Image Credit: Glasspoint
Oil has been the foundation of many Middle East and North African economies, but leaders of these countries are now looking to solar for their next energy revolution.
Oil has been the foundation of many Middle East and North African economies, but leaders of these countries are now looking to solar for their next energy revolution. With open space and vast amounts of sunshine, the region—commonly abbreviated as MENA—is a seemingly perfect fit for solar technology, in spite of its longstanding role as the world’s top oil supplier. But even in the oil-rich region, solar technologies are becoming too cost competitive to ignore.
The rise of solar and other alternative energy sources in MENA should not be viewed as an end to their fossil fuel dominance. Instead, using solar for domestic electricity production is—at this point—simply good economics. By using a cheap, abundant energy source to for power generation, MENA countries are in turn able to free up more oil for export and sale. This point is the focus of a recent report from global consulting firm Ernst & Young on the rise of alternative technology in MENA.
“MENA countries are increasingly realizing the opportunity cost being incurred by not adopting cleantech. They now seek to reduce the amount of fossil fuel they use domestically, which can be sold for more profit in the open market,” the report said.
Middle East energy expert at the University of Oxford Justin Dargin agrees that domestic energy consumption is a key driver of the move to renewables across the region: “The most important factor is for MENA countries, especially those in the [Gulf Cooperation Council], to reduce their domestic consumption of hydrocarbons for power production.”
By using a cheap, abundant energy source to for power generation, MENA countries are in turn able to free up more oil for export and sale.
He added: “The Gulf countries have seen their domestic energy demand skyrocket since the early 2000s. This growing demand has been responsible for many of the MENA countries that formally exported or were self-sufficient in natural gas to become gas importers. Renewable energy is seen as a way for the countries to buttress their foreign revenue while at the same time, obtain technology transfer and develop advanced industries centered on renewable energy technology and production.”
Dargin tells The Fuse that this renewable energy trend first picked up in the MENA countries in 2008, when natural gas deficits became common in the region.
Research from the Middle East Solar Industry Association (MESIA) isolates two additional key factors that are driving regional solar growth. For one, solar power pricing has dropped precipitously. It has fallen from $7.00/watt in 2008 to less than $1.50/watt in 2014 in Abu Dhabi—a roughly 75 percent cost reduction in less than a decade. The authors also note that the price of obtaining power from natural gas—largely imported to the region—is on the rise.
The Ernst & Young report pinpoints the top MENA countries with the best potential to see renewable energy investments over the coming five years. Saudi Arabia held the top spot and the UAE came in second place. But Jordan and Morocco, ranked third and fourth respectively, are poised to see major gains too.
To spotlight the region’s growing investment in solar, The Fuse has profiled three of the most promising projects underway right now.
United Arab Emirates
Already home to the world’s largest single unit concentrated solar power plant, the UAE is a regional model for pursuing ambitious renewable energy projects and seeing them through to completion. Earlier this year, the state-owned Dubai Electricity & Water Authority (DEWA) announced that it’s tripling its solar energy targets: pursuing a goal of drawing 15 percent of power capacity from solar power by 2030. The announcement came with an official commissioning of a new $330 million 500-megawatt solar plant set to begin construction next year.
DEWA is also responsible for the massive Mohammed bin Rashid Al Maktoum Solar Park. At its current Phase I size of 238,764 square meters, it is the largest photovoltaic solar plant in the region—and it’s still growing. DEWA says it will eventually expand to cover some 40 square kilometers and generate 1,000-megawatts of power.
Unlike many of its neighbors, Jordan is not a major producer or exporter of conventional oil and gas—although it does sit on one of the largest oil shale plays in the world. As a result, the country typically relies on imported fossil fuels for some 96 percent of its energy needs. However, the natural gas pipeline the country depends upon for imports has frequently been a target for violence.
In an effort to mitigate those substantial risks and costs, the Master Strategy of the Energy Sector in Jordan has set a new target for 10 percent of the country’s energy supply to come from renewables by 2020.
In an effort to mitigate those substantial risks and costs, the Master Strategy of the Energy Sector in Jordan has set a new target for 10 percent of the country’s energy supply to come from renewables by 2020. That 10 percent amounts to about 1,800 megawatts—one-third of which is set to be provided by solar power.
Jordan is in fact already leading the way for solar: In 2014 alone, the country awarded 12 projects, more than any other MENA country.
Morocco is, like Jordan, a MENA state without much to offer in terms of oil production. The North African country imports some 91% of its energy supply, according to World Bank estimates. Starting in 2009, Morocco set ambitious goals despite not having deep pockets like Saudi Arabia or UAE. By 2020, Morocco is aiming to fire up 6,000 megawatts of renewable energy to power 42 percent of its installed energy capacity. A recent blog post from GE hailed the North African state as having “the most ambitious clean energy target in the MENA region.”
In 2013, Morocco began Phase I construction on the Ouarzazate Solar Complex—Phases 2 and 3 already have successful bidders locked in. With some 3,000 hours of sunshine annually, the country has a powerful natural resource in solar energy. The project aims to generate 2,000 megawatts of power by 2020 to provide for an overall 18 percent of the country’s annual electricity needs.
“Solar could influence the country’s geopolitical importance in a significant way, chiefly as a conduit for solar energy production and export across the Mediterranean. The [Ouarzazate] project is a case in point,” Dargin says. “If this project eventually develops into a significant solar power production node, then Morocco, along with its neighbors, would become somewhat indispensible for the EU in its drive to secure stable energy supplies.”
While low oil prices might have had a positive impact on Morocco’s state budget, they are not essential to continuing the second and third phases of the Ouarzazate solar plant. Dargin notes that the project is insulated from oil price volatility by outside funding from the World Bank and others who are investing in the plant.
“Morocco has long-term plans to development its solar energy capacity, and is not allowing the ever present fluctuation in oil prices to alter its strategies,” Dargin says.
Solar makes inroads, but oil still dominates
While the MENA region might be fertile for solar energy, experts remain dubious that oil will ever cease to be the dominant power supplier for the region.
While the MENA region might be fertile for solar energy, experts remain dubious that oil will ever cease to be the dominant power supplier for the region. To be sure, many of these solar initiatives in MENA countries first kicked off when oil was at far higher price back in 2008—spurring them to try and find alternative domestic power sources as there was far more money to be made off of their domestic oil supplies outside their own borders.
Simon Henderson, Director of the Gulf and Energy Policy Program at the Washington Institute, told The Fuse that while high oil prices stimulated a push for solar energy, the big question that remains is whether or not these large-scale solar projects can survive with lower oil prices.
“Solar will be a marginal source of energy for the foreseeable future,” Henderson said, casting doubt on a widespread solar future. “Solar projects are now economically viable, but the major share of electricity generation will still come from oil, gas or coal power.”
But over the long term, Dargin sees an outcome that could prove hopeful for regional stability in a way that benefits global security: “Being able to develop and deploy renewable energy on a large scale would save a significant amount of the budgetary outlays of the MENA countries. As a result, they would have more funding available for social services and infrastructure development, which if undertaken correctly, would go a long way to mitigating some of the socio-economic demands that were present during the Arab Spring protests. This could ultimately enhance stability across the region, which would advance American interests in promoting regional stability.”