5.00/MMBtu or $10-16/barrel. This is promising for the region given that Qatar is the only Arab country with abundant cheap natural gas. Gas supplies in Abu Dhabi and Egypt are estimated to cost in the range of $5-6/MMBtu and can be more expensive in other countries. Based on these estimates, solar PV and onshore wind are capable of undercutting conventional sources in some countries, despite the widespread perception that renewables are not cost competitive. Other net-exporting countries are struggling to kick start their programs. Large oil or gas reserves and cheap extraction costs mean that hydrocarbons continue to meet rising demand in countries like Saudi Arabia, Kuwait, and Qatar. Policy uncertainty and the lack of an efficient regulatory framework are mainly responsible for slow progress. In 2012, the King Abdullah City for Atomic and Renewable Energy announced plans to invest $109 billion to produce 41GW of solar by 2032 in the kingdom. But little progress has been made so far. Given the large amount of investment required to reach this ambitious target, it is highly unlikely that the government will meet its renewable targets for now. Other countries, such as Kuwait, have declared a 15% renewable-energy target by 2020 but have only selected preferred bidders for its 50MW Al-Shagaya CSP plant; while Qatar, Oman, and Bahrain have made minor investments with no significant additions expected soon. Despite many claims that renewable energy will never reach its potential unless subsidies are phased out. Fuel subsidies are not the main constraint for renewable development and other factors play a more important role. One problem lies in the electricity-market structure in Arab countries. Almost all rely on a state-owned wholesale buyer to buy and sell electricity. Government wholesale buyers decide the purchase price of electricity from generators as well as the selling price to consumers. If governments want to keep prices low for end-consumers, there is nothing to prevent them from incentivizing renewable-energy sources in the same way they subsidize conventional sources. There are many reasons to be optimistic about the future of renewables in the region. Net-importing countries, driven by their desire to reduce dependency on fuel imports even in a period of low oil prices, will continue to lead in investment and deployment of renewable energy. But financing is becoming more challenging in the current environment and these countries need to continue developing their regulatory framework to attract investment into this sector. For net-exporting countries, with the exception of the UAE, renewables will take a back seat as they continue to rely primarily on conventional sources for additional capacity in the coming years and will use demand-side efficiency and price reform as measures to tackle rising consumption. But already the region has received some of the lowest renewable-energy prices awarded globally for both PV and wind.— SG
