Morocco imports 97 percent of its energy, according to a World Bank report in 2015, and it has few reserves of oil and natural gas, making solar attractive.
The Middle East has attracted more than its share of renewable energy projects in the past couple of years, with hundreds of megawatts of solar capacity added by countries across the region. If this wasn’t enough Saudi Arabia signed a memorandum of understanding with SoftBank Group Corp in March for a $200 billion solar power project in the kingdom that, if achieved on the planned timescales, would effectively dwarf all of the other solar projects previously undertaken in the region.
The SoftBank project, according to the details released, aims to provide a total capacity of 200 gigawatts by 2030. This would far outstrip Saudi Arabia’s domestic needs, indicating the kingdom’s desire to become a net exporter of renewable energy, even after meeting all of its own electricity demands.
“Saudi Arabia is a different market altogether and we are all waiting to see the implications of the Softbank 200GW proposal and what effect it has on the national renewable energy programmes,” says Roberto de Diego Arozamena, CEO of Abdul Latif Jameel Energy and Environmental Services, a Dubai-based renewable energy company with projects around the world.
But given the surging demand for energy in the Middle East, it looks likely that the capacity could be absorbed, assuming the necessary infrastructure was in place to transmit the electricity. “Over the next couple of decades, the population growth rate is expected to outpace current supply for electricity in the region,” says Nizar Jichi, Partner and Head of Energy & Natural Resources at KPMG Lower Gulf. “Industry reports say that the Middle East will need 277 GW to take installed capacity to the required 483 GW by 2035. The government recognises this need and has set ambitious targets, which it is on track to meet.”
Nizar Jichi, Partner and Head of Energy & Natural Resources at KPMG Lower Gulf.
Other countries across the region are also continuing to invest in renewables. About 83GW of renewable energy capacity alone will be included in the Middle East’s energy mix by 2035, Jichi adds. “Significant investments have been committed to the sector and this, along with continued focus, should help in supply keeping pace with growing demand. Activities in the renewable sector appear to be picking up pace. Forecasts by industry players show the Middle East is expected to more than triple its share of renewable energy to 20.6% in 2035, from 5.6% in 2016.”
Jichi points to several projects underway in the region, the primary ones being in the UAE, Saudi Arabia and Oman. In the UAE, Jichi highlights the world’s largest solar energy plants in Mohammed Bin Rashid Solar Park, which will be able to generate 5GW of power by 2030.
In Saudi Arabia, the big project underway is a contract for a 300MW renewable energy plant which was awarded to ACWA Power at a record low price of US$0.023417 per kilowatt hour (kWh).
Meanwhile, the Sultanate of Oman aims to reach 10% renewable energy share by 2025. To achieve this the current plan entails setting up six wind and solar parks with a combined capacity of 2.65 GW by 2025.
It should come as no surprise then, that most industry executives are upbeat about the outlook for the renewables industry in the Middle East. Paddy Padmanathan, President & CEO, ACWA Power, Saudi Arabia’s largest independent power plant developer, has a positive outlook for growth of renewables in the Middle East and North Africa region, and his optimism is backed up by numbers: “A recent Siemens report highlighted that that the Middle East is likely to deploy around 100GW by 2035, up from 16.7GW in 2016,” he says. “Additionally, Bloomberg New Energy Finance’s New Energy Outlook 2018 report found that solar and wind energy in the Middle East & North Africa will eventually undercut non-renewable energy sources; thereby pushing the region’s electricity mix to 50% zero-carbon by 2050.”
Saudi Arabia is expected to lead renewable energy developments in 2018, tendering new projects worth up to $7 billion, Padmanathan says, citing figures from international Renewable Energy Agency (IRENA). “We expect this trend in Saudi Arabia to continue as the Kingdom aims to add 9.5GW of renewables by 2023.”
ACWA is already busying itself to create some of this capacity, and the company will begin ground breaking for its 300MW solar photovoltaic facility in Saudi Arabia this year. “This is the first ever utility scale solar project in Saudi Arabia. Additionally, Saudi Arabia and SoftBank recently announced that they are going to develop the world’s largest solar power generation project. The first two solar parks in this project will have capacity to generate 7.2GW of power and construction is expected to begin this year with electricity generation up and running in 2019,” Padmanathan says.
The UAE also has ambitious plans and is already considered a renewables leader in the region. Mohamed Salama, Country Head of Global Banking, Standard Chartered UAE says that Abu Dhabi and Dubai are both heavily committed to solar. “Dubai plans to have the world’s lowest carbon footprint by 2050, when it targets clean energy sources such as solar power to account for 75% of the city’s power output, up from a targeted 7% by 2020 and 25% by 2030,” he says. “Dubai in May took another big step toward its goal of becoming the world’s greenest city when the inauguration of the 200MW first stage of the 800MW third phase of the Mohammed bin Rashid Al Maktoum Solar Park brought the emirate’s clean energy share of its total installed capacity to 4%,” Salama adds.
Further capacity is to be added over next two years and the project will add further clean energy capacity when the second and third stages of the third phase, each supplying 300MW, are completed in 2019 and 2020, respectively.
Investments in the Mohammed bin Rashid Al Maktoum Solar Park’s research and development centre will reach AED500 million ($136 million) by 2020, the Dubai Electricity and Water Authority said early this year. The centre will focus on the performance of photovoltaic panels in severe conditions and their long-term capability, as well as smart grid technologies, renewable energy and storage technologies, and other cutting-edge research into solar power and usage.
Mohamed Salama, Country Head of Global Banking, Standard Chartered UAE.
Dubai has also established a ‘Dubai Green Fund’ worth AED100 billion ($27.2 billion) to provide easy loans for investors in the clean energy sector at low interest rates, and through tax-free business zones is seeking to attract clean energy companies from around the world, according to Standard Chartered’s Salama. It is also planned that every rooftop in the city will have a solar panel installed by 2030.
Certainly, solar appears to have come of age in the region. The rise of solar has been assisted in no small part by the reduced cost per unit due to the new technologies available. KPMG’s Jichi says: “Recent reports suggest that the costs associated with wind and solar power are declining; some renewable technologies may soon prove to be less costly than traditional fossil fuels as early as 2020. Some studies have shown that the cost of electricity generated by solar power reduced by 60 per cent between 2010 and 2016,” Jichi says. “And it’s not just ACWA Power, but Abu Dhabi’s renewable energy company Masdar and its French partner EDF submitted the lowest ever bid of US$01.79 per kilowatt hour (kWh) for Saudi Arabia’s first solar power project.”
Not surprisingly the third phase of Mohammed bin Rashid Al Maktoum Solar Park impressed the industry with its reduced cost of energy and high levels of efficiency. Indeed, the project has not just been impressive due to its scale but also because of its efficiency, which saw it produce electricity at record low costs. “The solar park’s third phase achieved a world record in June 2016 when a bid of just 2.99 US cents per kilowatt-hour was accepted from a consortium led by Abu Dhabi clean energy company Masdar and Électricité de France (EDF) Group,” Salama says. “This was nearly half the winning bid for the plant’s 200MW second phase, which at 5.84 cents was itself at the time a world record low.”
The renewables industry has also benefitted from the increased participation of the private sector. Jichi points out that several countries in the GCC have recently moved towards allowing greater participation by the private sector in renewable energy schemes, mainly involved in building and running power plants, and the Mohammed bin Rashid Al Maktoum Solar Park is one of the first projects contracted under an independent power producer environment by the Dubai Electricity and Water Authority. Its fourth phase will be co-developed by ACWA Power, while Shanghai Electric will serve as contractor for the fourth phase’s engineering, procurement and construction elements, according to Jichi.
While the upside for the renewables industry is obvious, what about challenges? Jichi sites a few challenges including sandstorms and dust which affects the performance of solar panels and mirrors used in CSP plants, and which adds to the overall cost of managing and maintaining plants. Jichi also sites energy storage and grid infrastructure as challenges. Energy storage has long been a thorn in the side of the PV solar industry although recent advances in battery technology have raised hopes that economical utility-scale storage is close.
But there is another option, and one that is already well-established – and that is concentrated solar power, or CSP. This technique uses arrays of mirrors to reflect rays of the sun onto a single target, generating intense heat which can be stored for a limited time in the form of molten salt. While the technique is a less cost effective means of generating electricity than PV, its ability to store energy for later use has made it a popular choice in some markets, including the UAE. ACWA is working on the 700MW fourth phase of the Mohammed bin Rashid Al Maktoum Solar Park, which is the biggest Concentrated Solar Power project in the world. “We foresee that CSP will become increasingly competitive against PV, particularly because it can retain heat through thermal storage; which means that the plant can continue generating electricity after sunset,” Padmanathan says. “As such, CSP technologies offer great potential to meet the region’s goals for clean, secure and affordable energy.”
While Padmanathan admits the technology has some challenges, including its high cost compared with PV, he is optimistic that it has its place in the future energy mix. “Storing heat is more cost effective than storing electricity, and this is why MENA countries such as Dubai, Egypt, Kuwait, and Morocco have announced tenders for new CSP plants. Other countries in the MENA region have also announced investments into CSP projects and technologies,” he says.
North Africa is also showing solid growth. Morocco had 1,079MW of wind and solar power installed in 2016, making up more than 12 per cent of its energy mix and it plans to increase its mix of renewable energy to 52 per cent by 2030, according to Padmanathan.
Paddy Padmanathan, President & CEO, ACWA Power.
ACWA is working on the NOOR PV project, which is expected to be operational this year. The project will produce enough electricity to power thousands of homes and also reduce carbon emissions by tens of thousands of tons of CO2 each year, Padmanathan says.
Furthermore, ACWA Power’s 120 MW Khalladi Windfarm near Tangiers in Morocco, developed in collaboration with Argan Infrastructure Fund (ARIF), was due to be inaugurated in late June as this publication went to press. The wind farm represents an investment of AED 1.7 billion ($463m) and will produce around 390GWh annually to supply major industrial customers.
“The power generated from the wind farm will be equivalent to the yearly average consumption of a city of 400,000 people. With renewables playing an important role in the overall development of countries in Africa, including Morocco, the Khalladi project is assisting the region to meet its 2020 target of increasing renewables to 42% of its energy mix,” Padmanathan says.
Furthermore, the wind farm will contribute to the reduction of more than 200,000 tons of CO2 emissions per year and is part of ACWA Power and ARIF’s aim to develop 2,000 MW of wind capacity by 2020. The government of Morocco has committed to producing about 10% of its power from wind resources as part of its energy plan and is well placed to deliver on its ambitions of exporting power to Europe in the future. “ACWA Power has made significant investments in Morocco, and we expect projects and further operations to be rolled out over the coming decades,” Padmanathan says.
“Saudi Arabia’s Renewable Energy Project Development Office is also expected to tender 800 MW of wind capacity this year, making it a key market in the region for development of wind energy projects. Overall, the Middle East requires capital investment of up to US$40bn in order to meet its 2035 renewable energy targets,” Padmanathan says. “In this context, wind is likely to be the segment growing faster than the others in the region. The GCC region as a whole has immense potential to generate additional wind power, with the UAE and Bahrain having a combined wind capacity of 1.9MW compared to 163MW of solar power, according to Irena, and we see this figure increasing significantly due to all the projects in the pipeline.”
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