This is an extract from a recent report “Arab Future Energy Index 2023” published by Regional Center for Renewable Energy and Energy Efficiency (RCREEE). AFEX Renewable Energy 2023 exhibits a comprehensive assessment of five areas that impact renewable energy implementation and deployment in the Arab States. The assessed areas are market structure, policy framework, institutional capacity, finance and investment, and newly introduced carbon emissions and monitoring. Each area is evaluated based on selected factors that can reflect the status quo area and the development since the last AFEX RE edition.
Although the power sectors in many Arab countries were traditionally characterised by a high degree of vertical integration and state control, a gradual but slow transition towards competitive power market status is observed in some countries through unbundling vertically integrated power utilities. Two key issues are addressed in this:
- Independent Power Producers (IPPs)
- Grid access
Independent Power Producer
Independent Power Producers (IPPs) are those typically building, owning, and operating power generation facilities to sell electricity either to the utility or directly to a third-party through a Power Purchase Agreement (PPA). IPPs also can have the forms of direct export, and partial self-consumption. IPPs sales to the utility are the common practice in the Arab region, while third-party sales can be considered as an emerging supply option particularly appealing for larger industrial and commercial actors with high electricity needs and reluctant to become auto-producers of electricity.
Currently the Gulf area is leading in terms of the world lowest prices with several PPA price records achieved. In Saudi Arabia, a price level of 1.04$c/kWh was achieved for 600 MW Fasiliyah PV independent power producer (IPP) project. In UAE, 1.35$c/ kWh was recorded for the 2GW Al Dhafra Solar PV project. Moving to Qatar where it managed to materialise a price of 1.567$c/kWh in 800MW solar tender. In early 2020 Bahrain, Kuwait, Oman have several IPP projects in the pipeline.
Besides Gulf area, Algeria, Egypt, Jordan, Lebanon, Morocco, Palestine, and Tunisia, have shown a track record in IPP projects. Egypt has signed PPAs for several PV and wind energy IPP projects with prices 2$c/kWh for the 500 MW solar plant and 2.85$c/kWh for 1,100 MW wind power plant. Morocco has announced several hybrid projects combining PV and solar thermal technologies. Besides leading countries, several countries that started its journey towards installing considerable renewable energy capacity are using IPP scheme.
Utility Supply: Competitive bids, auctions, and direct proposal submission schemes have proved to be very successful in attracting private local and international investments. Arab countries allow for public competitive bidding either under IPP or EPC tendering procedures based on government calls for tenders. Jordan, Palestine and Egypt opted for direct proposal submissions.
In Algeria, the Ministry of Energy Transition and Renewable Energy has launched in late 2021 a bidding for 1GW solar PV capacity project. It has been divided into lots ranging from 50 to 300 MW each. A 100 MW solar PV power project is announced in Bahrain. The project is expected to enter commercial operation in 2023. The construction of the first IPP wind project in Djibouti is under way at a 60 MW wind farm in the Goubet region.
In Egypt, new private solar plants in Kom-Ombo will add 200 MW and 500 MW to the grid respectively. The Egyptian Minister of Electricity and Renewable Energy announced the development of a wind energy complex with a total capacity of 2,800 MW. Iraq announced in 2019, a 750 MW solar IPP program that will be divided into seven projects. The projects will be in 5 provinces with different capacities for each project. Government of Iraq to develop five solar photovoltaic projects with a combined capacity of 1GW. Kuwait is drawing up plans to develop 2 GW solar and wind projects through cooperation with the private sector.
In Morocco, the Moroccan Agency for Sustainable Energy (Masen) and the National Office for Electricity and Drinking Water have signed the final contracts with the developer consortium for the 270 MW Jebel Lahdid wind (IPP). In Qatar, an agreement to develop the 800 MW solar power plant in Al Kharsaah has been signed. Commercial operation is expected to be in 2023. The energy generated by the solar plant will be supplied to Kahramaa corporation under a 25-year (PPA).
Tunisia completed the first renewable energy IPP project in 2017. Currently Tunisia has four wind projects with a capacity of 30MW for each project under construction. The Tunisian government has given the green light to several solar projects with a combined output of 500 MW and a total investment of USD 408 million. In UAE Al-Dhafra Solar PV plant is being developed and under construction. The 2GW project IPP PV project is expected to be commercially operational in 2023. The plant will use innovative bifacial solar technology in addition to the latest crystalline technology.
Third Party Supply of Renewables: Six Arab countries (Algeria, Egypt, Morocco, Palestine, Syria, and Tunisia) are currently having the regulatory framework to allow third parties to sell electricity to the customers. Bahrain, Qatar, and Saudi Arabia allow third party supply as a conventional IPP. Morocco has third party supply in practice through NAREVA Holding Company: Three wind projects of 200MW total capacity supply power directly to large industrial customers. In Egypt small and medium scale projects of capacities ranging from a few hundreds kilowatts up to 20 MW are implemented through direct PPAs between the solar companies and the clients in industrial and commercial sectors.
Direct Export of Renewables: Four countries have the legal basis for RE direct export: Algeria, Jordan, Morocco, and Tunisia. In Morocco, Law 13-09 permits the export of RE-produced electricity by using the national grid and interconnections with specific authorization by the state-owned utility ONE. In Algeria, Law 02-01 allows for export. Tunisia Law 12 for 2015 has specified some conditions for exporting RE sourced electricity. In Jordan, the General Electricity Law specifies that subject to the Council of Ministers approval, import and export will be handled on a case-by-case basis.
Priority Access and Dispatch: Among the required regulations are RE priority access and dispatch which are effective consolidation measures that promote the competitiveness of the RE projects and increase the RE market attractiveness. It is important that all renewable electricity producers are treated in a non-discriminatory way. A regulated grid-transporting tariffs combined with an unbundled power sector can contribute to guaranteeing non-discriminatory access for all producers.
Grid Code or Connection Guidelines: The technical specifications that state the general conditions of how different power generation installations connect to the grid as well as the management and functioning of the electricity grid and system services are called grid or network codes. Grid codes must clarify which technical rules govern access to the grid for all types of RE projects. Furthermore, the grid code defines specific conditions for plants to receive pre-qualification and participate under different supporting schemes such as net metering or bids/auctions.
Renewable Energy Targets – Most Arab countries have announced ambitious RE targets. The announced targets are different and vary from as low as 15% to as high as 100%. Solar PV and wind are the dominant technologies across all countries in the region, together with some shares of CSP technology. Biomass and geothermal represent a minor share in the RE generation mix, except for Djibouti that is planning to depend to a great extent on geothermal power.
For the first time, two Arab countries have 100% RE targets: Djibouti by 2035, and Morocco by 2050. Morocco also has a 2030 target of 52% of RE share. In terms of installed target capacity, Saudi Arabia has the most ambitious target of 58.7 GW by 2030 followed by Egypt which has a target of 59.7 GW by 2035. These targets represent 30% and 42% share of national installed capacity respectively. The Egyptian RE strategy is under revision to be updated to reach more than 50% by 2035.
Iraq recently announced to increase the share of renewable energy to 33% by 2030. To reach this target, Iraq aims to install 12GW of solar projects. This represents a giant leap from the previously announced target of installing 2.24GW by 2025. Jordan to raise the target in the updated Energy Strategy for the Energy Sector 2020-2030, developed by the Ministry of Energy and Mineral Resources, from 21% in 2020 to 31% share for renewables in total power generation capacity and 14% of the total energy mix by 2030.
Morocco is on the right path to achieve the announced target of 52% of its electricity needs from renewable sources by 2030. Morocco plans to do more to achieve 100% by 2050 in its 2050 Morocco vision. The expected energy mix will come from rooftop solar 29.1%, solar plants 10.5%, CSP 4.8%, 41% from onshore wind, offshore wind 10.5%, wave energy 1%, and finally 3.1% from hydropower.
The National Energy Strategy for Oman has set an ambitious target to derive 20% of electricity from renewables by 2027. The renewable energy plan aims to secure at least 2,660 MW, with solar PV share of 79% and wind share of about 21%. In the 2040 vision, there is an ambitious target to raise the penetration of renewable energy in the energy mix to 20% in 2030 and up to 35-39% in 2040.
Renewable Energy Share
The second indicator is used to assess the country’s efforts to apply RE policy. Renewable energy share in the energy mix is always used to have an overall view on the energy situation in a country and its commitment towards renewable energy. Excluding hydro, it is noted that PV technology increased its share in the energy mix and scored 60% to prove its position as the favourite technology in the region. This is followed by wind energy which represents 31% of the renewable energy mix. CSP technology is present only in 6 countries and exhibit a share of 6%. Bioenergy has a minor share or 2.6%.
Hydro power still has the largest installed capacity with a total of 11.2GW followed by PV solar power with 7.4GW. The RE share in the Arab region is around 3.6% without accounting for hydro power. The total installed RE capacity is 23.6GW. A total of 5.1GW has been added in just 2 years to the RE portfolio in the Arab region.
The current trends in renewable energy policies witness a shift from feed in tariff (FiT) that was applied in several Arab countries such as Egypt and Jordan towards auctions and tender mechanisms which are under competitive bidding policies.
Direct Proposal Submission – Jordan, Egypt, Palestine, and Djibouti are the only countries in the Arab region that apply direct proposal submission schemes. Under the direct proposal scheme, developers are responsible for acquiring the development assets by themselves and are guaranteed a tariff for the power they produce usually after a call from the government to have a RE project. The criteria for direct proposal include development plan including financing, preliminary design, the contribution of local inputs to the facility, supplies, operation, and construction.
Competitive bidding – This scheme is currently the most popular and dominating one. The recent auctions resulted in driving the world record price for solar energy lower and lower. In early 2020, Kahramaa announced the results of the 800 MW solar tender at Al Kharsaah solar photovoltaic IPP project. The winning consortium was formed by French oil giant Total and Japanese conglomerate Marubeni Corp. The consortium offered a world record price at that time of $cents1.567/kWh. This price beats the previous world record of $cents1.6 submitted by French developer Akuo Energy in Portugal’s first PV auction.
In 2021, two new world records have been announced in Saudi Arabia. The second lowest is $cents1.239/kWh for the 1.5GW Sudair PV IPP – a project that had been directly negotiated with the developer through Saudi Arabia’s sovereign wealth fund Public Investment Fund (PIF). The current world record for lowest PV tariff is $cents1.04kWh was achieved for the 600MW Fasiliyah PV IPP project.
Building on the results of the recent auctions in the region, it is expected that competitive bidding will continue its dominance over the other renewable energy policy schemes.
For market structure, strong development and shift of powers are seen in the utility supply area. Several mega scale and even giga scale projects are under development and construction. The gulf area leads these developments especially in Kuwait, Oman, Qatar, Saudi Arabia, and UAE. In north Africa, the development is led by Egypt, Morocco, and Tunisia.
For the policy framework category, some changes are noticed in the Arab countries renewable energy targets. For example, Algeria changed the target to install 15GW of photovoltaic technology by 2035. In Jordan, the target has been raised in the updated Energy Strategy for the Energy Sector 2020-2030 from 21% in 2020 to 31% share for renewables in total power generation capacity and 14% of the total energy mix by 2030. Currently, two Arab countries have 100% RE targets: Djibouti by 2035, and Morocco by 2050. Morocco also has a 2030 target of 52% of RE share.
The complete report can be accessed here