(MENAFN - The Peninsula) The Peninsula
DOHA: Renewable energy developments in the Arab world are gaining momentum. The main driver behind these developments is the strong support from governments that recognise the urgency of tackling rising demand for energy and are attracted by the declining costs of solar PV, the Arab Petroleum Investments Corporation (Apicorp) noted in its Mena annual energy investments outlook 2019.
In addition to the government supports, multilateral development banks (MDBs) and development agencies have played a critical role in financing projects. Gas shortages, an increasing reliance on high-value liquids and environmental concerns have also added to the urgency of energy diversification. Equally important, renewables continue to rapidly improve their cost competitiveness against other sources of power generation.
To support their renewable sectors, the Arab countries have introduced several supporting mechanisms including competitive bidding, feed in tariffs (FiTs), tax exemptions, and power-purchase agreements (PPA), in addition to land and financial incentives. Apicorp estimates that in the next five years, close to $350bn could be invested in the Mena's power sector with renewable energy accounting for 34 percent of power investment, or 12 percent of total energy investment.
Jordan and certainly Morocco have so far led the region with their renewable initiatives. Morocco's target for renewable energy as a share of total generation is amongst the most ambitious in the world, standing at 42 percent by 2020. The Noor-Ouarzazate project is the largest Concentrated Solar Power (CSP) complex in the world. With an estimated capacity of 580MW, the project has already helped the country achieve 35% of its energy requirements through renewables.
In Tunisia, renewable energy is expected to play a bigger role in the country's generation capacity, where it could account for 12 percent by 2020, and 30 percent by 2030. The country has recently granted licenses to four European firms (ABO WIND AG, UPC Tunisia Renewables, LUCIA HOLDING and VSB Energies Nouvelles) worth $134m for the production of 120MW from wind.
For countries facing challenging fiscal conditions, financing has had to be sourced from the private sector or the international community. MDBs and development institutions have played a critical role in the financing of renewable projects in these countries at a time when international banks have been reluctant to enter riskier markets. In Morocco, the 850MW of wind projects currently under construction are being financed by the European Investment Bank and KfW.
In Jordan, in addition to providing financing solutions, the IFC helped the government address regulatory and sector risks to improve the business environment and attract more investment. Whilst this has attracted other private sector investment, the role of MDBs and development institutions are likely to remain key in the future. The next phase will be to facilitate funding for grid reinforcement and storage technologies required for massive penetration of renewables.