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Solar boom for MENA region

DNV GL recently attended the World Future Energy Summit and actively participated in a number of areas. Specifically, DNV GL contributed to the emerging solar industry which is in the early stages of a boom throughout the MENA region. The UAE is looking to increase its target for power generation from clean energy to 30 per cent by 2030, the energy minister said during the summit. Morocco has announced plans to implement 400MW of solar; the Saudi Electricity Company is embarking on procuring its first 100 MW of solar both through EPC and IPP approaches; Dubai is powering ahead with its 800MW facility and Abu Dhabi is in advanced stages to develop its 350MW solar plant with more planned; in the Northern Emirates FEWA is expected to announce a project for 100MW solar. The Emir of Kuwait has announced renewable penetration targets of 15% by 2030; Jordan and Egypt are powering ahead with their more advanced bidding round and FiT solar programs.

Expectedly, there was a sharp focus on the oil price trend and its emerging impact on renewable investments in the region. Essentially the cost of solar panels and the electricity produced has been reducing at a steady rate for a number of years. In many instances electricity production from solar is at grid parity with some other technologies and particularly economic where there are weak grid connections. Conventional thinking has been that at high oil prices it makes sense for oil importing countries to be less dependent on high cost imports and replace them with solar power and for oil exporting countries to monetize their oil at high prices and therefore install more solar capacity in their own countries.

With the international oil price crashing down to US$ 30/bbl it seemingly would turn conventional economic thinking on its head and due to the price-substitution effect, countries in the MENA region would be less inclined to invest in renewables in this environment. However, it seems the term of decision making and inter-temporal considerations have changed in the region. We are witnessing both oil importing and exporting countries looking to diversify their economies and be far less dependent on swings in the price of oil and the extreme effect this can have on government budgets.

There has been some hesitance from investors and developers given that around 4 years ago Saudi Arabia’s KA-CARE announced a huge program to ramp up low carbon generation installations to around 52 GW over the next 15 years. This program has not materialized and is currently being re-assessed. What most observers do not understand is that the KA-CARE program was never just a renewables program; it was a program for industrial transformation. In the meantime there have been investments in new smart industrial parks and production facilities; many Saudi companies such as ACWA power, Abdul Lateef Jameel and Walid Juffali are investing externally in solar PV and other projects to build their portfolio and capacity; universities such as the King Abdullah University for Science and Technology are investing research and development into renewable energies. What all this amounts to is a more focused preparation to benefit from a mass renewables program when it comes. There has also been a timing benefit in terms of the cost curve and grid parity pf solar PV in particular with some other technologies.

The next big focus will be on reforming the grids and transitioning utility business models. The grid will need to cope with high voltage utility scale renewables as well distributed generation with storage. There will be an increase in demand side management programs and the use of digital meters. This will be further impacted by interconnected grids dealing with alternating current and direct current connections. The system operators will need to better understand how to operate such complex systems and also make forecasts of wind and solar resources over shorter time intervals to optimize efficiency. There is an interesting road ahead for grids in the MENA region.

Therefore it is heartening to note that instead of talk about reigning in renewable programs in the MENA region, experience from industry leaders and experts at the WFES points to evidence that solar PV investments is seen as a good long term investment with continued potential for cost reductions and performance improvements. All of these dynamics bode well for the solar PV sector in the MENA region and we could well be at the precipice of a major solar PV boom in MENA.

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