An extract from MENA Solar and Renewable Energy Report by MESIA
Renewable energy usage has been growing significantly over the past 12 months. This trend will continue to increase as solar power prices reach grid parity. In 2019, the global estimated additions of solar photovoltaic (PV) reached almost 138 GW. Within the Middle East and North Africa (MENA) region, the increased industrial activity and drive towards renewables is reflected in each country’s strategy. Continuous population growth and economic development have placed pressure on existing power assets and in some cases, created a significant gap between electricity production and demand. Affordable renewable energies in the region – mainly solar – have become an obvious solution.
Investment in Renewable Energy
The total corporate funding in the global solar sector saw an 11% increase year-on-year at $109.4 billion in the first half of 2019. More than $2.6 trillion has been invested in renewable energy over the past decade.
Global solar power capacity increased by more than 25 times in this decade, from almost 23 GW at the beginning of 2010 to 617.9 GW anticipated by the end of 2020. Overall investment in the MENA energy sector could reach $1 trillion by 2023, with the power sector accounting for the largest share of the spending at 36%.
As the unit rate for solar energy investment is reducing year-on-year, a decrease in capital does not represent a slowdown in the industry. Instead, this indicates the price decline in renewable energy technologies as the amount of gigawatts installed remain high.
Investments in storage solutions, grid Interconnectivities and CSP, considered to have greater priorities recently. It is expected that stationary battery storage market size will surpass $170 billion by 2030, according to Global Market Insights. Furthermore, The GCC countries’ grid interconnectivity is expected to generate US$ 33 billion in investments, economic and energy savings over the next 25 years. In CSP, more cost-effective technologies and project bankability will play an important role to further CSP investment; however, the takeoff may take some time.
Solar Trends 2019-2021
Decrease in Solar Prices
Most recently, Dubai’s 900 MW solar tender hit another low-price record with $0.0169 per kWh. The continuous drop in costs for solar panels is one of the factors that have contributed to reducing CAPEX of utility-scale projects. It is important to note that the reference prices for solar electricity usually refer to utility-scale ground-mounted solar; however, the decrease of panel prices has also contributed to make rooftop solar a more viable option for businesses.
Growth in Energy Storage Solutions
Many MENA countries are looking to energy storage. The niche market of storage solutions evolved, and its competitiveness has evloved. Ongoing R&D is looking at reducing levelized cost of electricity (LCOE) through the use of a thermal storage medium that is capable of a wider temperature range than molten salts – the current state-of-the-art storage fluid used in tower CSP. Moreover, hydrogen as a storage solution is also an up and coming technology.
Cells and Modules
Many technologies are emerging to improve performance and reliability of solar modules such as high-efficiency bi-facial modules, half-cut cells, perovskite solar cells and heterojunction cells. Other modules currently under development include shingling, N-type and multi-busbar (MBB) modules.
New Fields of Action
With the development of solar in the world, the deployment of such technology is spreading rapidly. Floating Solar, Building Integrated Photovoltaics (BIPV) and Organic thin-film Photovoltaics are emerging in the industry, bringing in several advantages. However, many challenges are emerging to implement those technologies.
Other Recent Trends
Recently, solar applications are evolving especially by fostering end-use through renewable energy. The dramatic drop in the price of solar energy coupled with increasing competitivity of storage solutions will allow solar energy for a number of usages that have traditionally been large consumers of fossil fuels and are a major source of GHG such as transport, desalination, cooling and heating. Also, green hydrogen could play a key role in a clean, secure and affordable energy future; however, it is still in the development stage. Solar, on the other hand, is on the rise and will play a growing role in the future in the optimization of the new energy mix. As a result, the C&I sector is visibly growing.
Intermittency has been one of the main issues for a wider adoption of solar energy. Increased competitive storage solutions are, however, quickly changing the landscape. Storage solutions supplying a demand for 24 hours seems to be within reach. CSP projects are anticipated to reach 16 hours of energy storage in the upcoming projects in the UAE and Morocco.
Today the total global energy storage capacity stands at 187.8 GW with over 181 GW of this capacity being attributed to pumped hydro storage systems. So far, pumped hydro storage has been the most commonly used storage solution. However, PV-plus-storage, as well as CSP solutions, are paving the road towards a different future.
Solar projects combined with storage solutions will be necessary to allow more extensive growth of competitive solar energy. With the dramatic of the price solar energy, such combination is tending to reach grid parity. Solar plus storage solutions are evolving from a niche market to a large market. Growing exponentially, 25 GW of battery storage projects exist presently with roughly 77% under development. According to a study made by Bloomberg New Energy Finance (BNEF) in 2018, almost 4 GW of battery storage systems went online, and by 2020 this number could double, as market research experts predict.
Lithium-ion batteries dominate the PV-plus-storage market. They are so far the most commonly used in the market with 87% of the storage capacity installed, under construction and announced (leaving out pumped hydro). In the future, other technologies based on flow batteries and hydrogen storage could also develop. Recent developments in PV-plus-storage are scene in Jordan, Lebanon, Oman and the UAE.
Concentrated Solar Power
CSP is still marginal and considered to be expensive; however, in 2018, the MENA region’s CSP capacity had doubled compared to the previous year reaching 725 MW of installed capacity. It is expected that CSP projects will become even more competitive in the future. CSP has the ability to be dispatchable, providing consistent power throughout the day and night. Such characteristics will foster solar energy in countries that have a high direct normal irradiance (DNI). Yet CSP development, due to high DNI requirements, will be limited to some countries only, while PV will benefit from a wider market. In addition, CSP has a longer cycle of development and execution compared to other renewable technologies given the land size required, detailed studies and design, complex financing and longer construction periods. The UAE and Morocco are the top countries in CSP projects in the MENA region.
Highlights in MENA’s Leading Solar PV Markets
Demand for electricity has grown by average 6.91% annually, fed by a yearly increase in population around 1 million (one of the highest rates in the world). Algeria primarily uses oil and gas to meet domestic demand. However, the share of renewable energy in Algeria’s generation mix is growing slowly. In 2018 according to IEA, installed renewable energy capacity was of 670 MW out of which solar energy represented 343 MW (2.5% of the total energy capacity). In Q4 2019, the country updated its Renewable Energy and Energy Efficiency Development Plan, putting greater focus on the deployment of utility-scale PV and onshore wind. By 2030, the updated version of the programme aims to install:
- Solar PV: 5.6 GW
- CSP: 1 GW
- Wind: 2 GW
- Biomass: TBD
Bahrain’s 2030 Economic Vision aims to transform and shift from an oil dependent economy to a more diversified and competitive landscape. The National Determined Contribution of Bahrain is mainly based on small scale utility-based renewable energy projects and increased energy efficiency in transport, buildings and industry. The Kingdom’s plans evolved with the introduction of the National Renewable Energy Action Plan (NREAP) and the National Energy Efficiency Action Plan (NEEAP) in 2017. The NREAP plans policies, targets and initiatives to implement renewable energy options. It aims at 5% of renewable energy by 2025 and 10% by 2035. On the other hand, the NEEAP includes 22 initiatives across all economic sectors that target a national energy efficiency increase of up to 6% by 2025.
With the electricity demand reaching up to 27.6 GW in 2019 and a forecast, by Frost and Sullivan, of 67 GW in 2030, Egypt is in need of substantial additional power capacity. As specified by the Integrated Sustainable Energy Strategy (ISES) to 2035, the Egyptian government has set renewable energy targets of 20% of the electricity mix by 2022 and 42% by 2035. The ISES includes 52 GW of both large-scale and distributed on grid renewable energy by 2035. To foster the development of renewables, Egypt uses different frameworks, Net Metering, REFIT Program and IPP Model Projects. The lifting of subsidies on fuel and electricity tariffs by the government that started in 2016 as well as the development of energy storage solutions will play a major role in the increase of decentralized solar projects. The first tender for a 20 MW PV solar plant with battery storage, located in the Red Sea area of Hurghada, was announced by NREA for end 2019. The PV-storage project will be funded by an $85M facilitated loan from Japan International Cooperation Agency (JICA).
Jordan is seeking to reduce its high level of dependency on fossil fuels (which are mostly imported) that reached 92% in 2018, with a total cost of $2.82 billion equal to 10% of its GDP. Jordan is also facing a 0.2% annual growth in electricity demand. To achieve these goals, Jordan has used a combination of utility-scale IPP projects with a smaller solar rooftop initiative.
- Renewable Energy Program Projects: Round 1 projects located in Ma’an, Aqaba and Irbid as well as Round 2 projects in Mafraq Development Zone and Safawi are currently under operation. Round 3 projects consisting of 150 MW of solar and 50 MW of wind power, including a storage option, are being carried out in Ma’an and are planned to be completed in 2020.
- Baynouna Project is the largest single solar energy project developed under the PPA scheme with 200 MW. It is expected to be fully operational in the first quarter of 2020.
- Energy Storage Projects are pivotal to Jordan’s solar capacity development. In 2019, the country tendered a feasibility study for a 30 MW pump storage system to be installed on dams.
- Net Metering and Wheeling: 300 MW were attained through net metering and wheeling in 2018. Those schemes have attracted the C&I sector seeking to reduce their electricity bills. A dedicat-ed regulatory framework has made the adoption of distributed solar more widespread.
- Solar Heating: The Jordan Renewable Energy & Energy Efficiency Fund (JREEEF) has launched a project to bring hot water to all parts of Jordan using solar. Awarded in 2017, 20,000 solar water heaters are expected to be installed in the residential sector between 2013 and 2019.
In early 2019, the government had suspended the development of new renewable energy generation projects until the completion of technical studies to assess the capacity of the electrical grid to handle additional capacity. However, the continuation of the following projects was authorized under certain conditions:
- Round 3 projects are now required to demonstrate a reduction of energy costs, though the amount of the reduction has not been specified.
- Wheeling or net metering projects with a capacity under 1 MW.
Much like its neighbours, Kuwait’s demand for electricity and power has been rising sharply over the past few years. The country’s population grew by 2% from 2016 to 2017 while demand for electricity increased by 3%. Kuwait had set an objective of integration of 5.7 GW of CSP, 4.6 GW of PV and 0.7 GW of wind into the energy mix and targets 10% of renewables in 2020. Moreover, in December 2017 the new Minister of Electricity and Water indicated the country’s determination to reach 15% by 2030.
In 2019, the demand for electricity increased by around 2.4% while the production grew with the connection to the grid of a few projects by 25.1%. The country is still focusing its efforts to increase its share of renewable energy. Strategie Energetique Nationale Horizon 2030 includes an objective of 2 GW of renewables including hydropower, solar and wind making up 42% of the country’s energy mix by 2020 and 52% by 2030. The investment cost for meeting the 52% target is estimated at $30 billion by 2030.
The country has a significant potential for renewable energy with one of the world’s highest solar energy densities. The sultanate reviewed its targets to forecast an increase in peak power demand of 53%, reaching 9.96 GW by 2023. Of this total, 11% of electricity generated will come from renewable energy sources. By 2030, renewable energy should account for over 30% of the energy mix.
While the total power generation capacity of Pakistan has reached 25,374 MW, population growth and industrial and economic development have resulted in a growing gap between demand and supply of electricity. As a result, the Renewable Energy Policy 2019 draft was produced:
- NEPRA has switched from a FIT model to auction-based bidding in 2019
- The government has announced in Q3 of 2019 a target of 60% of renewable energy in its energy mix by 2030, out of which 30% from hydropower.
Based on vision 2030, the Kingdom of Saudi Arabia is aiming to reduce its dependency on oil rev-enues, diversifying its energy mix and developing its significant potential for renewable energy. To achieve those targets, a dedicated structure within the Ministry of Energy, the Renewable Energy Project Development Office (REPDO) was established. In 2018, the ambitions of Saudi Arabia’s National Renewable Energy Program (NREP) were substantially increased with a 5-year target of 27.3GW and a 12 years target of 58.7 GW, including 40 GW of PV and 2.7 GW of CSP. In total, the government is aiming investments in renewable energy up to $50 billion until 2023.
The national consumption of electricity in Tunisia has slightly increased between 2017 and 2018, from almost 15.6 GWh to 15.8 GWh. At the end of 2018, renewable energy represented 5.7% of the national energy production capacity (240 MW Wind, 10 MW Solar, 60 MW Hydro). The new regulatory framework that was introduced in 2015/2016 by the Ministry of Industry and Small and Medium Enterprises is leading the country to a major transition. Moreover, the 2030 Renewable Energy Action Plan aims to have 30% of the total energy production come from renewables. Tunisia is following three different regimes for renewable energy project development. The auto consumption regime is the process followed to grant small scale projects. The local consump-tion regime is categorised into – authorisation regime -small projects between 10 to 30 MW and concession regime -large projects above 30MW. Lastly, the exportation regime for electricity production for exportation purposes with no capacity limit.
The UAE has been and is still a front-runner in the energy transition in the GCC with the highest portfolio of renewables in the region. The UAE Vision 2021, UAE Green Growth Strategy, UAE Future Strategy and the UAE Centennial Plan (2071) With the electricity demand reaching up to 27.6 GW in 2019 and a forecast, by Frost and Sullivan, of 67 GW in 2030, Egypt is in need of substantial additional power capacity.
About 90% of the energy consumption of Iraq is based on fuel; the rest is supplied by natural gas. According to IEA, the electricity demand in Iraq, will increase with a 6% annual growth rate by 2030 and is expected to double to around 17.5 GW average per year. Iraq is now seeking to diversify its energy mix, the development of renewable energy power gen-eration technologies of 21 GW of solar and 5 GW of wind by 2030 could improve the sustainabil-ity and reliability of electricity in the country. The share of renewables in the energy mix could possibly reach up to 30% by 2030.
The trend in the MENA region has so far been towards the development of large utility-scale projects. Combination of decreasing LCOE and the latest technology have been enabled through competitive bidding. Solar PV is expected to remain the preferred option with growing contributions from CSP and storage projects.
Energy storage is set to emerge as a vital component for further renewable energy developments in the region. Large scale hybrid PV combined with CSP and storage projects may increasingly prove beneficial, as has been the case with projects developed.
Globally, the classic utility business models are undergoing profound changes. The end use of solar energy is increasing steadily. There is a significant demand for distributed generation projects throughout the region, even more changes in regulatory policy to incentivse self-generation along with excess energy sale back to the utility grid are necessary for this market to take off. In the long run, it is a new distribution of role between utilities and decentralised production, between electricity producers and consumers that is coming up.