Low-Carbon Energy Strategies in MENA Countries

Abstract

The chapter provides an analysis of the different strategies envisaged by each MENA country regarding the low-carbon energy transformation, mainly in the field of renewable energy sources. By examining the different national strategies, the chapter outlines how they depend on different level of commitments, ambitions and preferences regarding renewable energy sources and project size. Given their high potential, all MENA countries are considering solar projects, and to some extent wind projects (for example in Morocco and Egypt). The transformation of the global energy system and the internal challenges in MENA countries are the driving engines in the energy sector of these countries, though at varying speed depending also on their hydrocarbon endowment (or lack thereof).

This chapter presents the different strategies envisaged by each MENA country regarding the low-carbon energy transformation, mainly in the field of renewable energy sources.

While all MENA countries have announced renewable energy targets, MENA countries have undertaken different strategies regarding their national energy transformation. This is due to different level of commitments, ambitions and preferences regarding the renewable energy source and project size. Given their high potential, all MENA countries are considering solar projects, and at some extent wind projects (for example in Morocco and Egypt).

The transformation of the global energy system and the internal challenges in MENA countries are driving changes in the energy sector of these countries at varying speed, depending also on their hydrocarbon endowment (or lack thereof).

Among the Gulf countries, some have announced major renewables targets, such as the UAE and Saudi Arabia. These two countries have increased their renewable targets and they are eager to benefit from their large financial capabilities to gain political and economic gains through energy diversification. Others have been more prudent due to different reasons. For example, Qatar has been a late mover in the renewable energy sector as it strongly believes in the role of natural gas within the energy transition. Iran has increasingly set renewable energy targets and has expanded its hydro-power generation, while nuclear capacity has produced limited results.

The Mashreq countries have experienced an uneven growth in the renewable energies. Egypt, Israel and Jordan have increasingly worked on renewable projects driven by rising population, energy security concerns and economic opportunities. Egypt has managed to attract significant international investments for its renewable projects. Conversely, Lebanon faces major sociopolitical and economic challenges that severely undermine its ability to reach its targets.

Among the Maghreb countries, Morocco has been one of the first mover in the renewable energy development in the entire region motivated by political and security reasons. It set a target of 52% of installed renewable capacity by 2030. The other hydrocarbon-poor country (Tunisia) has set important targets, but political instability and economic challenges may undermine its ability to attract international investments. By contrast, Algeria has lagged behind with its targets as it has prioritized other investments during low oil prices.

Enhanced electricity interconnections among countries and clusters would bring numerous benefits in terms of energy security, energy trade opportunities and allow for an increasing share of renewable energy sources in the energy mix of MENA countries and beyond. Countries need to address regional power interconnections as it will be a crucial factor for supporting renewable projects.

1 Drivers of the Low-Carbon Energy Push in MENA Countries

Why is it that numerous/most countries in the region—including hydrocarbon-rich ones—are willing to (partly) change their energy system, by outlining ambitious renewable objectives and targets? Are countries in the MENA region seriously committed to pursuing the renewable path? Why are hydrocarbon-rich countries increasingly adopting renewable energy in their energy and electricity mix, given the very low cost of oil and gas supplies (i.e. low breakeven prices)? Are international negotiations (i.e. Conference of Parties (COPs) and the broader United Nations Framework Convention on Climate Change (UNFCCC)) playing a role in the increasing share of renewable energy in the MENA energy mix?

These are some of the questions this chapter attempts to answer by taking into account the socio-economic, financial and political peculiarities of each country in the region. The initial focus will be on the main external and internal drivers of the energy transition in the MENA region including its challenges and opportunities. The chapter will then highlight the most relevant mid- and long-term strategies and policies adopted by the single MENA countries, as well as the state-of-art of renewable energy development. Finally, it will assess whether these countries are likely to achieve their renewable targets within the planned timeframe, or if they may delay/fall short of their goals. In order to extend the discussion and provide a potential assessment of the path undertaken, each country will be analyzed within the framework of the relevant cluster (The Arabian-Persian Gulf, the East Mediterranean and the West Mediterranean).

The growing fight against climate change by governments worldwide represents a major external driver for the energy transformation of MENA countries. Action against climate change has shaped international politics, as governments have increasingly committed to implementing deep decarbonization policies. This ever-growing global consensus, combined with a more extensive scientific knowledge of the harm caused by climate change, has led to the creation of the international climate change regime, which forces MENA countries to act in cooperation with all the other countries. Moreover, climate change is expected to further exacerbate some of the existing challenging conditions that MENA countries must deal with: increasing air and water temperature, water scarcity, desertification, and so on. These conditions have a direct impact also on the energy sector.

In compliance with the international climate change regime and pushed by the domestic dimension of the fight against climate change, MENA countries have submitted their climate pledges, i.e. their nationally determined contributions (NDCs). The previous chapters have highlighted the fact that the MENA region, though often considered a homogeneous group, is far from being so. This is also true for climate change policies. Oil-producing countries have often combined actions to fight climate change with their need to diversify the domestic economy, as well as rendering it more efficient. Non-hydrocarbon producing countries have often set more ambitious decarbonization plans due to their dependency on imports and related macroeconomic imbalances.

Indeed, energy transformation in the MENA region is dictated not only by external drivers, but also by internal factors, in particular the socio-economic, political and energy context. These factors, which are different in each country, also shape their individual decarbonization policies. Economic improvements pass through energy sector transformation. There are few other places around the world where the social, political and economic destiny is deeply intertwined with the energy sector as in the MENA region. Therefore, countries in this area are also incentivizing significant changes in the energy sector to make it a driver of economic diversification. The transformation of the domestic energy sector may have several positive spillovers across multiple sectors (e.g. labor diversification, economic diversification, reduced vulnerability to volatility and low oil prices). However, its transformation also faces multiple challenges since energy policy is strongly linked to issues related to political economy and governance, with energy subsidies perfectly embodying this inexorable connection. Similarly, MENA countries need to expand their power capacity as domestic energy demand is expected to continue to increase at a high rate due to population growth, average GDP growth and planned localization of numerous industries in the countries, in line with diversification efforts. All these factors contribute to the growing water demand, which heavily relies (depending on the country between 60 and 90%) on energy-intensive desalination plants, thereby further increasing electricity demand.

Countries in the MENA region would highly benefit from the exploitation of their strengths (e.g. energy endowment and geographical location) and from the wide adoption of renewable energy not only for environmental reasons, but also to satisfy social demands, to offset economic downturns and to enhance economic diversification, creating positive spillover effects, including technological adoptions and breakthrough, which may maintain this region at the forefront of the future energy sector. The development and deployment of renewable energy contributes to the diversification of energy sources and to the enhancement of domestic productivity with the possible localization of the manufacturing industry and knowledge transfer. Wind and especially solar energy have an enormous potential in the MENA region, thanks to the large resources available in this area. Both oil-importing and oil-exporting countries would benefit from the development of renewable energy projects. Over the last years, to different degrees, all countries have therefore set ambitious targets in renewable energy, which are regularly being revised upwards.

Hydrocarbon-rich countries are aiming to find new business models that will enable them to remain key energy actors also in a decarbonized world. Some of these solutions in the energy sector include the decarbonization of the hydrocarbon sector, which is in any case expected to continue to play a certain role in the future. The competitive advantage of hydrocarbon-rich MENA countries is represented by their low-cost reserves and the long-lasting and excellent know-how of this industry. More in detail, exporting countries could decarbonize both the production process of hydrocarbons and the final products. For instance, these countries could invest in capital-intensive carbon capture, utilization and storage (CCUS) technology, enabling the decarbonization of the final petroleum products and enhancing the long-term sustainability and prospect of the hydrocarbon industry (Fattouh and Poudineh 2020). The CCUS technology is not yet widely adopted due to its high costs, which encourage hydrocarbon-exporting countries to invest in R&D and have cost efficiency gains. It could also be combined with enhanced oil recovery (EOR) and thus create value. Overall, this technology would partly offset the medium and long-term lower hydrocarbon demand related to environmental issues, while taking advantage of the know-how of countries in this industry. Integrating decarbonized solutions in the oil and gas industry of oil-exporting countries may result in lower profits as margins are smaller, but also in lower risks, making this industry more sustainable in the long run. In any case, in a progressively decarbonized world, adaptations are necessary for survival, and MENA hydrocarbon exporting countries have a competitive advantage and could in addition exploit a first mover advantage.

Another field that hydrocarbon-exporting countries may explore in terms of innovative, environmentally friendly solutions in the oil and gas business, regards methane abatement technologies, which are not yet well developed. Indeed, CO₂ is not the only concern for GHG emissions in the oil and gas sector, but also methane emissions have recently attracted a lot of attention, as they are considered the second main cause of global warming. In 2019, the oil and gas industry emitted 82 Mt (2.5 GtCO₂ equivalent) (Gould et al. 2020). While methane lasts less than CO₂ in the atmosphere, it is 28 times more potent with a 100-year timespan and 84 times more potent with a 20-year timespan (EU Commission 2020). It is quite challenging to precisely measure methane emissions, which were estimated at 570 Mt in 2019: 40% originating from natural sources and the remaining 60% from human activities—the so-called anthropogenic emissions. The three main sectors emitting the highest quantities of methane are the agricultural sector (145 Mt), the energy sector (134 Mt) and the waste sector (68 Mt) (IEA 2020a, b, c). Regarding the oil and gas industry, since methane has a value, it is estimated that up to 45% of methane emissions could be avoided at no net cost. For instance, a cost-effective way to cut methane emissions would be to detect and repair leaks, which are one of the main causes of uncontrolled methane emissions. Overall, countries in this region may enhance their efforts and become key players in the abatement of methane emissions. By coupling methane reduction policies and technologies with other decarbonized solutions (e.g. CCUS), these countries may well advertise their hydrocarbon production as more eco-friendly.

These technological solutions could also create further business opportunities for MENA countries, which may consider the production and supply of blue and green hydrogen to the rest of the world, contributing to the overall decarbonization, especially in the so-called ‘hard-to-abate’ sector. Due to technological challenges, MENA countries could consider the production of decarbonized industrial products thanks to their domestic production of clean and cost-competitive hydrogen.

MENA countries have put in place different regulatory, financial and political supports depending on their national peculiarities and political commitment—as shown in their NDCs. This chapter seeks to highlight these differences, presenting the evolution of past and current national plans and commitments regarding the transformation of the domestic energy sector.

MENA countries have high energy and, in particular, electricity demand growth rates. These must and can be curbed by eliminating universal subsidies and investing in energy efficiency. At the same time these countries need to progressively move away from fossil fuel-based power generation and move towards renewables, in particular considering the region’s high endowment of solar (and wind) energy resources. In fact, MENA countries have already set numerous renewable targets (Table 4.1).

Table 4.1 Renewable energy targets and indicators in the MENA countries in 2019

An aspect, which is often overlooked when addressing the electricity sector, is grid strength and interconnections with adjacent countries, which bring important benefits from an economic and technical perspective. There is a vast literature explaining these benefits, which include:

• Improving reliability and pooling reserves: the amount of reserve capacity that must be built by individual networks to ensure reliable operation when supplies are short can be reduced by sharing reserves within an interconnected network;

• Reduced investment in generating capacity: individual systems can reduce their generating requirements, or postpone the need to add new capacity, if they are able to share the generating resources of an interconnected system;

• Improving load factor and increasing load diversity: systems operate most economically when the level of power demand is steady over time, as opposed to having high peaks. Poor load factors (the ratio of average to peak power demand) mean that the utilities must construct generation capacity to meet peak requirements, but that this capacity sits idle much of the time. Systems can improve poor load factors by interconnecting to other systems with different types of load, or loads with different daily or seasonal patterns that complement their own;

• Economies of scale in new construction: unit costs of new generation and transmission capacity generally decline with increasing scale, up to a point. Sharing resources in an interconnected system can allow the construction of larger facilities with lower unit costs;

• Diversity of generation mix and supply security: interconnections between systems that use different technologies and/or fuels to generate electricity provide greater security in the event that one kind of generation becomes limited. In many countries, this complementarity has been a strong incentive for interconnection between hydro dominated systems and thermal dominated systems. A larger and more diversified generation mix also implies more diversity in the types of forced outages that occur, improving reliability;

• Economic exchange: interconnections allow the dispatch of less costly generating units within the interconnected area, providing an overall cost of savings that can be divided among component systems. Alternatively, it allows inexpensive power from one system to be sold to systems with more expensive power. This, for instance, is presently the case in Europe where countries with nuclear power generation export massively to those with more expensive fossil fuel power generation;

• Environmental dispatch and new power plants siting: interconnections can allow generating units with lower environmental impacts to be used more, and units with higher impacts to be used less. In areas where environmental and land use constraints limit the siting of power plants, interconnections can allow new plant construction in less sensitive areas;

• Coordination of maintenance schedules: interconnection permits planned outages of generating and transmission facilities for maintenance to be coordinated so that overall cost reliability for the interconnected network is optimized.

Electricity interconnections do, however, not only provide technical and economic benefits. They can also contribute to fostering international cooperation amongst the countries involved. In fact, the significant legal, economic, and organizational linkages between nations trading power, which are obligatory parts of most successful grid interconnections, offer the potential to spur government-to-government cooperation in other areas. A grid interconnection necessarily sets up means of communication between governments in that representatives of the governments involved in the interconnections must agree on the terms of power sales and purchase agreements and must cooperate in the operation of shared power lines.

The international political and legal frameworks necessary to build and operate major international energy infrastructure such as power lines (and, for example, gas or oil pipelines) thus provide experience and channels for international communication on economic (such as trade in other goods and services), social (such as indigenous peoples and cultural exchanges), and security (such as border control) issues, to name just a few.

Cross-border interconnections are expected to play a more important role in MENA countries as renewable energy sources and electrification increase. Yet, the current level of grid connectivity in the MENA region is still very limited, and mainly refers to interconnections among countries of the same geographical cluster. As of today, there is a lack of adequate interconnection infrastructure between countries, but sometimes even between regions within the same country. And although some interconnections do exist within the clusters, electricity trade is still modest. The existing electricity trade between countries generally occurs at small-scale and is governed through bilateral contracts rather than by market forces. And if there is some trade among countries of a cluster of countries, there is extremely little trade between the clusters. As of today, cross-border electricity trade within clusters consists of:

• the GCC power interconnection, which connects countries in the Arabian Peninsula, namely Kuwait, Saudi Arabia, Bahrain, Qatar, the UAE and Oman;

• the interconnection infrastructures within the West Mediterranean countries (Algeria, Morocco and Tunisia), and

• The Eight Countries (EIJLLPST¹) regional energy interconnection project.

All these interconnections suffer from insufficient utilization and synchronization difficulties. Very little connectivity exists between the three clusters or with adjacent regions. In fact, so far, the MENA region is synchronously interconnected to Europe only through the Morocco-Spain link.

It should be noted that interconnecting power grids is not a simple process and requires cultural changes, trust between countries and institutional reform, which often takes several decades, as well as a clear and robust legislation and regulation. Moreover, the interconnected systems are often not synchronized, but based on Direct Current interconnections which do not allow easy integrated electricity market creation. In order to pursue the synchronization of electricity markets within and outside the region, countries need to address and pursue stability in their electricity market. Some MENA countries need to cope with market instability and blackouts, which discourage synchronized interconnectivity, especially with the EU. Thus, grid reinforcement inside countries and among countries in the MENA region needs to go hand in hand with structural reforms related to subsidies and to greening the energy mix in the power sector.

Overall, given the primary role and relevance of renewable energy for MENA countries, it is important to understand the state of the art in renewable development: what are MENA countries’ renewable targets and are these countries on the right track to attain them? This chapter will provide answers to this question firstly by outlining the main renewable energy targets and projects for each country in the three clusters; and secondly, by analyzing the likelihood of attainment of the renewable targets, also highlighting the main driving forces and challenges countries face on their path. The regional electricity interconnection status and future expansion plans will also be highlighted.

Table 4.1 shows the latest² declared renewable energy targets in MENA countries and compares them with the present penetration of renewables in the energy and power mixes.

2 The Arabian-Persian Gulf

Economic diversification is fundamental for countries in this cluster since their socio-economic model, based on the rentier economy, is deemed unsustainable in the medium-long term. Indeed, the oil and gas sector accounts for more than half of exports and GDP in most countries of the region (i.e. 70% of exports and 50% of GDP in 2019 in Saudi Arabia). Volatile and low oil prices do not satisfy these countries’ fiscal breakeven oil prices,³ which range from $50 (Qatar) to $197.8 per barrel (Iran) in 2019 (IMF 2020b).

Growing budget deficit and national debt are expected in the coming years due to lower oil demand forecasts, challenges posed by economic diversification, while striving to maintain high levels of economic benefits for the nationals. These economies have already shown some weaknesses. Indeed, Saudi Arabia runs a high deficit since 2015, the surpluses of Kuwait, Qatar and UAE have continued to shrink, and Bahrain and Oman have already experienced difficulties in keeping their accounts positive in periods with high oil prices. Oil-producing economies need to address oil price volatility, which could exacerbate this condition, and is expected to intensify in the medium- and long-term. On the other hand, oil demand is expected to decrease due to stronger decarbonization policies and international conventions (e.g. UNFCCC) resulting in oil supply–demand shock. Following oil demand drop, both NOCs and IOCs were obliged to revise their investment plans. For instance, in August 2020 Aramco cancelled a $10 billion project for a refinery in China’s Liaoning region (MECEI 2020). The project was planned to enhance the company’s presence in Asia and to comply with the horizontal diversification discussed in the previous chapter (McFarlane and Said 2020).

The unsustainability of the rentier model is also reflected on the saturation of the public sector in the vast majority of countries in this region, resulting in a high youth unemployment rate. Most countries have enacted more stringent “nationalization” policies, especially in the public sector, since it is regarded as the best fit for nationals in terms of skills, reputation and wages. For instance, Kuwait has started to lay off 50% of expats working for subcontractors in government ministries (Al Faisal 2020), while Oman has not renewed 70% of foreign consultant contracts for advice to the government (Al Monitor 2020). Policymakers may face challenges to enact courageous reforms in this field, as they may antagonize the population.

The diversification of the energy mix triggers positive spillovers, also contributing to economic diversification. Iran has attained moderate levels of diversification with non-oil exports exceeding oil ones in most years since 2011 (Mohamedi 2019). The GCC countries are attempting to shift to a knowledge and technology-based economy, rather than relying on a cheap foreign labor force. The domestic production of solar panels may therefore foster the localization of a high-tech manufacturing industry, enhancing know-how in the sector and possibly reducing the reliance on oil revenues. Similarly, some countries are pushing towards technological and green advances in the energy sector, such as hydrogen production and exports in the case of Saudi Arabia and Oman. Also, given the saturation of the public sector, renewable energy might boost employment in the private sector, in a context of high youth unemployment (i.e. 63.4% for young Saudi women and 23.6% for young Saudi men in 2019) (General Authority for Statistics 2018).

Overall, in order to diversify their economies, countries in the Gulf cluster have published documents, the so-called Visions, with a set of objectives and targets to be reached by a precise year, as detailed in Table 4.2.

Table 4.2 Gulf countries’ economic diversification strategies, Vision

The goals set in the Visions of each country are different, even though they all tackle similar sectors and fields (healthcare, education, labor market, tourism, high-tech etc.). The Visions or affiliated documents also include targets related to the energy transition, focusing primarily on increasing the role of renewable energy in the countries’ energy mix. Renewable energy objectives vary greatly, also depending on the target year of the Vision: 44% of renewables in the energy mix of the UAE by 2050, 9.5 GW of renewable energy (revised upwards in 2019 to 59 GW) in Saudi Arabia by 2030, 30% of renewables in total electricity demand by 2030 in Oman, 20% of renewables in the electricity mix of Iran by 2025 and so on. Also, differences arise regarding both the presence and the share of specific renewable energy sources: while wind energy and waste-to-energy may not be present in all Visions, solar energy predominates the cluster’s renewable energy mix, even though some countries focus on large solar PV or CSP projects (e.g. Saudi Arabia, Kuwait), while others on small-scale rooftop PV (e.g. Bahrain). Thus, despite the numerous similarities, each country has considered its peculiarities in socio-economic, energy and geographic terms to come up with quite different renewable energy targets, as shown in Table 4.3.

Table 4.3 Targets of renewable energy for each country

Numerous factors may explain the different targets and sources set for renewable energy in the different Visions. Firstly, each country has a different degree of security of supply: the UAE, Oman and Bahrein may be considered to have low energy security, given their current reliance on imports to satisfy their domestic energy market. On the contrary, Saudi Arabia, Iran, Qatar and Kuwait may be deemed energy secure. Secondly, high-energy consuming countries in absolute terms—those with a large population—may benefit from conspicuously investing in renewable energy and free oil (and potentially gas) for export, with the notable example of Saudi Arabia. Also, countries with a large population or with a high degree of economic diversification (localization of industries) rely more, in absolute terms, on energy-intensive seawater desalination plants, which are key to water security. Thus, projects that combine desalination plants and renewable energy sources, primarily solar PV, have been planned (Dubai Emirate) or contracts have been awarded to build them (i.e. Al Khafji in Saudi Arabia) especially in countries with high water demand. Thirdly, compared to gas-rich countries (i.e. Qatar) oil-rich countries may be particularly willing to invest in renewable energy in order to diversify their revenues and overall economy from oil, which is expected to reach a global demand peak in the medium term. Lastly, environmental concerns were not deemed the primary reason for switching towards renewables. However, some countries are going to face a greater likelihood of natural disasters, such as Oman with heatwaves, as well as Bahrein with the risk of being submerged (Bodetti 2019). These threats have pushed these countries to include the environmental aspect of renewable energy in their discourse.

As most of the Gulf countries announced ambitious renewable energy targets, these countries could benefit from higher interconnectivity. As of today, the six member states of the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – have an interconnection scheme (Map 4.1). They created the GCC Interconnection Authority (GCCIA) in 2001. In 2009, these countries signed two agreements, the General Agreement (GA) and the Power Exchange and Trade Agreement (PETA). The GA established the principles of electricity cooperation, while the PETA set the legal terms for commercial trade. GCCIA member countries developed cross-border interconnections through three phases:

Map 4.1

Source GCCIA https://www.gccia.com.sa/P/the_interconnection_project/55

Approximate route and layout of the GCC interconnection.

• 1. First phase, completed in 2009, the GCCIA formed the GCC north grid by connecting the power grids of the northern states of Kuwait, Saudi Arabia, Bahrain, and Qatar.

• 2. Second phase, by 2006 it established the GCC southern grid by connecting UAE and Oman.⁴

• 3. Third phase, the north and south GCC grids were interconnected in 2011.

At present, the GCC electricity trade consists of (a) scheduled exchanges or prearranged bilateral trades and (b) unscheduled exchanges or the contingency trade of electricity as a necessary basis, particularly during emergency shortages.

Today’s design of the electricity markets of GCC countries only allows bilateral energy exchange and settlements of trade imbalances on an in-kind basis, or in-cash basis, based on the tariff set by the regulators. As of today, the low volume of cross-border energy flows has resulted in the underutilization of the GCC interconnection grid’s designed capacity (< 5%), which also represents the potential for future trade. These countries are synchronized and connected, yet there is no connection with countries in the East Med cluster.

2.1 Saudi Arabia

• Targets and projects

In the last decade, the Kingdom of Saudi Arabia has periodically set and later revised renewable energy targets, with a major focus on solar energy. In 2013, the King Abdullah City for Atomic and Renewable Energy (KA-CARE) published a white paper establishing a target for the production of 54 GW of renewables by 2032. However, this target was scaled down in 2016 with the publication of Vision 2030, which envisaged a first target of 5.9 GW of solar energy out of 9.5 GW of clean energy by 2023 (Vision 2030 2016), representing the generation of 10% of Saudi total production. The Renewable Energy Project Development Office (REDPO) was established within the framework of Vision 2030. REDPO operates under the Ministry of Energy, Industries and Mineral Resources, with the aim of carrying out the National Renewable Energy Project (NREP). Moreover, the Public Investment Fund (PIF) Program is set to complement REDPO, with REDPO expected to deliver 70% of the total capacity and PIF the remaining 30%. While REDPO adopted a competing tendering strategy to choose the projects, PIF has to negotiate with international actors and to rely on the domestic manufacturing industry to carry them out. The Electricity and Cogeneration Regulatory Authority (ECRA) is responsible for the regulation of the electricity and water desalination sector and it supervises the restructuring of the electricity sector. It also supervises the entry of private operators for private production projects in line with the Saudi Vision 2030.

Renewable energy targets in Vision 2030 were revised upwards at the beginning of 2019. REDPO announced new ones, which included a mid-term target—27.3 GW from solar energy by 2023—and a long term one with 59 GW from renewables by 2030 (40 GW solar energy, 16 GW from wind energy and 3 GW from CSP). These new targets reveal the increasing importance of concentrated solar power (CSP) for the development of the renewable sector. Indeed, as CSP stores heat, it can be used to power the water desalination projects the Kingdom has envisaged to carry out in the medium term. In April 2020, a new institutional body, the Supreme Committee for Energy Mix Affairs, for Electricity Production and Enabling Renewable Energy was established to oversee the renewable energy projects. The Supreme Committee is chaired by the Crown Prince MbS. Moreover, Saudi Arabia has unveiled its Saudi Green Initiative in March 2021, setting an ambitious target of 50% of electricity coming from renewable energy sources by 2030.

Despite the numerous targets announced by Saudi authorities, the development of renewable energy has so far been quite modest. Indeed, Saudi Arabia has a total installed capacity of 86 GW in 2019, of which only 413 MW from renewable energy corresponding to 0.5% of the total electricity capacity. Saudi renewable capacity accounts only for 835 GWh of electricity production, which accounts for 0.2% of the total electricity produced. The slow deployment of renewable energy sources pales if the great renewable potential of the country is taken into account. The country possesses large and uninhabited territories, where solar power infrastructures may well be constructed. The Kingdom can also take advantage of its strategic location in the Sun Belt as well as wind potential in some of the country’s regions (Maps 4.2 and 4.3).

Map 4.2

Source evwind.es

Solar energy potential (horizontal irradiation) in Saudi Arabia.

Map 4.3

Source Mohamed, Eltamaly and Alolah 2016

Wind energy potential (speed) in Saudi Arabia.

Even though the deployment of renewable energy sources in Saudi Arabia has so far lagged behind the targets, over the 2010 decade there have been some positive developments demonstrating the promising potential of solar energy, especially PV.

The renewable targets respond to the multiple challenges that Saudi Arabia seeks to address, such as growing energy demand, economic diversification, freeing up oil export volumes as well as participating actively in the international climate change policy debate. Renewable energy sources may bring significant advantages to Saudi Arabia also in terms of economic diversification and increased power capacity. Indeed, the country has to considerably expand its power capacity as domestic electricity demand is expected to continue to increase significantly. Between 2008 and 2018, internal power demand grew by around 4%/year in average, mostly driven by the expected annual population growth (+ 2.62%), annual average GDP growth (+ 3.81%) (World Bank 2019a, b) and planned localization of numerous industries in the country. These factors will also contribute to a growth of water demand, exacerbating the use of energy-intensive seawater desalination plants, which are generally supplied with fossil fuels. Also, the development of renewable energy is likely to trigger positive externalities in other domestic sectors, such as the manufacturing industry. These spillovers are deemed in line with Vision 2030, which aims at increasing both the diversification of the economy from oil and the competitiveness of the local economy. By doing so, thousands of new jobs are expected to be created, which would contribute to the reduction of the (youth) unemployment rate among Saudis. Renewable energy, especially solar, is relatively easy to adopt, and it is seen as a great opportunity to offset growth in power and water demand as well as to enhance economic diversification and competitiveness of both the local economy and labor market.

Despite major announcements, Saudi Arabia’s solar PV capacity is still quite limited, as most projects are still in the planning or tendering phases. In 2020, solar installed capacity amounted to 409 MW (IRENA 2021a, b), mainly thanks to the commissioning of the first utility-scale solar PV in 2019, the Sakaka IPP PV project, with an output capacity of 300 MW. The first commissioned solar plant was the King Abdallah Petroleum Studies and Research PV solar field in 2010 with a capacity of 5.3 MW. The solar field closed a few years later. Since then, Saudi Arabia has tried to increase its solar capacity. In 2021, the construction of the 300 MW Jeddah solar power plant began. The project should be commissioned in 2022. ACWA Power has also reached financial close for the 1.5 GW Sudair solar power plant. Both projects have signed PPAs with Saudi Arabia in 2021 in the second round of the country’s procurement scheme for renewable energies. PPAs were signed with five other projects totaling 1170 MW.⁵ Also, REDPO launched three rounds of NREP to shortlist bidders for the 11 development projects.

The main renewable projects announced by the Kingdom may be divided in those deemed more likely to be developed and those considered less feasible, mostly with respect to the capacity planned and the level of current development. Table 4.4 summarizes the main solar PV projects and attributes the probability of their commissioning.

Table 4.4 Main solar PV projects in Saudi Arabia

Saudi Arabia has also invested in Concentrated Solar Power (CSP). So far, Saudi Arabia has developed this technology integrated with the gas power plant, the integrated solar combined cycle (ISCC) power plant, in three projects. With a CSP capacity of 50 MW out of a total capacity (CSP plus CCGT) of 1390 MW, the Waad Al Shemal ISCC plant was the first plant of this type commissioned in 2018. However, the country’s first project, Duba ISCC-1, was launched in 2015. The project will have a total capacity of 600 MW (50 MW of CSP and 550 MW of CCGT). The project is currently under construction by Saudi Electricity Company (SEC) and it should be commissioned in 2022. The third CSP project is the Taiba project, with an expected total capacity of 3780 MW. The project has been announced but it is witnessing delays due to uncertainties related to the development phase (possibly passing from Saudi Electricity Company -SEC- to an IPP (ENERDATA 2021a; Papadopoulou et al. 2019). Overall, Saudi Arabia is monitoring the 750 MW CSP plant project in Dubai to study its potential investment in this technology, as the prices of this technology may also decrease.

Wind is the other main renewable source included in the Kingdom’s “clean energy” objectives. As of 2021, the only operational wind project is Turaif, operated by Saudi Aramco, with a capacity of 2.75 MW. Three large scale wind projects have been envisaged in the Kingdom. Its first wind project, the 400 MW Dumat Al Jandal wind plant, is expected to be fully commissioned before the end of 2021, starting to produce in 2022. The plant, whose construction started in September 2019, is the first large wind power plant in Saudi Arabia and the largest in the Middle East. A consortium of EDF Renewables and Masdar is responsible for the project, which is expected to produce 1.4 TWh/year under a 20-year PPA. The second wind project regards the on-shore Yanbu wind farm with a capacity of 850 MW, which was in the announcement phase in 2021 and the operator is REDPO. Lastly, the Plambeck floating offshore wind, with a capacity of 500 MW, was also in the announcement phase in 2021, and its operator is Plambeck Emirates (ENERDATA 2021a).

Saudi Arabia, akin to other regional peers, notably the UAE, is evaluating the development of a decarbonized hydrogen production industry under the responsibility of the Ministry of Energy. In this country the promotion of hydrogen is pursued along with renewable and gas projects. Indeed, several projects, regarding both blue and green hydrogen production, are under development. In March 2021, Air Products, ACWA Power and NEOM signed a $5 billion agreement to build a 1.2 Mt/year ammonia production plant in Saudi Arabia, which will be fed with green hydrogen produced using 4 GW of solar, wind and storage. The project is scheduled to be commissioned in 2025. A month later, ENEOS and Saudi Aramco signed an MoU to develop a blue hydrogen and ammonia supply chain connecting Japan and Saudi Arabia, while Altaaqa and AFC Energy have signed a MoU to develop and use AFC Energy’s hydrogen fuel cell technology in Saudi Arabia and the Middle East.

• Scenario

Saudi Arabia is expected to reach, and likely exceed, the Vision 2030 target for solar energy that was set in 2016 (5.9 GW), before being revised in 2019. However, it will be undeniably challenging for the Kingdom to reach its new upgraded target of 40 GW from solar energy projects by 2030, even when including all the envisaged new solar projects. Also, the interim target of 20 GW of solar energy by 2023 seems difficult to attain, as the combined capacity of all current projects may not be sufficient to reach this objective. Saudi Arabia will need to massively push for the development of renewable projects, especially PV, in the 2020 decade if it wants to succeed in reaching the solar target of the Vision 2030.

While giant leaps have been made to increase the capacity of renewable energy in the Kingdom, numerous challenges may prevent the full exploitation of renewable sources. First, the roles of the two main bodies regulating renewable energy—King Abdullah City for Atomic and Renewable Energy (KA-CARE) and Electricity and Cogeneration Regulatory Authority (ECRA)—may be at times ambiguous, leading to administrative and regulatory problems (ETHRAA 2019). Furthermore, despite its great potential in the Kingdom, the adoption of small-scale solar PV is supported by only few incentives. To promote small-scale solar PV (from 1 kW to 2 MW), the Electricity & Cogeneration Regulatory Authority introduced a net metering scheme in 2018, whereby the surplus solar electricity exported to the grid is subtracted from the quantity consumed the following month (Asif and Khan 2018). The rules were updated in July 2020 to better incentivize such decentralized installations. As this policy alone is not deemed to sufficiently incentivize the adoption of small-scale PV in the short term, the net feed-in tariff (NET-FIT) scheme might be introduced. Under this scheme, priority for the electricity generated is given to self-consumption and generators receive payments only for the net excess of power exported to the grid, with a tariff rate set above the retail price to incentivize the market. The NET-FIT scheme is deemed particularly suitable for the Kingdom for several reasons. Firstly, it does not disrupt the current net-metering framework, which simplifies its implementation. Secondly, the NET FIT scheme becomes even more financially advantageous for small generators, especially in a context of gradual decrease and abolishment of subsidies on electricity prices by 2025 as announced by Saudi Arabia in 2017 (Gnana 2017). Lastly, this policy promotes energy conservation, which is a key objective of the Kingdom given the projected growth in electricity demand. In the medium-long term, when small-scale PV is widely adopted and (if) electricity subsidies are eliminated, the government may gradually reduce the NET-FIT rate. Overall, this scheme might be applied to residential, commercial and industrial buildings. Financial incentives also enhance the adoption of small-scale solar PV. To help cover the upfront capital cost, Saudi Arabia could offer soft loans (below-market rate or zero interest loans with longer repayment periods) or capital subsidies (covering a share of this cost).

Despite the economic hardship caused by the Covid-19 pandemic, Saudi Arabia has expanded its commitment to renewable energy sources as the Saudi Green Initiative proves. However, in order to achieve its official targets, Saudi Arabia will need to provide financial resources as well as guarantee policy supports (e.g. reforming energy prices and subsidies) despite potential economic challenges and volatility.

In-depth assessment of possible attainment of renewable targets

The original goal of Vision 2030 (9.5 GW by 2030) may well be attained, thanks to the current projects proposed and their different level of development. As aforementioned, it will, however, be very challenging for the Kingdom to attain the new Vision 2030, i.e. the 40 GW solar target by 2030 and the interim 20 GW solar target by 2023, given that all the projects announced in 2021, regardless of their development phase, have a combined capacity slightly above 5 GW.

Regarding the CSP target, only three CSP projects are envisaged in the Kingdom, and they are at different phases: Waad Al-Shemal (50 MW) is operational, Duba ISCC-1 (43 MW) is under construction, while Taiba (180 MW) has been announced. Nevertheless, if all completed, the combined capacity of the three projects is relatively low (273 MW). Thus, it may be quite unrealistic for the Kingdom to considerably boost investments and attract CSP projects in such a short period of time to attain the 3 GW CSP target by 2030. However, since CSP plants are quite new in Saudi Arabia and the construction of the first two CSP plants has only recently begun (in 2017 and 2018), it is difficult to predict whether the 2030 objective (3 GW) will be reached. Also, CSP technology costs continue to decrease, especially thanks to economies of scale and the 35-year power purchase agreement (PPA), hitting the lowest price of USD73/MWh. These recent developments may result in an exponential uptake of this technology (Helioscsp 2019a).

The Kingdom has to walk on a steep path to reach the new objective of 16 GW capacity in wind by 2030, as the only operational wind plant—the Turaif plant- has a capacity of 2.75 MW. Mackenzie Power and Renewables forecasted Saudi Arabia to develop numerous wind projects for a total capacity of 6.2 GW between 2019 and 2028 (Richard 2019). However, these figures might be over-optimistic since, to date, out of the three large-scale wind projects developed, only the Dumat Al Jundal wind project (400 MW) has been put forward. The others are just in the announcement phase or under construction (Midyan wind park) and have a combined capacity of 1.75 GW. Nevertheless, it may well be possible for the Kingdom to develop a total wind capacity of around 3.1 GW in the medium term (by 2030), especially in light of the evaluation of the new wind project. By doing so, Saudi Arabia could reach the original objective of Vision 2030, which included 3.5 GW of clean power, excluding solar energy.

Saudi Arabia has also envisaged the development of nuclear energy, as it would provide a base load to the electricity sector, while solar energy would guarantee the peak load. 70% of electricity demand in the Kingdom is represented by air conditioning, part of which is base load and part of which has a good correlation with sunshine. In this regard, the Kingdom established King Abdullah City for Atomic and Renewable Energy (KA-Care) in 2010, and this institution set the goal to build 16 nuclear reactors producing a total of 17 GW by 2040 on the Gulf. To date, Saudi Arabia has planned a tender process in 2020 for the development of two large nuclear plants (2.8 GW) and has updated its agreement with South Korea for the construction of one Small Modular Reactor (300 MW) (World Nuclear Association 2019a). In 2018, Saudi Arabia approved a new nuclear policy, planning to build 16 reactors with a total capacity of 18 GW over the next 20 years. It has been reported that Chinese companies had expressed their intention to collaborate with Saudi energy companies and authorities in this sector. Saudi Arabia would particularly benefit from the adoption of Small Modular Reactors (SMRs) compared to large nuclear plants for various reasons. Since SMRs are a new and emerging technology, Saudi Arabia may leverage the partnership with South Korea’s vendor to localize and export a portion of the SMR value chain, enabling human capital development and the growth of private and public investments. While the costs and the risks are higher for the first units constructed, the overall costs per unit of electricity of SMRs ($2-$4/MW) are lower than large reactors ($9.8/MW) (Mansouri 2019). Other economic advantages include lower upfront capital costs per unit, lower investment risks and simplified design.

To sum up, it is challenging for the Kingdom to attain the latest ambitious targets announced by REDPO in 2019 (40 GW from solar, 16 GW from wind and 3 GW from CSP by 2030), given the projects proposed and the current wind or solar power plants already in operation. However, Saudi Arabia is very likely to reach its Vision 2030 objective regarding solar energy (5.9 GW) and to surpass it (even doubling it in the best-case scenario). Also, even though the country may not reach its wind objective (3.5 GW), it is likely to exceed its solar power targets, enabling the Kingdom to reach the original 9.5 GW objective of total renewable energy by 2030.

2.2 United Arab Emirates

• Targets and Projects

The UAE is composed by a group of emirates, which could pursue different policies in different fields. Regarding renewable energy sources, the UAE is characterized by a multi-vector policy, due in particular to the different energy policies pursued by Abu Dhabi and Dubai. Surely, the UAE—especially Abu Dhabi—has elevated itself from a respectable oil and gas producer to become a key leader in clean energy solutions in the MENA region. The IRENA headquarters, located in Masdar City, Abu Dhabi, are proof of the great emphasis that the UAE puts on renewable energy sources. Renewable energy also represents a great opportunity to enhance and display its technological, financial and political capability and ambitions. Meanwhile, Dubai had considered more polluting solutions (i.e. coal power plant) to raise its energy status, stressing the multi-vectoral energy policy in the UAE.

Despite its complex nature, the UAE has published ambitious renewable targets over the years, showing its appetite to play a key role in the future energy sector at world level. In 2015, the UAE published the “UAE State of Energy Report”, which set the target of 27% of the country’s energy mix from clean energy by 2021. A couple of years later, in 2017, the “Energy Strategy 2050” was published with the goal of increasing the percentage of clean energy (intended as renewables plus nuclear) in the energy mix from 25 to 50% by 2050. More in detail, the UAE aims at producing 44% of the energy mix from renewables, 38% from gas, 12% from clean coal and 6% from nuclear (UAE Ministry of Energy and Infrastructure 2017). These ambitious targets also reveal the great effort conveyed to strengthen energy self-sufficiency for the country. While coal can be easily imported, without any particular economic or geo-political implications, in Abu Dhabi gas will continue to be produced mainly domestically, thanks also to the new gas discoveries, or imported to other Emirates through the Dolphin pipeline from Qatar, or imported thanks to LNG. With long-term contracts between the UAE and Qatar expiring in 2032, security of gas supply could be partly reduced, as uncertainty surrounds new gas contracts and gas prices. All in all, the Energy Strategy 2050 pushes for a 70% reduction of the carbon footprint in power generation. In order to reach these targets, the UAE is committed to using its abundant financial capability, announcing the investment of AED 600 billion (around $163 billion) by 2050 for renewable energy. Similarly, in December 2020 the UAE updated its NDC, including the first emission reduction target by 2030, corresponding to a decrease in emissions of 23.5% below the Business-As-Usual scenario (BAU) by 2030. In May 2021, the Ministry of Energy and Infrastructure of the UAE reiterated its commitment to reduce the country’s CO₂ emissions by 70% by 2050, as defined in the Energy Strategy 2050, and to increase the use of clean energies—renewables and nuclear—by 50% by 2050. The UAE aims at reducing its emissions especially thanks to solar and green hydrogen. Also, the country plans to reduce electricity consumption by 40% as its electricity consumption per capita is one of the highest in the world. The Emirati policymakers are increasingly committing to renewable energy sources. The country aims to reach 20% of its installed capacity (50 GW) from clean sources (11 GW, including nuclear) in the short term (by 2024). Finally, in October 2021 the UAE restated more vigorously its climate ambitions with the announcement of its pledge to become carbon–neutral by 2050. To achieve the pledge, the UAE needs to face both significant challenges (high carbon intensity, overdependence on fossil fuels) and some advantages (small population, vast financial resources and limited economic complexity).

In 2020, the UAE had a renewable energy capacity of 2540 MW over a total installed capacity of 40,026 MW, corresponding to 6.3% of the total electricity capacity. However, their lower capacity factor (compared to thermal generation) resulted in a much lower share contribution in terms of power generation. In 2020 renewable energy sources produced in the UAE were only 5034.8 GWh, which accounted for 3.6% of the country’s total electricity production.

In order to reach these targets, various projects have been planned and, in some cases, commissioned. Numerous proposals, especially solar energy in the Emirates of Dubai and Abu Dhabi, if implemented, are set to break various world records, in terms of capacity and LCOE. Firstly, in Dubai, the renowned Mohammed bin Rashid Al Maktoum Solar Park is expected to become the largest single site solar energy park in the world with a capacity of 5 GW by 2030 and total investments amounting to AED 50 billion ($13.5 billion). The first two phases of the project have been carried out in 2013 and in 2017 with a capacity of 13 MW and 200 MW, respectively. The third phase was commissioned in November 2020 with a capacity of 1000 MW, while the last phase will take place at the end of the 2020s with an expected capacity of 800 MW by 2030. When fully operating, the Al Maktoum Solar Park is expected to meet 25% of Dubai’s total domestic demand for electricity (EIA 2020). In 2019, DEWA announced that the ACWA Power would build and operate the fifth phase (900 MW solar PV power plant) of the project. The 900 MW fifth phase would bring the current production capacity of the Mohammed bin Rashid Al Maktoum solar plant to 1313 MW. Once fully operational, the plant will have a total capacity of 5000 MW. In August 2021, ACWA Power announced the official inauguration of the 300 MW first stage of the 900 MW Shuaa Energy 3 PS.

Moreover, in 2016, the Abu Dhabi Water and Electricity Authority (ADWEA) tendered the first PV project of this Emirate at utility level: the Sweihan solar power plant (1117 MW). At the end of the bidding, in terms of capacity, the proposals were surpassing 1 GW. The construction began in May 2017 and commercial operations started in April 2019. The photovoltaic IPP was initially proposed as a 350 MW project, but the capacity was increased to the present capacity due to the availability of additional land. As of 2021, the Sweihan solar power plant is operated by ADWEA with a capacity of 1177 MW and its shareholders are ADWEA (60%), Marubeni (20%) and JinkoSolar (10%). Also, smaller and worse-off emirates are planning to invest in renewables to satisfy the targets of the Energy Strategy 2050. The Emirate of Umm Quwain, for instance, is developing a solar park with an expected capacity of 500 MW, which is in the bidding phase, as of 2021.

In terms of CSP, the Emirate of Dubai started the construction of the largest Concentrated Solar Power—Noor Energy 1—in the Mohammed bin Rashid Al Maktoum Solar Park, with a capacity of 700 MW, which is planned to come online in 2021. To put this project into context, the current largest CSP in Morocco has a capacity of 150 MW. Similarly, in 2013 the Emirate of Abu Dhabi commissioned the largest concentrated solar power plant in the world (at that time) named Shams 1, which provides electricity to roughly 20,000 households thanks to a capacity of 100 MW. It was developed and financed by the Shams Power Company, a joint venture between the Emirati Masdar (60%) and a consortium composed of Total (20%) and Abengoa Solar (20%). The latest investments of Dubai and Abu Dhabi Emirates in Concentrated Solar Power reflect the main advantage of this technology, which enables energy storage. Indeed, solar heat is retained through thermal storage for 8–12 h and it is converted to electricity at night in order to meet the demand.

In its “Energy Strategy 2050”, the UAE also set a target for nuclear energy (6% of the energy mix by 2050). Thus, the country has pursued an ambitious nuclear program, which accomplished some major developments. The nuclear program envisages an investment of $24 billion for the construction of a nuclear power plant in Barakh, Abu Dhabi. The plant consists of four reactors (with a capacity of 1400 MW each) for a total capacity of 5600 MW. The first unit was connected to the grid in August 2020, becoming the first operating nuclear reactor in the Arabic peninsula. The other three units are expected to be commissioned in 2021/2022. Once fully operational, the power plant will cover almost 25% of domestic electricity needs.

On the contrary, the UAE does not prioritize wind energy, which is not yet particularly developed in the UAE, in line with other GCC countries. Overall, the UAE is the first GCC country to have installed a wind turbine on Sir Bani Yas Island with a capacity of 30.85 MW, commissioned in 2008.

All in all, the UAE has been pushing renewable energy as an essential pillar of its energy policy. With its aggressive strategy of renewable energy adoption, with respect to most other MENA countries, it has actively contributed to an overall decrease of the costs of renewable energy technology, primarily solar PV.

• Scenario

Predicting whether the UAE will reach the objectives set in its Energy Strategy 2050 is deemed more challenging and unforeseeable with respect to other GCC countries, because of the longer time spam considered (2050 for the UAE vs. 2030 for KSA). Thus, more variables come into play, which may affect the speed of adoption of renewable installations (i.e., economic growth, the global economic crisis, oil prices, technological development for renewables and transport, the role of gas in the energy transition, weather conditions). However, given the data and trends currently available, some projections might be envisaged. Since the renewable targets set for the UAE correspond to a percentage of its energy mix, in order to achieve these objectives, the level of investments and the capacity of new solar and wind projects will depend on the growth of the total primary energy consumption over the next 30 years.

Even though the UAE has displayed a remarkable interest in renewable projects, a large amount of additional capacity is deemed necessary to reach its 44% of energy mix coming from renewable sources by 2050 (considerably more than the one planned to date).

The main renewable projects proposed in the UAE represent less than 1% of the country’s primary energy demand and 3% of power generation in 2019. The current renewable projects planned seem far from the clean energy targets (44% of renewables in the energy mix by 2050). It is therefore necessary to significantly increase investments in renewable energy projects to attain the country’s renewable targets, also given the forecasted growth in total primary energy consumption.

The exact additional capacity needed to attain these targets depends on the growth of the electricity demand. Regarding electricity consumption, in the last two decades electricity demand has grown by approximately 7% per year. Such a high growth rate might not be followed by the same growth in the capacities of renewable projects. However, the growth rate in demand might tend to diminish since one of the main points highlighted in Energy Strategy 2050 regards improvements in energy efficiency (by 40% compared to 2017 levels) including higher prices. Moreover, also a change in the country’s immigration policies might lead to a change in demand since 90% of the total population in the Emirates is composed of foreigners (Forstenlechner and Rutledge 2011). Regarding the effects of investments on the capacity of the renewable power plants proposed, technological improvement plays a fundamental role also with respect to the total renewable capacity that might be attained with the investments planned (AED 600 billion by 2050). In this regard, sovereign wealth funds (SWF) play a key role in “green” investments. For instance, the Abu Dhabi Investment Authority (ADIA), one of the main SWFs amounting to $710 billion at the end of 2020, started a climate change equity portfolio in 2020 and is a shareholder in projects that generate a total of 20 GW of power from clean sources (Arabian Business 2020). Similarly, the Mubadala Investment Company, an Emirati SWF, fully owns Masdar, one of the leading developers and operators of renewable energy projects at utility-scale in the MENA region and beyond. Since 2006, Masdar has invested a total amount of $2.7 billion (Masdar 2021).

At the same time, the UAE presents a curious dichotomy regarding energy transformation and climate policy, especially in its two major emirates: Abu Dhabi, though being a hydrocarbon producer, set itself as a major clean energy pioneer in the region, while Dubai decided to invest in coal power plants. Indeed, the Hassyan coal-fired power plant, when fully operational with a planned capacity of 3.6 GW, will not only be the first coal plant in the GCC, but the largest one in the broader MENA region, surpassing even Turkey (Afsin-Elbistan power station, 2.8 GW). The first phase of Hassyan is expected to be completed in 2020–2021, with a capacity of 2.4 GW. Hassyan is categorized as a “clean coal” power plant, as it follows the strictest environmental regulations and a CCS is to be built. Thus, this plant contributes to the attainment of the UAE 2050 target of 7% of clean coal in the energy mix, as a way to enhance energy security. However, in 2022 Dubai announced that the Hassyan power plant will be converted to use natural gas amid the UAE’s wider pledge to reach net-zero by 2050 (AP 2022).

Some key challenges arise for the wide deployment of renewable energy, due to intrinsic peculiarities as well as external circumstances. Indeed, a major difficulty the UAE is likely to face consists of accompanying R&D with the development of local manufacturing capacity and intellectual property rights, which may contribute to the localization of industries and economic diversification.

Lastly, since each Emirate has a relatively high degree of freedom in energy regulation, it may be quite challenging to carry out a cohesive strategy and development in the renewable energy field. A clear example regards the Hassyan coal power plant, revealing divergence in energy policy between Abu Dhabi and Dubai. While Abu Dhabi aims at reducing energy vulnerabilities by lowering the share of gas in the energy mix to become less dependent on Qatar, Dubai also seeks more autonomy in the energy field from Abu Dhabi itself.

Overall, the UAE is a pioneer in renewable energy technology and investments in the MENA region. It has made considerable investments in R&D for renewable technology, as part of the wider diversification effort to become a technology and green hub. Nevertheless, some challenges are present in the UAE, regarding not only the attainment of the ambitious 2050 renewable targets, but also a struggle of intentions. Energy is not a federal competence, allowing each emirate to maneuver with a certain degree of freedom. Emirates came together as the UAE produced its NDC. However, some frictions and disagreements could prevent coherent energy policy in the UAE. The initial commissioning of the Hassyan coal plant is quite illustrative. Nonetheless, the UAE is strongly committed to leading renewable energy policies and development in the MENA region, taking advantage of its small population and vast financial resources.

2.3 Qatar

• Targets and Projects

Qatar is considered a late adopter of renewable energy compared to its regional peers. This condition may be motivated by its vast gas reserves combined with a small population. These features have historically allowed the country to export large amounts of gas—and consequently earn massive rents. Natural gas has been considered the ‘fuel bridge’ for the global energy transition, contributing to replacing more polluting sources (notably coal) in the energy mix and reducing CO₂ emissions. This status has also contributed to rosier forecasts of gas demand compared to oil demand, and it may have induced Qatar to prefer investing and consolidating its position in the gas industry, especially in the LNG sector, rather than committing to and implementing plans for the development of renewables. However, natural gas’ environmental footprint has increasingly been put under scrutiny, threatening its label of ‘fuel bridge’. Natural gas emits less CO₂ (carbon dioxide) compared to other fossil fuel sources, yet it is responsible for the emission of CH₄ (methane). With methane being increasingly put in the spotlight, especially following the 2021 IPCCC Report, Qatar may revise and expand its commitment in favor of renewable energy sources and other technological solutions (i.e. CCUS) that may preserve the country’s current business model based on exporting natural gas. Qatar ratified the Paris Agreement in April 2016 and it submitted a Nationally Determined Contribution (NDC) in 2015. The country did not make any firm commitment to reduce its GHG emissions in its first NDC in 2015. In August 2021, the Gulf country submitted an updated version of its NDC, which enhanced Qatari ambitions towards reducing its overall emissions. Indeed, Doha announced its intention to achieve a 25% reduction of its GHG emissions by 2030, relative to baseline scenario.

Regarding renewable energy, the country strives to meet 20% of its energy demand from RES by 2030. Qatar’s plans to develop renewable energy sources have so far been delayed for years even though it inaugurated the first solar-panel factory (300 MW/year) in 2014. Doha planned to build a large 3.5 GW solar complex in the long term, which however has been frozen. Qatar was committed to exploit its solar potential, reaching a capacity of 1800 MW by 2020 for a cost estimated between $10–20 billion. However, the first large-scale solar power plant (the 800 MW Al Kharsaah photovoltaic power project) has been commissioned in October 2022. The project is composed of two phases. Developed under the build, own, operate and transfer (BOOT) model, the project will be owned by Siraj Energy, Marubeni and Total for a period of 25 years. The ownership of the power plant will then be transferred to Qatar General Electricity & Water Corporation Kahramaa (Power-technology n.d.).

The targets set in the renewable energy field were published in the Qatar National Development Strategy, envisaging the commissioning of 200 MW solar energy projects by the end of 2020, to be increased to 500 MW afterwards (Planning and Statistics Authority 2019). By contrast, Qatar’s National Development Strategy 2018–2022 does not outline any wind energy target. The slower pace of renewable adoption and deployment of renewable energy sources is shown by the lack of a precise deadline at governmental level to increase the renewable capacity to 500 MW. Nevertheless, Qatar Petroleum has stepped up its efforts in the renewable energy field, aiming at installing 4 GW of solar PV by 2030 (Adler 2021). Moreover, Qatar Petroleum launched its new Sustainability Strategy, which establishes several targets in line with the goals of the Paris Agreement in January 2021. In the Strategy, QP outlines several targets to reduce greenhouse gas emissions by 2030. It aims at reducing the emissions intensity of its LNG facilities by 25%, of its upstream facilities by at least 15%, and at reducing flare intensity across upstream facilities by over 75% (QP 2021). In order to reduce its GHG emissions, QP is also working on one of the most crucial technological solutions for Qatar’s gas exports, carbon capture storage (CCS). In 2019, QP successfully inaugurated the largest CO₂ recovery and sequestration facility in the MENA region with a design capacity of 2.2 Mtpa of CO₂ at Ras Laffan (QP 2020). Under its sustainable strategy in 2022, QatarEnergy (the former QP) announced that it aims to develop of CCS facilities to capture more than 11 Mtpa of the country’s CO₂ by 2035 in Qatar.

With respect to other Gulf countries, Qatar has a lower economic and strategic need to develop renewable energy, as demonstrated by the lack of specific renewable targets for the energy sector in the Qatar National Vision 2030. Indeed, given the abundancy of gas and the expected growing demand of gas in the medium term, Qatar may be less pushed to invest in renewable energy than oil-rich countries. Therefore, only a few broad statements regarding renewables have been formulated in Qatar’s Vision, while the main focus is the pivotal role of gas in the security of supply and in the country’s energy mix as well as exports. In order to preserve its business model and its status of world’s top LNG exporter, Qatar has emphasized and invested in decarbonization solutions for its LNG industry, such as CCS, rather than developing renewable energy sources. At the beginning of 2021, in the Qatar Petroleum final investment decision (FID) for the planned Qatargas expansion, a CCS was also envisaged, which would reduce carbon emissions by 25% with respect to other comparable projects worldwide (Adler 2021). This CCS project is expected to be completed by 2025 and to have the largest capacity in the LNG industry worldwide. The carbon could then be used for enhanced oil recovery (EOR) in existing oil and gas fields.

Solar energy represents the main pillar of the development of renewable energy in the country, while wind energy is largely absent from official documents and discourses. Despite the rather low and short-term targets set for renewable energy, the Ministry of Municipality and Environment has announced that Qatar is likely to exceed the 20% solar energy production level in 2030, during a high-profile meeting organized by UNGA on the topic “Climate and Sustainable Development for all” at the beginning of 2019 (The Peninsula 2019). Moreover, Qatar has placed particular emphasis on the enhancement of energy efficiency and the subsequent reduction of electricity and water consumption by 25% and 35%, respectively, by 2022. It is the only country that has set a target for the reduction of water consumption in energy efficiency measures, reflecting the quasi-total dependency of water supply on energy-intensive desalination plants (IRENA 2019).

As of 2020, few renewable energy projects are present in Qatar. A ground and roof mounted solar plant is currently operating with a capacity of 1.1 MW (Qatar Solar Technology n.d.). However, the first large-scale project for solar power generation—located in Al Kharsaah—was announced at the end of 2018 by Qatar General Electricity and Water Corporation (Kahramaa), which also owns and manages the country’s transmission and distribution systems. At the beginning of 2020, the French Total and the Japanese Marubeni won the bid for its construction with an estimated capacity of 800 MW to be operationalized by 2022. The total project is estimated to cost around $500 million with Total and Marubeni owning a 40% stake while Siraj Energy—a joint venture between QP and Qatar Electricity & Water Company—the remainder (TotalEnergies 2020).

Despite the rather low and vague renewable targets at government level, some changes are underway. Indeed, in 2021, Qatar Petroleum has stepped up its efforts in the renewable energy field, as it aims at installing 2–4 GW of solar PV by 2030 (Adler 2021). The willingness of Qatar Petroleum to boost its renewable portfolio is likely to reflect the country’s present renewable ambition, as H.E Saad Sharida Al-Kaabi is both the President and CEO of the NOC, and the country’s Energy Minister.

In conclusion, Qatar is taking its first steps in the renewable world, as it probably sees this sector as a great opportunity to show its technological progress. Unlike most of the other countries in the MENA region, Qatar does not have the same urgency to invest in renewable energy, because it expects decarbonized gas to play a key role within the global energy transition. For these reasons, it is increasingly considering investments in decarbonization technologies (CCUS) and detection and reduction of methane leakages to make its LNG acceptable in a low-carbon future.

• Scenario

Given the small capacity projects and the lack of specific renewable targets in its Vision 2030 as well as in its updated NDC in 2021, it might be concluded that the country does not yet consider the development of renewable energy projects as one of its key priorities. Indeed, the increasing key role of gas in the country’s energy mix and energy transition in the mid-term, the limited territory available for the development of large solar parks and the slow processes of investment, bidding and tendering (The State of Qatar 2018), might represent some key challenges for a strong political commitment in favor of the full exploitation of Qatar’s renewable energy potential. Moreover, the country needs to perhaps better delineate the responsibilities in setting renewable targets between the government and Energy Ministry and Qatar Petroleum.

Nevertheless, Qatar is likely to achieve its renewables objectives declared in the Qatar National Development Strategy 2018–2022. In order to be in line with the Qatar National Development Strategy 2018–2022, the first phase (350 MW) of the solar PV project in Al Kharsaah is going to be commissioned in 2021, while the remainder in 2022. The President of Kahramaa—who signed a 25-year PPA for the output of the solar plant—stated that PPA prices were the lowest ever, without disclosing them (Parnell 2020). Thus, very low prices in Qatar and in the GCC region for solar PV may further incentivize Qatar to make conspicuous investments in renewable energy, and employing solar energy domestically may even become economically more convenient than gas, which has the opportunity cost of export. Moreover, thanks to its important financial capabilities, Qatar is focusing on the development of small-scale renewable projects, especially those representing a technological breakthrough in this field. By doing so, Qatar has the opportunity to show off its technological advancement and its willingness to invest in renewable energy.

To conclude, Qatar has moved more slowly than its regional peers in the development of renewable energy. However, greater political pressure and economic considerations may incentivize Doha to take advantage of favorable and lower renewable costs increasing its investment efforts in energy transformation. At the same time, Qatar has enhanced its commitment to position itself as leading player in the LNG industry in a low-carbon scenario, investing in CCS projects.

2.4 Oman and Bahrain

• Targets and projects

Oman and Bahrain currently rely only on gas to meet their domestic electricity demand. However, the development of renewable energy in both countries has been pushed by numerous factors including the strong growth in internal electricity consumption (around 8.6% of average annual growth rate in Oman and 4.8% in Bahrain between 2009 and 2019) (IEA 2020b, c), the depletion of fossil fuel reserves and a relatively high rate of nationals’ unemployment, especially among the young. For instance, Oman is striving to develop a domestic solar energy industry through the transfer of know-how from foreign companies with the aim to create thousands of jobs in this sector.

Thanks to its large territory, Oman holds a great potential for the development of renewable energy projects. Indeed, a 2008 study carried out by Oman’s Authority for Electricity Generation found that 50% of homes with a 20 m² rooftop could install solar panels for a combined solar capacity of 420 MW. Moreover, the study affirmed that using only 0.1% of the country’s land area, CSP plants could be built in the desert, and would provide 2.8 GW of solar energy capacity. The study also projected the potential capacity of 375 wind turbines to amount to at least 750 MW. Thus, if all these projects were to be carried out, the overall renewable energy capacity would amount to 3.97 GW, corresponding to nearly 50% of the country’s total installed capacity in 2018 (Al-Sarihi and Bello 2019). Thus, in 2019, the Oman Power and Water Procurement Company (OPWP) set the renewable energy target of 30% of the country’s energy mix by 2030: the predominant source is solar (21% of the total energy mix), followed by wind (6.5%) and waste energy (2.5%), as shown in Fig. 4.1. Map 4.4 highlights the most suitable locations in the Sultanate for the installation of solar and wind capacities.

Fig. 4.1

Source Authors’ elaboration

Oman’s energy mix by 2030.

Map 4.4

Source Hereher, Al-Kenawy 2020

Solar and wind energy potential in Oman.

OPWP also planned to generate 3.05 GW from renewable energy sources by 2025. While from 2014 to 2018 renewable energy increased only from 1 to 8 MW (less than 1% of the country’s electricity mix), in the last couple of years the Sultanate has stepped up its efforts to steadily increase the share of renewable energy in the country’s energy mix. Indeed, regarding large-scale solar projects, in March 2019, the OPWP awarded the first IPP for the construction of the 500 MW Ibri 2 Project to the consortium led by the Saudi ACWA Power, with an expected investment of $400 million and in operation in June 2021. The OPWP also issued a request for qualification in July 2019 for the development of a second IPP—Manah 1—with a total capacity of 1.1 GW. Other solar IPPs have been planned with a timeframe for the bidding process, construction and operationalization as detailed in Table 4.5.

Table 4.5 Planned solar IPPs in Oman

IPPs for wind are also scheduled in the coming years, as Table 4.5 shows. The first Omani wind plant, developed by Masdar, came online in Dhofar in 2019 with a capacity of 50 MW, which is seen as a success, as it is also the first wind plant in the GCC. Also, a waste-to-energy plant (120–160 MW) has been planned to come into operation by 2024.

Lastly, Oman has stepped up its efforts in renewable energy also thanks to the Sahim project, which is projected to boost the adoption of small-scale solar energy, which holds a high potential in the country. Indeed, the first phase (2018) of this initiative pushed for the adoption of rooftop solar panels, with the possibility to export excess electricity to the grid. The second phase (2019) aimed at the installation of rooftop solar panels in 10–30% of houses, for roughly a total of 1 GW of capacity (Oxford Business Group 2020a).

Bahrain is focusing on the development of renewable energy, especially to compensate the widening gap between the growth in domestic primary energy supply (4.2% per year) and domestic consumption (5.3% per year) over the last twenty years (Sustainable Energy Unit 2018). The gap widens even further when non-industrial energy consumption is taken into account, as it grows at 6.6% per year. Thus, also to partly offset this issue, in 2014 Bahrain set the target of 255 MW of solar energy capacity to come online by 2025, thanks to mostly small-scale solar projects (with a target of around 150 MW) and the rest coming from Power Purchasing Agreements (PPPs) for large-scale projects (Cosgrove 2019). The renewable targets were set out in the National Renewable Energy Action Plan (NREP), which was partly developed by the Sustainable Energy Unit (SEU), established by the Kingdom in 2014. Renewable energy is extremely limited in Bahrain, as according to the IEA (2019a, b), renewable energy capacity was not yet developed.

Contrary to Oman, Bahrain has so far focused on decentralized, small-scale renewable energy projects, especially solar. A tender for rooftop solar panels was launched in 2019 for 66 government buildings, for a total capacity of 3 MW. Also, plans to install solar panels for public lighting, parking slots as well as commercial and residential buildings were proposed and discussed. The adoption of rooftop solar panels is encouraged with a net metering framework. Regarding large-scale solar projects, at the beginning of 2019 the Kingdom launched a tender for the Askar landfill solar farm, which has a planned capacity of 100 MW.

Overall, Oman and Bahrain have similar reasons to develop renewable energy capacity, but they had two diverging approaches due to their intrinsic peculiarities. Oman is relying mostly on large-scale renewable projects from various sources, thanks to its large and scarcely populated territory. On the contrary, Bahrain, given its limited availability of territory and smaller population, has concentrated its investments in small-scale projects, focusing primarily on solar PV.

• Scenario

Oman has been very ambitious both in terms of renewable energy objectives and planned projects. The main renewable projects in planning and construction phases may be considered on track with the OPWP deadlines to the attainment of 3.05 GW of renewable installed capacity by 2025. However, in order to reach this target, roughly 1 GW of renewable capacity remains to be developed, meaning that further investments are needed.

Nevertheless, to fully exploit its renewable potential, the Sultanate has to face and overcome a few challenges especially regarding its regulatory framework in the energy sector. Oman needs to assign clear roles and responsibilities to the numerous actors in the energy field and it should also adopt a cohesive strategy among the numerous entities to include renewable energy in different spheres (transport, electricity). Indeed, to reduce inefficiency and have a coherent strategy in the energy field, Oman started to reorganize the different bodies operating in the sector. In 2018, the Ministry of Oil and Gas was designated to become the policy-maker of all sources of energy, including power. Similarly, the independent regulator—Authority for Electricity Regulation—remained the oversight body, also incorporating water regulation. The energy-water nexus in GCC countries is becoming more and more relevant, given the projected steep growth in energy-intensive seawater desalination plants to satisfy an increasing water demand. In 2017, the Sultanate successfully introduced financial incentives to adopt small-scale solar PV, namely a Feed-in-Tariff. Nevertheless, households are required to cover the upfront expenses related to solar panels, and electricity tariffs are still very low, discouraging the switch towards self-generation. This challenge also derives from the presence of relatively high energy subsidies for electricity deriving from fossil fuel sources.

Oman could gradually liberalize the energy market in order to further attract private and foreign investments (Al-Sarihi and Bello 2019), which are highly needed, especially to reach the target of 30% of the country’s total capacity from renewable energy sources by 2030. The Sultanate eyes this opportunity and puts a lot of effort in starting a privatization of utilities, as most of them are partly or fully owned by the government. At the end of 2019, Nama Holding (owned by the Nema Group, fully owned by the Ministry of Finance) announced its intention to sell a 49% stake in the Oman Electricity Transmission Company (OETC) and a 70% share in the Muscat Electricity Distribution Company (MEDC). Other utilities are projected to carry out a gradual privatization.

All in all, the recent developments and strategies carried out by Oman to overcome its main challenges in the energy and electricity sector may be quite successful in developing renewable energy sources at large scale. In this way the country’s dependence on hydrocarbons would be greatly reduced, and the Sultanate could take advantage of the high renewable potential in its territory. Foreign investments could also significantly increase, with possibly positive spillovers, in terms of employment opportunities for the local population.

Bahrain has recently directed its efforts towards renewable energy by publishing its renewable energy targets in 2018, which are solely focused on solar energy. Despite Bahrain’s focus on small-scale solar projects, the country may not reach its 150 MW target of small-scale solar projects by 2025 as only 3 MW of rooftop solar panels on governmental buildings are currently under discussion. Looking at large-scale renewable projects in planning, tendering, construction phases or in operation, the Kingdom may be able to reach the target of 100 MW by 2025 for large-scale solar projects. The Askar landfill solar farm, which has already been through the whole tendering process, may well signal Bahrain’s ability to carry out large-scale projects thanks to a relatively attractive and reliable regulatory framework.

Nevertheless, Bahrain still faces considerable challenges for the development of renewable energy, due to intrinsic peculiarities and some inefficiencies. For instance, challenges may include the lack of vast land to construct large-scale solar or wind projects and the low level of engagement and cooperation between research institutions, public and private sectors in the renewable energy field. Moreover, other difficulties may regard financial capabilities especially for activities that enable the development of renewable energy capacity. Countries usually set up clean energy funds thanks to the allocation of a share of the government budget as well as public and private donations (SEU 2017). In the case of Bahrain, raising funds may be rather challenging, given a worsening trend in government debt over the last decade. Covid-19 further strained public finances, with government debt and government deficit reaching record-high levels in 2020, 129% of GDP and 16.8% of GDP, respectively (Fitch Ratings 2021). Nevertheless, Bahrain managed to boost the deployment of renewable energy sources through different financial incentives, namely net metering for decentralized small-scale solar PV, tender-based Feed-in-Tariffs to boost private deployment and the so-called Renewable Energy Mandate for all new buildings. The latter measure is particularly relevant as Bahrain has a thriving real estate sector (SEU 2017).

2.5 Kuwait

In its New Vision 2035, Kuwait has set an ambitious goal to generate 15% of its electricity from renewables by 2030. In 2020, installed renewable capacity in Kuwait stood at 106 MW, accounting for 0.5% of total installed electricity capacity. This produced 60 GWh, accounting for 0.1% of total power generation in the country.

Kuwait has also planned to develop renewable energy sources especially to free up oil and natural gas for external markets, given the relatively high growth of domestic electricity consumption—with an annual average growth rate of 3.9% between 2008 and 2018 (IEA 2020d). Indeed, energy consumption per capita in Kuwait is among the highest in the world due to high energy subsidies, almost complete reliance on energy-intensive desalination plants to meet domestic water demand and extreme temperatures in the summer, which has recently extended from April to October.

Despite the fact that in 2018 renewable energy accounted for less than 1% (80 MW) of the total country’s generating capacity, Kuwait set the target of 15% of the country’s power mix to come from renewable energy by 2030. In order to reach the 2030 renewable target, the country has started changing its energy regulatory framework: Law No. 39 of 2010 and Law No. 10 of 2014 opened up the development of the energy market to independent power producers (IPPs) through public private partnerships (PPPs), while previously the Ministry of Electricity and Water was the sole responsible (Oxford Business Group 2018a). Despite the high ambitions and some developments, so far Kuwait has not implemented any flagship policy to speed up the development of renewables.

Following these changes in legislation, a stream of renewable projects was planned, and some were constructed and commissioned. The Umm Guidar PV solar project, consisting of solar panels with a capacity of 10 MW in the Umm Guidar oil field, came online in 2018, without being connected to the national grid. The major renewable energy project in Kuwait regards the Shagaya renewable energy complex with an expected capacity of 4 GW from CSP (around 56%), PV (35%) and wind (7.5%) (Reuters 2019). The Shagaya complex, with a planned capacity of 4 GW by 2030, was developed by the Kuwait Institute for Scientific Research (KISR), initially in three phases, later extended to four: the first phase, consisting of a capacity of 70 MW (50 MW CSP, 10 MW solar PV and 10 MW wind), was connected to the grid in 2018. Phase 2 will be entirely developed by the Kuwait National Petroleum Company with the construction of the Dibdibah solar PV project for a combined capacity of 1.5 GW by 2021. Phase 3 and 4 will be tendered through Public Private Partnerships and will comprise a mix of PV, CSP and wind by 2027. The third phase would have a total capacity of 2000 MW.

In conclusion, Kuwait, similarly to Oman, has focused on utility-scale projects, primarily solar energy. Nevertheless, Kuwait may be considered to be falling behind on renewable energy projects and investments with respect to other GCC countries, as to date very few projects have been envisaged and planned. This trend may be partly explained by a small population coupled with high oil production and reserves.

• Scenario

Kuwait has recently stepped up its efforts to further develop renewable energy projects. An example is the expansion of the Shagaya renewable energy complex’s capacity from 2 to 4 GW. Also, the actual timing for the construction and commissioning of the Shagaya renewable complex seems compliant with the timeframe set for both the project and the renewable targets. Nevertheless, the total renewable energy capacity to come online by 2035 is likely to amount to 5 GW, less than the capacity needed to achieve the country’s renewable target (15% of the country’s power mix from renewable energy by 2030). Despite the establishment of the Higher Energy Committee to enhance cooperation in the energy sector, numerous agencies and authorities (Ministry of Energy & Water, Kuwait Authority for Partnership Projects and Kuwait Foundation for the Advancement of Sciences) operate in the power sector so that collaboration and synergy in the renewable field may be at times challenging. The rather blurred role of the different entities is also partially related to the divergent positions the National Assembly and the government take in numerous stances.

The low level of private sector involvement in the energy sector may further hinder the development of renewable energy in the country despite the push towards the establishment of Public Private Partnerships (PPPs). Indeed, Law No. 16 of 2014 stipulated the creation of a joint public company consisting of a minimum 50% share to Kuwaiti citizens, 26% share to the private company and 6% share to the reaming agencies involved in the project. This division of shares also contributed to discouraging FDIs (Kuwait Institute for Scientific Research 2019). Kuwait may also focus on small-scale rooftop solar PV, which would not only contribute to the renewable targets, but may also keep in check the skyrocketing energy consumption rate by offering a net metering or a feed-in-tariff or a combination of the two.

In conclusion, having only recently entered the renewable energy world, Oman, Bahrain and Kuwait still have to address numerous challenges. All three countries need to boost cooperation and integration of agencies in the renewable field, in order to put forward efficient, fast-pace and coherent renewable energy decisions as well as to further attract private (and foreign) investments.

2.6 Iran

• Targets and Projects

Iran holds a great, yet untapped potential for renewable energy thanks to its location and available land for the development of solar and wind energy. To date, hydropower is the most exploited renewable energy source, representing 9% of power generation in 2019. The development of renewable energy in the country would entail numerous benefits, including the reduction of air pollution, especially in large cities (i.e. Tehran).

SUNA (Iran Renewable Energy Organization) was responsible for overseeing renewable policy development and project licensing as well as securing PPAs with renewable power producers until its integration into SATBA (Renewable Energy and Energy Efficiency Organization).

In the 20-Year Vision (2005–2025), Iran aimed at becoming a regional power in terms of renewable energy production by 2025: Iran envisages that electricity generated from renewable energy sources (excluding hydroelectricity) would account for 10% of the total electricity generated in the country by 2025 (Moshiri and Lechtenböhmer 2015). In its Fifth Development Plan (2010–2015), Iran announced its ambitious intention to install 5000 MW of renewable energy (excluding hydro). The lifting of international sanctions in 2016 prompted Iran’s ambitions in renewable energy as the legal environment for foreign investment improved. The Sixth Development Plan (2016–2021) set out specific renewable targets and objectives. Besides the construction of non-renewable energy power plants, the country’s Sixth Development Plan aims to achieve 4.5 GW of wind and 0.5 GW of solar capacities by 2021, with an additional 2.5 GW of wind and solar capacities by 2030. These targets were also instrumental in reducing environmental concerns, as Iran is a signatory of the 2015 Paris Agreement, where it pledged to attain a renewable capacity (excluding hydro) of 7.5 GW by 2030.

In order to reach 5 GW of renewable (excluding hydro) as specified in the Sixth Development Plan, an investment of $10 billion was estimated, which was deemed feasible with the lifting of sanctions on the country. A key role was to be played by foreign investors, with European countries proposing investments amounting to $3.6 billion in 2017. For instance, in 2017, Norway’s Saga Energy signed a $2.9 billion deal with the state-owned Amin Energy Developers to build a solar power plant with a generation capacity of 2 GW (Dudley 2017). Similarly, a 50 MW solar plant was planned to be constructed by an Italian company in Qeshm island, while a Danish company also signed a contract to build wind turbines. Technical support was also envisaged, as Spain was expected to provide technical services regarding renewable technologies to SUNA, the Renewable Energy Organization of Iran.

However, with the US reinstating numerous sanctions on Iran in 2018, foreign investments have been tremendously reduced (if not disappeared) and it has become even more challenging for Iran to develop its renewable energy capacity. Thus, Iran had little time to commission renewable projects in conjunction with foreign investors. The main example of a successful joint venture for Iran is represented by the commissioning of a 30 MW solar plant located in Jajarm, which was designed and constructed by a private Swiss company. As of 2021, a PPA was signed for this plant and the designated operator is Hamoon Mehr Afarin.

Despite the new sanctions, Iran has managed to increase renewable capacity (including hydro) between 2011 and 2020, from 8.8 GW to 12.9 GW (IRENA 2021a, b) 95% of which hydroelectricity. Iran has managed to increase its non-hydro renewable capacity also thanks to its focus on small-scale solar PV. Indeed, 3,403 small-scale solar PV have been installed and 2,500 other units are in the planning and construction phases (Jalilov 2019). Thus, contrary to some GCC countries, which do not have any hydro potential and have focused mainly on large-scale renewable (solar and wind) projects, Iran has also developed an advantageous framework for the adoption of small-scale solar and wind projects. For instance, a Feed-in-Tariff was put forward in the Fifth Development Plan (2010–2015), which is deemed to incentivize the adoption of solar and wind energy, with guaranteed prices extended from 5 to 20 years in 2015.

Nevertheless, in 2019, the capacity of non-hydro renewable sources (669 MW) accounted for less than 1% (0.8%) of the country’s production capacity (roughly 80 GW), while hydro for 14%. At the end of 2019, Iran had only 302 MW of installed wind capacity and 365 MW of solar. The country planned to develop several wind and solar plants; however, international sanctions have deeply undermined Iranian ability to implement and launch these projects.

Iran managed to develop hydropower (Fig. 4.2), taking advantage of its vast network of rivers—unlike most of the other MENA countries—and political commitment. Particularly since 2000, Iran has planned and built several dams across the country aiming at increasing food and energy security as well as supporting local and rural employment. Iran is working to additionally expand its hydro capacity with around 5 GW currently under construction. The main hydropower project is the 1500 MW Bakhtiari Dam, whose construction started in 2013 for an estimated total investment of $2.3 billion. However, the commissioning has been delayed.

Fig. 4.2

Source Authors’ elaboration on Enerdata 2020a, b, c, d

Installed hydroelectricity capacity in Iran (MW).

Nuclear energy is also present in the country’s energy and electricity mix, accounting for 1% of Iran’s electricity generation capacity. Nuclear power plants in Iran date back to the 1950s under the Shah regime. Following the Islamic Revolution (1979), the nuclear power program was halted due to political reasons and economic constraints following the Iraq-Iran War, and later revived in the 1990s. As of today, Iran has one operating nuclear power reactor, the Russian built Bushehr Nuclear Power Plant, with a single 915 MW reactor unit and plans are in place to expand its capacity with the construction of two additional reactors.

The slow pace of installed renewable capacity also reflects the critical situation of Iranian power, which faces underinvestment because of huge debt and international sanctions. Under the Fifth Development Plan (2010–2015), Iran planned to add 5 GW per year, but it managed to add only 1.8 GW per year over that period.

• Scenario

The ambitious political intentions regarding renewable energy clash with the country’s overall situation, characterized by international sanctions and a relatively weak economic outlook and regulatory uncertainties. Such a challenging situation hinders the full exploitation of Iran’s renewable potential.

Since 2015, Iran commissioned 400 MW of renewable capacity, a figure considerably lower than the renewable target of 5 GW envisaged in the country’s Sixth Development Plan by 2021. Regarding the 2030 renewable objective, the 7.5 GW target represents roughly 8.8% of the country’s electricity production capacity with respect to 2019 (85 GW), which is an ambitious, yet attainable target also compared to other countries in the Gulf cluster (i.e. KSA, UAE). Despite the country currently lagging behind its renewable targets, it may be able to catch up in the coming decade if some challenges are addressed. In other words, the attainment of Iran’s 2030 renewable objective largely depends on political circumstances both domestically and internationally.

From a geopolitical perspective, a potential reconciliation between the US and Iran may contribute to reestablishing a favorable international financial environment for foreign investments in Iran’s renewable energy sector. With the election of Joe Biden as President of the US, some positive developments regarding the lifting of sanctions may occur. President Biden has expressed his intention to rejoin nuclear talks with Tehran. However, the US needs to overcome several challenges, such as Iranian and American political developments and other Middle Eastern countries’ skepticism. The lift of international sanctions may be particularly beneficial for Iranian renewable energy development. Indeed, the lifting of US sanctions may also allow international financial institutions, such as the World Bank and the European Bank for Reconstruction and Development, to provide funds and expertise. Their role has been particularly relevant in the development of renewable energy sources in other countries.

The 2016–2018 period shows that if a more investment-friendly environment is in place at international level, Iran can attract foreign investments for its energy transformation. As already discussed, Iran managed to attract multiple foreign investments in the renewable sector from European countries, but also beyond. For instance, a consortium of Iranian, Indian and South Korean companies was planning to build a 1 GW solar park in the Khuzestan Province.

Moreover, small scale solar PV projects are deemed to be quite successful and may contribute to the attainment of the renewable targets and enhance the resilience of the country’s energy system. The FIT policy may be deemed more incentivizing for small-scale projects with respect to the net metering scheme employed in Saudi Arabia, as it entails revenues for small-scale producers and not just savings on the bill.

All in all, Iran may decide to focus on wind and solar energy, also due to the numerous challenges nuclear and hydropower face. As of today, nuclear faces major political opposition from the US, which may be difficult to overcome unless a renewed nuclear deal between the US and Iran is achieved. Hydropower relevance, instead, may decrease over the next decades, as it is particularly exposed to climate change, which alters precipitation levels. Between 2017 and 2018, precipitation levels decreased by 25%, contributing to the reported reduction of water entering Iran’s dams by 33% (Badawi 2018). Moreover, Iran already faces water scarcity due to assertive agricultural policies aimed at boosting food supply and self-sufficiency. This imperative to enhance the agricultural output is in line with the general goal to diversify revenues and exports from oil. However, a growing competition between agriculture and hydropower may hinder the contribution of this low-carbon energy source to Iranian decarbonization.

To conclude, Iran did not attain the Sixth Development Plan objectives by 2021, but it may be able to reach the 7.5 GW target by 2030, in particular if the US changes its foreign policy towards Iran. Indeed, the country is likely to attract large foreign investments in the renewable field, thanks to its untapped renewable potential and the availability of vast and diverse land (with specificities particularly suitable for solar energy in some regions and wind energy in others).

3 Mashreq

The East Med cluster has serious political challenges and the energy sector of these countries is quite heterogeneous. On one side, there are countries experiencing a relative hydrocarbon abundance, such as Iraq, Egypt, Syria and Israel (thanks to recent large offshore gas discoveries); on the other side, there are other countries (e.g. Lebanon and Palestine) witnessing energy shortages on a daily base with blackouts due to infrastructure and political barriers. Among the East Med cluster countries, Jordan represents a successful example, as it has managed to overturn its lack of energy security and energy independence mostly by attracting investors and developing renewable energy sources. The development of renewable energy would contribute to overcoming key domestic energy issues, as will be detailed for each country, relative to its intrinsic peculiarities. All countries have thus strived to enhance their uptake of renewable energy sources, with different targets, as summarized in Table 4.6. The present section does not include an analysis on renewable developments and energy transformation projects in Iraq and Syria given their current unstable sociopolitical condition that hinders their efforts.

Table 4.6 Renewable energy targets by country

Countries in this cluster have a huge potential to attain regional security of gas and power supplies, thanks to interdependence and complementarity. They strived with remarkable initiatives to establish energy and electricity networks, which, however, are neither very reliable nor resilient due to regional instabilities, (civil) wars and geopolitical forces at play. Also, energy exchanges in this cluster are limited by competition in the same market for gas and by electricity peaks at similar times for power.

Power exchanges are possible with power interconnections, which are currently used only for emergency situations. Cooperation and development of energy interconnections among countries in this cluster and the broader region date back to 1988, with the establishment of “Eight countries regional energy interconnection” by Syria, Jordan, Egypt, Iraq and Turkey. A few years later, Palestine, Lebanon and Libya also joined the energy interconnection program, whereby each country signed an agreement to update its power system. In 1996, the countries signed trade agreements with conditions on using energy interconnections (Li et al. 2017). Up until the beginning of the 2010s, there was a momentum for the construction and synchronization of the countries’ grids, so that the Jordanian-Egyptian-Syrian-Libyan interconnection was developed and the first power exchanges were carried out, while other projects were planned (i.e. Syrian-Turkish, Syrian-Lebanese, Iraqi-Turkish, Syrian-Iraqi and Egyptian-Libyan electric interconnections) (NEPCO 2013).

Overall, geographic factors, political disagreements and the lack of grid synchronization among some countries make exchanges almost an exception. Overcoming these challenges would represent quite a breakthrough for countries experiencing blackouts and energy insecurity, and would benefit the others economically, so that regional energy security and interdependence could be established. Also, with the increasing share of renewables in the countries’ electricity mix, interconnections represent a key instrument to address the variable generation of some renewable sources (wind, power) in order to balance power production and consumption, as renewables are usually generated in remote areas at the periphery of grids.

It goes without saying that the main challenges to the establishment of reliable and efficient power exchanges regard security concerns in the region and geopolitical factors, which may prevent the full development of an effective network infrastructure and a common regulatory framework. For instance, Lebanon, with the precondition of solving key domestic issues, would greatly benefit from power imports to offset the daily blackouts. However, it may find it difficult to import electricity as Syrian infrastructure is either destroyed or unreliable, while it does not have any trade exchange with Israel for political reasons. Also, Palestine, and especially Gaza, which is the other worst area in the region in terms of energy security, is prevented from importing sufficient energy sources and electricity to satisfy the internal demand.

3.1 Jordan and Lebanon

• Jordan

As discussed in Chap. 3 (Sect. 3.2.1), Jordan and Lebanon have taken diverging paths in terms of renewable energy development since 2015. Both countries depend heavily on imports to satisfy their domestic energy demand, for instance Jordan imports 94% of its oil and gas, becoming vulnerable to oil price fluctuations. At the same time, they both witnessed a high growth in internal energy consumption up to 2017 (between 2010 and 2017: 4% on average per year in Jordan and 5% in Lebanon), as a result of a large influx of Syrian refugees, coupled with population growth. Nevertheless, Jordan’s energy consumption has decreased by a total of 10% between 2017 and 2019 (ENERDATA n.d.). While Lebanon stabilized its energy consumption in 2018 and 2019, the 2020-21economic crisis resulted in a reduced energy demand. It should be remarked that, due to the country’s dysfunctional energy system, in 2019 (prior to the economic downturn) Lebanon’s per capita energy consumption was 60% lower than the regional average and the country’s per capita electricity consumption 35% lower than the regional average (ENERDATA n.d.).

Targets and Projects

To face the above-decribed issues, Jordan developed a coherent strategy for the quick development of renewable energy, especially to increase its energy security. Under the National Energy Strategy Plan 2007–2020, renewable energy became pivotal in the country’s energy policy and investments amounting to $20 billion in energy development by 2020 were planned. The same Plan set renewable energy targets corresponding to 7% and 10% (2 GW) of the total primary energy supply by 2015 and 2020, respectively (Abu-Raman et al. 2020). In the Renewable Energy Law adopted in 2012, the 2020 target corresponded to a capacity of 1800 MW. To reach the 2020 target, Jordan focuses on solar and wind. In 2020, installed solar capacity was 1359 MW and wind 515 MW. In the same year, renewables accounted for 29% of electricity capacity and around 14% of electricity production.

In support of this strategy, the Kingdom adopted the Renewable Energy and Energy Efficiency Law (REEL) No. 13 in 2012, which encouraged private sector investments in renewable energy by simplifying procedures and exempting investments from taxation. It also included energy management and efficiency measures especially for the industrial and service sectors, which represent the main energy consumers (ISMED 2014). To further incentivize an investment-friendly environment, the country successfully enhanced transparency of the power sector, a key challenge for most countries in the MENA region, through the so-called “Reference Price List”. This List includes indicative prices per renewable source and it can be considered as a Ceiling Tariff, so that developers compete below the upper limit set by the government. Under this framework, investors can evaluate the feasibility and minimize the risks of their investments (Abu-Ramman et al. 2020). Favorable investment and regulatory conditions resulted in over $5 billion investments in the renewable energy sector between 2014 and 2020, which were attained also by attracting donations and loans from GCC, the European Union, the European Bank for Reconstruction and Development and the French Development Finance Institution.

Especially since 2015, Jordan has planned, constructed and also commissioned numerous renewable energy projects, in particular solar PV (and plans for CSP), wind energy and small-scale biomass projects. The first two renewable power plants commissioned were the 200 MW solar plant in Ma’an in 2016 and the 117 MW wind plant in Al Tafileh in 2015 (Ministry of Energy and Mineral Resources 2018). In 2019, renewable energy sources accounted for 7% of primary energy sources so that Jordan became the country with the highest degree of penetration growth of renewable energy sources in the MENA region and the third globally. Table 4.7 summarizes the main large-scale recent renewable power plant realizations in Jordan.

Table 4.7 Main large-scale renewables in Jordan

Jordan has a combination of large-scale renewable projects and small-scale projects through numerous incentives (generous feed-in-tariffs) so that renewable capacity amounts to 1.9 GW in 2020 and almost 30% of all residential buildings have solar water heating systems installed on the roofs. In the coming years, numerous additional renewable projects are expected to come online so that Jordan is projected to become a hub and frontrunner in renewable energy development in terms of capacity building, training and technology transfer for the MENA region.

In conclusion, Jordan represents a remarkable example of a rapid and successful development of renewable energy in just five years. Indeed, the country managed to adjust its regulatory, legislative and financial framework to attract investors and roll out such a large renewable program in only a few years. The government has unveiled its National Energy Strategy for 2020–2030 with new objectives in favor of energy diversification and the strengthening of local energy sources in order to reduce its energy dependence. The contribution of imported natural gas in the power mix will be reduced from over 80% to 53% by 2030. The strategy’s targets by 2030 include a renewable share in total power generation of 31% (14.4% in 2019) and 14% in the total energy mix (7% in 2019).

Scenario

Jordan may well represent a model for the development of renewable energy in the MENA region: in 2019, renewable energy sources accounted for 14% of the country’s total electricity generation, up from 0.7% in 2014. Also, Jordan reached 7% of total primary energy supply from renewable sources in 2018, three years later than planned. However, it has managed to almost attain its 2020 target of 10% of total primary energy supply from renewable sources, corresponding to around 2 GW. Indeed, in 2021, the total capacity of renewable power plants in operation amounts to 1715 MW. The 2020 renewable objective was particularly challenging to attain, especially due to the combination of two factors. Since January 2019, the country has decided to indefinitely halt all investments in renewable energy above 1 MW (IRENA 2021b) and the Covid-19 pandemic resulted in an economic downturn, also affecting renewable investments. All in all, similarly to the 2015 renewable target, the Kingdom may add roughly the missing 300 MW needed to reach the 2020 renewable targets by 2025.

Regarding the recently set renewable targets by 2030, it is challenging to forecast the country’s renewable trajectory, due to the uncertainty in terms of economic recovery from Covid-19 not only for the Kingdom, but worldwide, given the significant share of foreign investors in renewable energy projects. Another uncertainty regards the country’s energy policy that prevents investments in projects above 1 MW. However, since 2015, Jordan has been a pacesetter in the uptake of renewable energy in this cluster and in the whole MENA region, so that by 2030 the country may well keep its role in this field. Moreover, in developing its energy policy, Jordan considers a key aspect: energy security. This is because of its quasi-total dependence on energy source imports, which may force Jordan to prioritize all domestically produced energy sources. It may thus be beneficial for the country to accompany renewable energy with an increasing role of oil shale⁶ and possibly nuclear energy, in the form of Small Modular Reactors (SMRs).

Jordan owns the eight largest reserves of oil shale in the world so that it plans to produce around 25,000 barrels per day by 2022. The oil shale program runs since 2008 (when oil prices were above $100 per barrel) in cooperation with Estonia’s company Enefit, which is the world’s largest oil shale producer (Gnana 2019).

Regarding nuclear energy, Jordan canceled its ambitious plan to build two 1000 MW nuclear power plants by 2025. Instead, it is promoting and prioritizing the possible development of Small Modular Reactors (SMRs) in cooperation with Saudi KA-CARE, in order to enhance the country's grid resilience. Indeed, the two conventional nuclear power plants may have posed some challenges in case of a shutdown, as combined they would have provided almost one-third of the country’s total electricity. The nuclear program has been quite active especially because of the country’s uranium reserves that also led to an agreement with the French company AREVA for exclusive mining rights (World Nuclear Association 2019b).

All in all, it may be quite challenging to forecast Jordan’s trajectory and the new energy policy given the possible role of oil shale and nuclear energy. Indeed, the development of these two energy sources depends on numerous factors (economic recovery, interconnections, oil prices, country’s geopolitics) so that their role in the country’s energy mix, with respect to renewable energy, is quite unpredictable. Given the economic downturn following Covid-19 it may also take longer to attract investments in the renewable field to attain the renewable targets, but the country’s excellent historical record will keep attracting investors.

• Lebanon

Targets and Projects

Renewable energy sources for Lebanon represent a great opportunity to defuse major challenges in the energy and especially power sector, such as oil imports for electricity generation, reliance of the population on private diesel generators, social discontent on energy sector mismanagement, highly indebted public utility and so on. More in detail, similarly to Jordan, Lebanon is highly insecure in terms of energy, relying entirely on fossil fuel imports, thus domestic renewable production would represent a huge benefit for the country. Moreover, energy demand exceeds the country’s generation capacity, leading to daily blackouts lasting many hours, depending on the region. Renewable energy would contribute to offsetting the large gap between energy demand and supply, enhancing economic growth (by reducing blackouts) and saving almost $250 million in the power sector per year (with a 30% renewable electricity consumption target), mostly thanks to significantly lower fossil-fuel imports (IRENA 2020). But of course, renewable energy has high investment costs and needs to be financed.

In 2011, Lebanon framed its energy policy through the publication of the National Energy Efficiency Action Plan (NEEAP) and the National Renewable Energy Action Plan, which set a target of 12% of power and heating consumption from renewable energy sources by 2020, primarily wind (200 MW), large-scale PV (150 MW) and distributed PV (100 MW). In 2018, Lebanon, in cooperation with IRENA, set a new target of 30% of electricity and heating demand to come from renewable energy sources by 2030. This target may be deemed particularly ambitious, given the current total renewable capacity. Indeed, in 2020 total renewable power capacity amounts to 344 MW: 253 MW from hydropower, 79 MW from solar energy, 3 MW from wind energy and 9 MW from bioenergy (IRENA 2021a). Overall, the main renewable energy source is represented by small-scale solar PV projects and 63% of distributed solar capacity is on-grid, while wind energy has practically not been developed yet.

Lebanon, in cooperation with the country’s central bank, also established the National Energy Efficiency and Renewable Energy Action Plan (NEEREA), which provided low interest rates for loans (up to $10 million) for renewable energy and energy efficiency projects and other financial benefits. This initiative may be considered quite successful as 938 projects were financed by March 2019. Nevertheless, the growth of solar PV installation decreased after 2017, also as a result of growing interest rates on loans offered by NEEREA (Ahmad 2020). Regarding the regulatory framework, the country signed its first PPA for electricity consumption from renewables in 2018.

The push towards the adoption of renewable energy may be offset by the political and economic context. The country has experienced hyperinflation⁷ since July 2020. Moreover, the sociopolitical landscape has been shaken by an explosion at Beirut Port—resulting in 204 fatalities and thousands of wounded. The ever-growing economic challenges and political inactions resulted in protests against the political class. After more than a year of political deadlock and a worsening economic situation, a new government has finally been formed in September 2021. The new government is called to implement a serious reforming process in order to alleviate the economic burden. The government’s reforming effort should devote particular attention to the Lebanese energy sector, which represents about 40% of the country’s public debt since 1992 (Ahmad et al. 2021).

In conclusion, despite the enormous energy, economic and political challenges Lebanon is facing, the country is striving to increase the adoption of renewable energy sources, which would provide energy security, lower reliance on private diesel generators and would counteract the longer electricity blackouts. Indeed, following the default on its debt in March 2020 and the outbreak of Covid-19, the daily blackouts became longer and more frequent across the whole country. As the international community, headed by France, is currently pushing for reforms in numerous areas, the highly inefficient and indebted energy sector has become a priority and it is under the spotlight of citizens and donor countries alike.

Scenario

Lebanon has a target of 30% of power and heating consumption from renewable energy sources by 2030 (IRENA 2020). However, the achievement of this renewable target depends on numerous variables, especially given the country’s economic and political instability in the foreseeable future. The coming years are crucial for Lebanon’s overall stability and the development of renewable energy may actively contribute to offsetting the country’s energy issues thus leading toward a long due reform in this field.

In line with numerous other sectors, there is a low level of political commitment to adopting renewable energy, and more broadly, to reforming the highly inefficient energy sector. Indeed, in order to reach its renewable target, Lebanon needs to address numerous challenges in its energy sector, which has not yet considered the adoption of renewable energy sources from a regulatory and technical perspective. For instance, the 2030 renewable target does not state the share to be attained for each energy source or the path to be followed for the development of renewable energy. Various laws were amended to integrate renewable energy policy, but a coherent and integrated legal framework regarding renewable energy in electricity law is still missing.

Another key signal of the political stalemate and low political commitment regards the inability to carry out an energy subsidy reform, as discussed in Chap. 3. The high levels of energy subsidies and low electricity tariffs reduce the competitiveness of renewable energy sources. The lack of energy reform is due to political issues rather than social issues, as the population is already heavily reliant on private diesel generators, which are not only highly polluting, but also very expensive. The current economic fallout, especially inflation, results in an increasing use of diesel generators, in a context of staggering poverty growth and the absence of safety net mechanisms. Despite these significant challenges, Lebanon is striving to focus on distributed generation, which provides numerous advantages, as detailed in Table 4.8.

Table 4.8 Potential benefits and main beneficiaries of distributed renewable energy systems in Lebanon

In this regard, since 2011, Lebanon has employed the net metering scheme mostly for commercial and industrial use, which, however, involves numerous technical difficulties, such as complex administrative steps, manual net metering and so on.

In conclusion, Lebanon has to address key issues, from both regulatory and technical perspectives, in order to enhance the efficiency of its energy sector and move towards a wider adoption of renewable energy. Lebanon needs to successfully overcome these challenges to gain the trust of its population and of the international community, as the energy sector is perceived as one of the key examples of the country’s mismanagement and inefficiency. It is also a precondition for economic development.

Lebanon and Jordan have undertaken two different paths towards the adoption of renewable energy and broader energy security. Irrespective of the economic crisis and political stalemate in Lebanon, the two different strategies resulted in diverging outcomes in terms of energy sector performance. Indeed, Jordan has managed to decrease the public utility’s debt, attract private and foreign investments and ensure a reliable and affordable access to energy and electricity to its population. On the contrary, Lebanon’s energy sector is an emblem of its economic and political conditions: inefficient, dysfunctional, challenging to reform, unreliable and expensive, highly indebted and a major driver of social dissatisfaction.

3.2 Egypt

• Targets and projects

Prior to roughly 2015, Egypt strove to develop its renewable energy capacity as a way to satisfy its increasing domestic energy demand, at a time when gas production and reserves were decreasing. Despite the numerous offshore gas fields discovered in its waters, among which the largest one in the Mediterranean (Zohr), Egypt continued to consider renewable energy a fundamental pillar of its energy policy for numerous reasons.

Firstly, Egypt’s geographical features, such as location and vast uninhabited territories, provide renewable energy with great potential. Secondly, increasing the share of renewables in the power sector may meet growing energy demand, enhance energy security and preserve vital foreign exchange income from gas exports. The large use of natural gas for electricity generation would otherwise result in the rapid depletion of gas reserves and the simultaneous erosion of natural gas exports. Moreover, a relevant share of renewable energy may also result in the development of a “green economy”, which may boost job opportunities within the country. If developed, this new approach would represent a great benefit for Egypt, as it is witnessing a high rate of youth unemployment (26%) and a growing population (Al-Riffai et al. 2019). In Egypt, numerous industries related to the solar PV value chain are already present, (i.e. steel and glass manufacturing, pump fabrication plants) representing a considerable potential to underpin its green industrial ambitions (IEA 2020e).

Egypt’s commitment to renewable energy dates back to 1986, when it established the New and Renewable Energy Authority (NREA), the main agency responsible for the development of renewable projects, with a particular focus on solar and wind projects. In order to boost the renewable energy potential, Egypt also published numerous documents and laws incentivizing the adoption of renewable energy technologies. The main document, passed by the cabinet in 2016, comprises the “Egypt Integrated Sustainable Energy Strategy to 2035”, which envisages a total installed capacity of 61 GW of renewable energy by 2035: 31 GW solar PV, 12 GW CSP and 18 GW wind energy (IRENA 2018). These targets should enable Egypt to increase electricity production from renewable energy sources to 20% by 2022 and 42% by 2035. In terms of share, solar would produce 25% of Egypt’s electricity production, wind 14% and hydropower 2% by 2035. However, these targets may understate the high potential of electricity coming from renewable energy sources, as the Remap analysis carried out by IRENA assessed renewable energy sources to possibly satisfy 53% of the electricity mix by 2030 (IRENA 2018). This gap with the country’s targets may also be due to the significant discoveries of large gas fields, which would also contribute to satisfying the domestic electricity demand at relatively low costs.

It is well-worth to highlight Egypt’s capability to attract investors for its renewable projects, since it has only recently started to develop renewable energy sources at large scale. More in detail, Egypt has enacted legislative reforms to its electricity sector in order to enhance its competitiveness, hence incentives to invest in renewable energy projects. Indeed, Law No. 2013/2014 aimed at involving the private sector in electricity generation from renewable energy sectors by introducing numerous schemes, such as feed-in-tariffs, competitive bids and independent power production with third party access. One year later, Egypt passed Law No. 87/2015, which was regarded as a breakthrough for the establishment of a competitive electricity market. This law envisaged the separation of electricity generation, transmission and distribution activities, putting an end to the single-buyer model. Nevertheless, although high voltage consumers could choose among electricity generators in a fully competitive market, medium and low voltage consumers are supplied with a regulated tariff, thus two electricity markets were established depending on the electricity consumed by the users (Elkadi Salah 2019). Also, the state-owned Egyptian Electricity Transmission Company can buy electricity produced by private companies at a tariff (8.4 cents per kw), which is deemed to attract investors (Hammad 2020).

Partly thanks to these reforms, to date Egypt has quite succeeded in providing confidence to international agencies and attracting foreign investments primarily through joint ventures for large-scale solar and wind projects. A successful financing case regarding wind energy is represented by the Zafarana wind farm, located in the Gulf of Suez. This large wind farm, with a capacity of 550 MW, is the second largest wind farm in Egypt after the Gabal El Zeit wind farm (580 MW) (Magoum 2020). The total cost of the project amounted to $912 million: $456 million were obtained with a Public Private Partnership (PPP), $306 million from international organizations and development banks (e.g. African Development Bank, International Finance Corporation), $100 million from local governments and $50 million from the Clean Technology Fund. The largest share of funds was provided by a PPP, in the form of a joint venture between Egypt’s NREA and Emirati Masdar (Mansour 2015). Overall, numerous wind projects for a combined capacity of 3990 MW are currently under development (to come online by 2023) and located in the Gulf of Suez, Gabal El Zayt and the West Nile, while a 600 MW wind project is under the tender-bidding phase (IRENA 2018).

Along with the UAE and Morocco, Egypt is one of the most “attractive” countries for foreign investments in renewable energy projects. Egypt attracted over one third of total renewable energy investment by EBRD in the region (more than €1 billion) (OME 2021). For instance, foreign organizations, companies and donors are involved in the development of the Benban Solar Park, currently the largest solar park in the Mediterranean and the fourth in the world (1650 MW), comprising 41 solar power plants. In 2018, the first section of the park—50 MW “Infinity 50”—was connected to the grid. It was completed in 2019.

More than 30 companies from 12 countries joined the development phase, such as the Emirati Alcazar Energy, the Italian Enerray and the French Total Eren and EDF (Lewis 2019). This mega-project is estimated to cost $2.1 billion, thus foreign investments and loans were necessary to concretize it. Egypt managed to have international and multilateral active support. For instance, the International Finance Corporation (IFC), an institution of the World Bank Group, with a consortium of nine international development banks, loaned $653 million while the Multilateral Investment and Guarantee Agency (MIGA) provided $210 million to cover political risk insurance in order to attract private investments for this project. (IFC 2019).

Egypt’s competitiveness in sustainable finance, compared to other MENA countries, is shown by the latest developments in this field, i.e. the launch of its first green bonds, amounting to $750 million, the largest value in the whole MENA region (Oxford Business Group 2020d). These bonds are considered key instruments for renewable investments. Indeed, the country is striving to become a “green” energy hub for the East Med cluster and for the broader region. At a global level, sustainable financial instruments, such as green bonds, have been issued in the first 9 months of 2020 with a 24% increase compared to the same period in 2019.

Overall, large-scale solar PV projects for a total capacity of 3161 MW are in the bidding, tendering or under development phases, and they are expected to come online by 2023 (IRENA 2018). In addition, in Egypt a Concentrated Solar Power (CSP) is also operational in the Kuraymat region since 2011. This CSP is part of ISCC Kuraymat, an integrated solar combined cycle technology with an overall capacity of 140 MW (120 MW combined cycle and 20 MW CSP). Hydropower also plays a relevant role in the Egyptian energy sector, as it represents 1.2% of the country’s total energy supply and 6.7% of the country’s electricity mix (IEA 2019a, b). In Egypt, the construction of (diversion) dams dates back to the mid nineteenth century, with the so-called barrages at the Delta of the Nile River. The first dam was built at the turn of the twentieth century—the Aswan Dam—which was later also equipped with a hydroelectric plant with a capacity of 345 MW. The most well-known dam in Egypt is the Aswan High Dam, built between 1959 and 1970, accompanied by a 2.1 GW hydroelectric plant. The primary objective of this dam was to guarantee a relatively stable water flow to Egypt by storing water in the reservoir. Hydropower is not only the primary source of renewable energy in Egypt, but it is also a source of geopolitical tensions with neighboring countries. Indeed, the Grand Ethiopian Renaissance Dam (GERD) has been a source of dispute between Egypt, Ethiopia and Sudan since 2011, the beginning of the dam’s construction. Egypt feels threatened by this dam, located in Ethiopia in upstream Nile, as it may reduce the river’s water flow, which is essential for livelihood and agriculture.

Following the Arab Spring, Egypt experienced periodic blackouts in 2013–2014. However, it overcame these challenging conditions by developing new gas fields and by boosting small-scale distributed solar projects. The development of small-scale distributed solar projects benefited from the adoption of a feed-in-tariff, which contributed to increasing the total capacity installed from 10 MW in 2014–300 MW in 2017, as envisaged by the introduction of the FIT program. Other initiatives to incentivize the installation of distributed solar PV were carried out, such as the CoM Initiative and Egypt-Sun Initiative for governmental buildings (IRENA 2018).

Egypt has also evaluated the development of the nuclear sector. In 2017, the country agreed with Rosatom for its first nuclear power plant in El Dabaa, composed of four units of 1200 MW each. The project has an estimated cost of $30 billion of which $25 billion could be lent by the Russian government.

In conclusion, Egypt has carried out numerous legislative reforms and set out clear renewable objectives with the aim of becoming a key player in “green” energy in the cluster and beyond.

• Scenario

Despite great improvements, Egypt may not be able to attain the renewable interim target—20% of electricity generation from renewable energy sources by 2022, but a few years later. Indeed, in 2020, the country had only 3.36 GW of installed capacity of renewable energy sources, which amount to 3.5% of Egypt’s power generation (excluded hydro). However, as aforementioned, the great majority of renewable projects are expected to come online in 2023 (around 7.9 GW), which will strongly boost renewable energy capacity and reach the interim target just a couple of years later, especially if delays in the projects are also taken into account.

Egypt successfully moved from a period with recurrent blackouts, until 2014, when electricity demand was not satisfied, to the current overcapacity situation. Indeed, in 2019 Egypt employed only 55% of its total installed capacity and, given the renewable targets, this gap is forecasted to remain also in the coming decades. The electricity demand is expected to reach 70–85 GW by 2035, while total installed capacity will amount to 160 GW, including the renewable targets. The gap is considerable, also taking into consideration that the renewable energy utilization rate is quite low. Therefore, Egypt has already signed agreements with neighboring countries to export its electricity surplus, for instance with Sudan, Cyprus, Greece and Saudi Arabia. The agreement with Saudi Arabia considers a project to establish a 3 GW power interconnection, given the complementary condition of the electricity sector of the two countries. Indeed, the two countries have electricity peaks at different times: Saudi Arabia during the day due to air conditioning and Egypt after sunset due to appliances usage. The project was discussed since the early 2010s and stalled for a few years due to political instability and overlap of the interconnection route with the Saudi mega-project NEOM. In 2014, negotiations retrieved, and Saudi Arabia is expected to pay 60% of the infrastructure of the power interconnection while Egypt the remaining, for a total estimated amount of $1.6 billion (Mahmoud 2020). This project is particularly relevant as it is one of the first attempts to interconnect electricity networks among countries in different clusters of the MENA region, and it may reduce Egypt’s power overcapacity.

Overall, in the long term, the power overcapacity situation may also hinder the attainment of the 2035 objective, as it may not be economically convenient and feasible to further expand the installed capacity for electricity generation. In the short term, this risk is reduced as renewable energy projects have already been developed and are expected to come online by 2023.

The Covid-19 pandemic has affected the subsidy reform, as the country reduced gas prices for industrial providers as well as electricity prices for high voltage consumers to counteract the industrial slowdown with the pandemic (Oxford Business Group 2020c). As economic growth was severely hit, consumers also reduced their power consumption so that the government had to freeze electricity prices for all users until 2025. It also decided to extend the period of energy subsidies phase-out to 2025, instead of 2022.

In conclusion, Egypt is facing a power overcapacity situation, which may also limit its efforts to reach the 2035 objective, as it would entail further investments and installation of renewable power capacity. Nevertheless, this may also represent a relevant opportunity for Egypt to scale up power interconnections, which are pivotal also in a framework of increasing renewable penetration in a country’s electricity mix. As Egypt is successfully managing to attract considerable investments in renewable energy projects, it may also enhance cross-border interconnections within the cluster, the MENA region in the longer run and possibly directly or indirectly with Europe.

3.3 Israel and Palestine

• Israel

Targets and Projects

Being an overall energy-importing country, Israel would benefit particularly from the development of renewable energy sources both economically and politically as well as environmentally. Indeed, the country has traditionally relied on coal for energy security reasons. However, over the last decade Israel has been able to replace coal with gas in the electricity mix, thanks to the recent offshore gas discoveries. An increasing share of renewable energy sources would allow Israel to devote additional gas volume to exports, without diminishing energy security and, at the same time, contributing to improve Israel’s regional foreign policy. Natural gas would remain a key energy source for Israel’s energy mix in the foreseeable future, ensuring stability to the power sector. Israel has well-known solar potential and an advanced high-tech sector. Renewable energy technology may also boost this sector, possibly enabling exports of these technologies. Despite the great potential, Israel faces some major challenges in decarbonizing its power sector. First, despite improvements in energy efficiency, electricity demand is expected to grow by 2.1% per year to 2030 mainly due to population growth and further need of desalination (OECD 2020). Second, Israel lacks electricity interconnection to neighboring countries, and it is considered an energy island due to its geopolitical landscape. Third, land availability next to major consumption centers is a barrier to scaling up low-cost utility-scale solar PV (OECD 2020).

Over the last decade, Israel has stepped up its efforts in the development and adoption of renewable energy. An initial step was taken by the Government in 2011, when it approved a plan to promote renewables for power production. It set a target of 2760 MW of renewables by the end of 2020, representing 10% of the power mix. It also set an interim goal (1550 MW by 2014), which however it did not reach (706 MW in 2014 and about 1500 MW reached in 2019). The 10% target for 2020 was expanded in 2015 through the submission of Israel’s Intended Nationally Determined Contribution (INDC). In the INDC, Israel adopted a target of 17% of renewables in electricity production in 2030. Throughout the last decade, Israeli policymakers have increasingly prioritized solar PV rather than wind and CSP. In 2018, the Israeli Ministry of Energy released a plan on energy economy objectives for the year 2030. In this plan, Israel committed to terminating the use of coal in electricity production in all coal-fired power plants by 2030, using natural gas. At the same time, it reaffirmed the 2030 target of 17% production from renewable energy.

In June 2020, Israel announced an increase in the renewable target from 17 to 30% of total electricity generation by 2030. To achieve this target, Israel established an investment plan of $22 billion in the 2020 decade, and the installation of 15 GW more in renewable energy, which will be predominantly covered by solar energy (Shumkov 2020). Contrary to the policies proposed and enacted in most of the other countries of the MENA region, the private sector will play the primary role in the large-scale adoption of renewable energy, especially solar PV.

The country’s solar capacity is developing rapidly and reached 1.4 GW at end 2019, starting from 76 MW in 2010. The development of renewable energy, especially solar PV, is carried out thanks to tenders for large-scale solar PV projects as well as net metering and feed-in-tariffs for small-scale solar PV projects (i.e. rooftop PV panels) (Bellini 2020a). The development of large-scale solar PV projects is quite recent, as the largest solar PV power plant—the Zeélim solar park—with a capacity of 120 MW, came online in October 2019. This project is based on a joint venture between Shikun & Binui Energy (SBE) and Belectric, which has already commissioned 25 solar PV projects in Israel through its subsidiary Belectric Israel Ltd (PV Europe 2018). The country is working on another large-scale solar PV project, the Dimona solar project in the Negev desert, for which the government has relaunched a tender for its construction. In line with the updated and ambitious targets, the capacity of the Dimona project will be extended from the initial planned capacity of 300–500 MW, making it the largest solar project in Israel once commissioned. Construction is expected to start in 2021 with commissioning in 2023 (Bellini 2020b). However, disagreements emerged between Israel Land Administration and the solar sector, as authorities feared that the land to be occupied by the solar plant would be needed for sand mining. Nevertheless, the procurement phase is still ongoing. Since 2015, Israel has commissioned several other smaller capacity solar parks like the 50 MW Zmorot solar power plant in 2016 as well as the 60 MW Mashabei Sadeh PV and the 53 MW Sunlight 1 in 2018.

Regarding small-scale solar projects, a new incentive scheme was launched at the end of 2017, under which PV projects smaller than 15 kW can benefit from net metering (all excess electricity would be sold to Israeli Electric Corporation) or from a feed-in-tariff lasting 25 years ($0.137/kWh). For PV projects between 15 and 100 kW, a 25-year feed-in-tariff of $0.129/kWh would be applied (Bellini 2018). Israel experienced the deployment of 1.6 GWh rooftop PV capacity by 2020.

Concerning CSP, Israel is the second market for CSP technologies in the South and East Mediterranean—behind Morocco. Ashalim CSP 1 and 2 (110 MW each) were commissioned in 2019. The project required a total investment of $1 billion thanks to an agreement signed between Abengoa and Shikun and Binui Renewable. It satisfies the consumption of roughly 70,000 households (Shikun and Binui Ltd 2019). The CSP plants are complemented by a solar PV project (30 MW), which came online in 2018.

Even though it has traditionally prioritized solar energy, Israel has planned several wind projects. The country indeed could enhance its installed wind capacity from around 30 MW in 2020 to hundreds of megawatts in a couple of years. Around 700 MW of wind projects are planned or under construction. The largest wind park projects are located in the Golan Heights, with over 450 MW total capacity. The Emek Habacha project (99 MW) is currently under construction and is expected to be commissioned in 2021. Other two large-scale wind projects have been authorized: the 190 MW Emek Haruchot poject and the 130 MW Ruach Bereshit. Once fully commissioned, the Emek Haruchot will be Israel’s largest wind farm. Moreover, Israel has also approved the 152 MW Aran wind farm and announced other smaller projects. Yet, the country did not meet its 2020 wind energy target of 800 MW.

Israel is committed to exploiting its renewable energy potential with a specific focus on solar energy. Given the promising future of solar energy in Israel, with the positive spillovers in the high-tech sector, in April 2020 the Ministry of Energy announced that a key pillar of the plan to recover from Covid-19 would include investments to add 2 GW in solar energy to the existing capacity. In order to reach this new solar energy, Israel’s government proposed a $1.9 billion investment as part of its $7.1 billion economic plan for recovery. Furthermore, the Israeli government envisages supporting the planned solar projects through $1 billion of loans and $143 million of state guarantees (Bellini 2020c).

In conclusion, Israel is also taking steps in the renewable energy world, thanks to a combination of both large-scale and small-scale renewable projects and a focus on attracting private investments.

Scenario

It is quite unlikely that Israel will attain its upgraded renewable target in time. Indeed, the combination of the largest projects coming online in the coming years does not seem to reach the extra 15 GW needed to achieve the new 2030 renewable target (30% of power generation from renewable energy sources, primarily solar energy). However, it is quite likely that Israel will reach its previous 2030 renewable target (17% of electricity generation from renewable sources) and it may even exceed it thanks to the latest investments envisaged to recover from Covid-19. Israel also attempted to rely on clean energy imports to meet its renewable targets, but with little success. For instance, a recent and underground talk for the import of clean energy (25 MW) from Jordan has been ongoing in the summer of 2020, but the outcome is still uncertain (Holmes and Kierszenbaum 2020). It may be quite challenging to import electricity generated from renewable energy sources due to Jordan’s opposition and broader geopolitical tensions. Having said that, Jordan, being in dire need of gas, signed the agreement with Israel despite the popular revolts.

Israel, which was a main energy importer, has recently become an energy exporter. It has used its gas reserves in order to replace its diesel and coal power plants. Thanks to gas-fired power plants, coal is expected to be phased out in the energy mix by 2030. Given the great availability of gas and the high potential and investments in renewable energy, electrification has become a popular theme in energy discussions and policies.

• Palestine

Targets and Projects

Renewable energy may represent a high value added given the specific context of Palestine. First of all, the peculiarities of the Palestinian energy sector drive the need to develop renewable energy sources: Palestinians have the lowest energy consumption (0.79 MWh per inhabitant), while paying the highest price, in the MENA region. Energy demand is also steeply increasing thanks to progressive industrialization, high population growth and improved living standards so that the current reliance on fossil fuel imports (100%) and electricity imports (87%) is becoming economically and socially unsustainable (Juaidi et al. 2016). All these elements contribute to the occurrence of blackouts, which last several hours per day in Gaza, disrupting daily activities. Renewable energy may well represent a solution to overcome these challenges. Indeed, solar energy in particular has a high potential in the region (3000 h of sunshine per year) and, in the next few years, renewable energy is projected to be the cheapest and most reliable energy source, as fossil-fuel based power plants require continuous fuel imports, which are at times restricted by Israel. Renewable energy may thus be regarded as one of the most viable solutions for Palestine in order to move towards energy security and independence as Israel’s legislation adds another level of complexity to the Palestinian energy sector, which would also require an update in legislation. Palestine is not allowed to build a national transmission system, and permits to establish new connection points are extremely difficult to obtain. Also, Palestinian distribution companies are restricted from connecting their electrical grids (Khaldi and Sunnika-Blank 2020). These constraints highlight the need for Palestine to develop solutions closer to energy consumers, namely renewable energy.

Given the numerous benefits renewable energy sources would bring—first and foremost energy security—and their high potential, in 2012 the Council of Ministers published the so-called “General Strategy for Renewable Energy in Palestine”, which provided the legal basis for the development of renewable energy. Under the General Strategy, renewable targets were set and later revised, given the restrictions to access certain zones in Palestine. The Council of Ministers set the target of 10%—corresponding to 130 MW—of electricity from renewable energy sources by 2020 while the Palestinian Energy and Natural Resource Authority (PENRA) expanded the target to 500 MW in the timeframe 2020–2030 (80% from solar PV, 10% from wind and 10% from biogas/biomass). The target of 500 MW is reduced to 300 MW in case access to area C of the West Bank continues to be restricted, as this area holds the highest renewable energy potential (Milhem 2020).

In order to reach the renewable targets, in 2015 the Palestinian Investment Fund (PIF) established Masdeer, the agency responsible for the implementation of renewable projects worth $2.5 billion. Thus, Masdeer was charged with the “Noor Program”, which comprises renewable projects for a total capacity of 200 MW by 2026. In the framework of the Noor Program, the construction of the first Palestinian solar PV plant was started in Noor, Jericho in 2019, with a capacity of 7.5. The next two scheduled solar PV plants are Noor Jenin plant (5 MW) and Noor Tubas (4 MW).

Due to the scarce availability of land in Palestine, numerous renewable projects are planned to be small-scale, especially rooftop solar PV. The main project of this kind regards the installation of rooftop PV panels on 500 public schools across the West Bank, which would provide electricity to over 16,000 houses for a combined capacity of 35 MW. This project is funded by a $8.1 million loan signed between Masdeer and the International Finance Corporation (IFC) as well as a $8.1 million loan signed between Masdeer, the Dutch MENA Private Sector Development Program and the Finland-IFC Blended Finance for Climate Program (Gordon 2020). Through a net metering scheme, the schools would see their bills reduced and excess electricity would also be sold to Palestinian distribution companies at very competitive rates. Regarding Gaza, a similar project for rooftop PV panels was carried out in 2014 by UNDP and financed by the OPEC Fund for International Development (OFID), providing electricity to around 107,000 people. The project included, among other things, the installation of rooftop PV panels on 4 schools and on 2 maternity health care clinics (UNDP 2012, 2016).

Overall, Palestine is striving to develop an independent, secure and sustainable energy policy and sector, and renewable energy sources may be its best tool. Progress on regulation and legislation should be stepped up in order to boost the viability and efficiency of renewable energy as well as to attract foreign investments. The international community should also advocate for an independent and reliable energy system for Palestine, free from imposed infrastructure restrictions, and with free access to area C of the West Bank. Indeed, this area does not only hold the largest solar potential, but it also suffers the most in terms of underdevelopment due to Israeli restrictions.

Scenario

Palestine has not been able to reach its 2020 renewable target (130 MW) and given the current projects in operation it may not attain it soon. Also, regarding the renewable target of 300 MW/500 MW (depending on the restrictions to access Area C of the West Bank) of electricity from renewable energy sources by 2030, Palestine has to face significant obstacles for the attainment of these targets and the full exploitation of renewable potential. Indeed, the progress of renewable energy development depends on numerous variables, such as the amount of funds provided by international organizations, external forces and policies (i.e. Israeli energy policies and restrictions to area C), internal forces (i.e. highly fragmented internal politics between Gaza and the West Bank) and the decrease in technology costs for solar PV.

Moreover, despite being the most viable tool, renewable energy sources are not sufficient to satisfy energy and electricity demand so that other complementary policies should also be carried out. A sustainable energy transition for Palestine envisages two other pillars: energy efficiency (as in most other countries) and energy infrastructure. Energy efficiency is a key pillar to accompany the development of renewable energy, and the “National Energy Efficiency Action Plan 2” showed political awareness of these issues, as it envisages the utilization of smart technologies and demand management. However, new energy efficiency measures seem quite challenging to put in place due to the level of development of the Palestinian grid as well as the restriction to access numerous meters. Lastly, infrastructure for fossil fuel goes back to the discussion in Chap. 3 (Sect. 3.2.3) regarding the inability to exploit fossil-fuel natural resources and restrictions to the development of adequate infrastructure imposed by Israel. Also in this case, the development of fossil-fuel infrastructure seems quite unlikely in the short and medium term given the historical and current dynamics in this sector.

To conclude, international organizations and donors should pay particular attention to renewable energy sources, especially small-scale decentralized solar PV (i.e., on rooftops), as they would partly enhance Palestine’s energy security by reducing its dependence on Israel. Both Palestine and Israel would highly benefit from a further development of renewable energy, primarily solar energy. While Israel is focusing on replacing coal with gas and renewable energy and attaining higher electrification in numerous spheres, Palestine aims at increasing its energy security and independence at cheaper prices. However, also in the renewable energy field, the Israeli and Palestinian systems are inexorably interlinked, given the particularity of their political situation.

4 Maghreb

Countries in the Maghreb cluster—Algeria, Tunisia and Morocco—have a huge potential in terms of renewable energy sources, thanks to their geography and the availability of vast and scarcely populated territories, especially in the hinterland in the south (Sahara Desert). Also, they are located close to Europe, which can represent a large potential in terms of a “green electricity” export market. At the same time, Europe can provide stable imports when the domestic demand cannot be satisfied, which was historically driven by rising population growth, high energy subsidies and an increasing degree of industrialization. Another great advantage of Maghreb countries is their energy potential, and especially the electricity exchanges among themselves. Given these advantages, countries in this cluster have enhanced their efforts to increase their installed renewable capacity, with different renewable targets, as summarized in Table 4.9. The present section does not include the discussion and analysis on Libya’s renewable developments given the ongoing political and security instability.

Table 4.9 Renewable energy targets by Maghreb country

In terms of electricity interconnections, the West Med cluster has a long history. The Maghreb electricity interconnection—comprising Algeria, Tunisia and Morocco—dates back to the 1950s. There are several interconnections among these countries (OME 2021). Morocco and Algeria are currently linked through three AC lines for a total carrying capacity of 2500 MW and a NTC of about 1000 MW. Algeria is also linked with Tunisia through four AC lines, with a TTC of 1500 MW and a NTC of about 300 MW. Lastly, Tunisia is linked with Libya through two AC lines, although they are normally not operated due to stability problems in connecting Tunisia to the Libya-Egypt synchronous system (OME 2021).

In 1989, the Arab Maghreb Union established the Comité Maghrébin de l’Electricité (COMELEC), which aimed at integrating the countries’ electricity markets with the European one. Algeria, Morocco and Tunisia have been interconnected with ENTSO-E since 1993. In 2003, a non-binding document was signed, which aimed at further developing the regional electricity market among the three countries and integrating it with the EU network. The document also envisaged the establishment of a variety of institutions,⁸ composed of the countries’ energy ministers whose goal was to provide political coordination. During the first meeting of the Ministerial Council in 2010, a breakthrough took place with the agreement on the non-discriminatory access to the transmission network and the attempt to harmonize electricity rules.

While the Maghreb countries are well connected with their European neighboring countries in terms of gas pipelines, the two Mediterranean shores have a low level of power trade. The Maghreb countries’ grid is synchronized with the European grid and the interconnections among Algeria, Tunisia and Morocco are well-developed at the infrastructure level, even though few exchanges take place at cluster level, usually only in emergency and extraordinary situations. The only existing interconnector between Maghreb countries and Europe is the one linking Morocco to Spain. With the realization of the Morocco-Spain submarine AC link in August 1997, the integrated grids of Morocco, Algeria and Tunisia were synchronized with the UCTE system. The first interconnection was a 700 MW (400 kV) submarine AC link. In July 2006, a second AC link, a 400 kV as well, was inaugurated increasing the total transfer capacity to 1400 MW. A second interconnection project is represented by the Italy-Tunisia interconnection, whose capacity is 600 MW. It would be the first link between these two countries and it received the full support of the EU as it is included in the list of Projects of Common Interest. It is expected to be achieved by 2027.

The need of a more interconnected power sector is crucial also for the intra-MENA countries. In order to have a truly regional electricity market, the West Mediterranean cluster should be linked, via power interconnectors, to the East Mediterranean one, in particular to the Eight Countries region network. Indeed, excess power in the Mashreq cluster (e.g. Egypt) may be exported to the Maghreb cluster, to complement electricity imports from Europe as a way to enhance Maghreb security of electricity supply (diversification of suppliers and routes). The East Mediterranean cluster, thanks to the links with the West Mediterranean grid, may also be able to export excess electricity to Europe, using the already existing infrastructure network. Therefore, the project of building an interconnection between Tunisia and Libya by 2022 is seen as vital for the development of a regional power market, even though it may encounter security and geopolitical challenges, which may offset the current power exchanges between the East-Med and the West-Med clusters. To actually implement and establish an interconnected and synchronized system among MENA countries, it is crucial to reform power sectors, addressing the challenges in terms of reliability and overcoming conflictual conditions.

Given the key relevance of natural gas in the energy transition and as a complement to renewable energy sources, gas-importing countries—Morocco and Tunisia—rely on existing gas pipelines, which connect Algeria to Italy or Spain, passing through their territories, and on new plans to build LNG terminals to increase LNG imports, as in the case of Morocco. Thus, gas exchanges in the West Mediterranean cluster are quite well developed, even though they are unidirectional: from the resource rich country in the cluster—Algeria—or from gas-rich countries outside the cluster to resource poor ones, Tunisia and Morocco. In 2021, the gas exchange between Algeria and Morocco was interrupted as the two countries did not extend the expiring contract because of growing political disagreements over Western Saharan status. This decision resulted in stopping gas exports towards Spain via Morocco in December 2021.

All in all, this cluster holds a high potential for the development of renewable energy, especially in terms of geography and climate conditions. Thus, countries in this cluster may well be able to position themselves as leaders in this field in the Mediterranean, and more broadly in the MENA region and even Africa.

4.1 Algeria

• Targets and Projects

Having abundant domestic oil and gas reserves, Algeria has developed renewable energy sources more slowly compared to other Maghreb countries, with the exception of Libya which has been even more timid regarding renewables. Nevertheless, also Algeria has set out some objectives in terms of renewable energy sources and energy efficiency as a way to both diversify its economy and to partly limit the negative energy and economic consequences of an ever-growing domestic consumption too reliant on fossil fuels. Algeria has also been affected directly by climate change: during the last decade, it has witnessed years of extreme heat with a decline in yearly rainfall. Algeria is the third largest CO₂ emitter in Africa and ranks high (5th in 2019) in terms of flaring worldwide. Like other MENA countries, Algeria has some favorable characteristics to develop and deploy renewable energy: the geographic location (3000 h of sunshine per year) and the availability of vast and uninhabited areas (the Sahara Desert accounts for 75% of the country’s territory).

Renewable energy sources may contribute to sustaining the high pace of the country’s demographic growth—about 2% per year—which is one of the main drivers of the rising electricity demand, amounting to 5% per year between 2015 and 2019. As the population is forecasted to continue to grow at a sustained pace, increasing installation capacity for power generation becomes a priority for the country. Thus, the adoption and spread of renewable energy sources would partly obviate these issues, in addition to freeing up gas for export and consequent revenues.

Throughout the last decade, Algeria has revised and enhanced its RES targets. It initially published in 2011 the Algerian Renewable Energy and Energy Efficiency Development Plan, which aimed at installing 12 GW of a new capacity coming from RESs by 2020. In 2015, the country extended its targets by envisaging the installation of 22 GW of renewable energy sources by 2030, so that renewables would account for 37% of installed capacity and should cover 27% of the country’s electricity mix. Figure 4.3 shows that solar PV would play the main role in achieving the target accounting for 13.6 GW, followed by wind (5 GW), solar CSP (2 GW) and biomass (1 GW). Moreover, Algeria also considered the possibility to produce additional clean electricity (10 GW) for exports (Bouznit et al. 2020).

Fig. 4.3

Source Authors’ elaboration on Algerian Ministry of Energy-Program of renewable energy and energy efficiency and cogeneration; Bouznit et al. (2020)

Share of each renewable energy source for the attainment of the 22 GW RES target.

Over the last two decades, Algeria has developed mostly solar PV, as summarized in Fig. 4.4. To achieve its 22 GW target, Algeria has programmed to construct around 60 power plants, including 20 PV plants, 7 wind plants, 6 solar thermal plants and a few CSP. Over the period 2015–2020, Algeria planned to install 3 GW of solar. However, the country is far behind its objective as only 450 MW of solar had been installed by end 2019. In 2019, Algeria created the Commission for Renewable Energy and Energy Efficiency to speed up the development of renewables.

Fig. 4.4

Source Authors’ elaboration on IRENA (2020)

Renewable Electricity Capacity, 2000–2019 (MW).

Despite small progress in solar installed capacity, Algeria has made several efforts to boost solar capacity as well as plants from other renewable sources. The Tafouk solar plant is one of the key initiatives in this sense. It consists in the deployment of 4 GW of solar PV between 2020 and 2024, with 800 MW of solar capacity being tendered each year.

The second renewable energy source with respect to the 2030 targets is wind, but Algeria has encountered so far several obstacles in this sector. The highest potential for wind development is in the Sahara Desert, where the turbines may require higher levels of maintenance, making the projects less profitable. To date, the only wind plant online—Kabertene in the Wilaya of Adrar—has a capacity of 10 MW. Plans to expand the wind capacity with the development of two 20 MW wind farms were put on hold and postponed indefinitely.

The Algerian government looks to renewable energy also for its potential positive spillovers to the economic and labor sphere. For example, the Tafouk solar plant could yield some positive spillovers as the modules, cables and other structures will be made in Algeria (Bellini 2020d). Indeed, the construction of the Tafouk solar plant is expected to open up 56,000 construction positions and 2000 job opportunities when operational, which is highly relevant in the short term, due to the negative effects of the Covid-19 pandemic on the economy and on the labor market. The requirement of making the modules and cables in Algeria is also likely to create opportunities in the long term, as the country will have benefited from technology and knowledge transfer so that it may be able to become a “solar PV” manufacturing hub for the cluster and beyond. This would allow economic diversification in a sector with high potential and high demand in the coming decades, in terms of both manufacturing and “green” power generation. To do so, Algeria however should implement a series of policies in order to facilitate foreign investments, improve its educational system to develop the required job and knowledge skills. The current economic and political turmoil in the country may, however, hinder the adoption and implementation of such measures.

Despite all the challenges, Algeria announced numerous measures to ease the path towards the attainment of its 2030 renewable targets, including legislative reforms, tax incentives, feed-in-tariffs and financial aid. The backbone of renewable energy development is Law No. 09–09 of 2009, which envisaged the establishment of the National Fund for Renewable Energy (NFRE) with the aim of providing different financial aid to investors, by assigning 0.5% of oil royalties to this fund. Law No. 11–11 of 2011 further extended financial aid by devoting 1% of oil royalties to the fund, which was then denominated National Fund for Renewable Energies and Cogeneration (NFREC), also including cogeneration activities. Further incentives were offered with the Executive Decree No. 13–218 of 2013, which envisioned bonuses for the diversification costs of electricity generation and premiums above production costs for all the electricity produced by public and private companies. Indeed, electricity coming from renewable energy sources has to be sold exclusively to the only distribution company Sonelgaz with PPAs lasting maximum 25 years. Executive Decree No. 17–98 of 2017 completed the delineation of the market and conditions for renewable investments in Algeria: all renewable projects have to go through tenders or auctions (Bouznit et al. 2020). Furthermore, it is well worth to highlight that the 51/49 rule, whereby foreign investors have to enter into a partnership with a local company in Algeria as they are allowed to own maximum 49% of the project, does not apply to the renewable energy sector, enhancing its attractiveness to foreign investors (Proctor 2020). Lastly, Algeria has established a feed-in tariff (FiT) scheme for solar PV with capacities over 1 MW, granted for a period of 20 years. Throughout the period, there are different rates for the first 5 years and for the next 15 years. Table 4.10 summarizes the main elements and renewable energy incentives in the country.

Table 4.10 Sum up of the renewable energy market in Algeria

In conclusion, Algeria is striving to develop an attractive framework to incentivize (foreign) investments as well as to diversify its economy from hydrocarbons revenues by establishing itself as a manufacturing hub for renewable technologies, primarily solar, in the region and beyond.

• Scenario

Algeria has so far been unable to significantly exploit its great renewable potential despite having set several RES targets. With roughly 450 MW of solar energy capacity and 230 MW of installed hydroelectricity capacity, the original 2011 renewable target of 12 GW installed by 2020 has not been reached. This objective was increased in 2015 to the 22 GW of installed renewable capacity target by 2030. Political turmoil and economic constraints are deeply interlinked in Algeria’s context, given Algeria’s overreliance on revenues collected from hydrocarbon exports. To achieve its renewable targets by 2030, Algeria will need to attract and devote massive amounts of investment both from public and private sectors to sustain renewable energy sources, grid and infrastructure development.

The attainment of the 2030 renewable target may be undermined by higher oil price volatility. Algeria is one of the most hydrocarbon-dependent countries in the world, as in 2018 non-hydrocarbon exports accounted for just 2% of its total exports and hydrocarbons accounted for 19% of GDP and 40% of government budget. Due to the country’s high reliance on hydrocarbons, lower oil and gas demand and exports may entail lower government revenues, and therefore higher fiscal deficit. Thus, the possibility to increase public investments in renewables may be limited in a period of low oil prices or oil prices volatility, which directly affects the government’s revenues and expenditures. For example, one of the main providers of renewable energy investments in Algeria is the National Fund for Renewable Energies and Cogeneration (NFREC), which is made up of the income coming from 1% of oil royalties. A looming peak in oil demand (unless oil prices increase) may significantly reduce Algeria’s oil rents hence reducing NFREC funds.

In order to maintain its social welfare, in 2014 Algeria started drawing from its large foreign exchange reserves, which drastically decreased from $195 billion in 2014 to $44.2 billion in 2020. Algeria may encounter serious political and economic challenges in its efforts to ramp up its renewable capacity. In a moment of higher oil price volatility and temporary austerity policies, policymakers may prioritize the pursuit of short-term policies and actions to appease Algeria’s population as they did following the 2011 Arab Spring. This outcome may reduce the necessary political consensus for renewable development, especially as the country is experiencing major political turmoil (i.e. Hirak protest movement since February 2019).

Within this framework, renewable energy plays a vital role, going beyond and above energy transition and environmental considerations in Algeria. Indeed, given stagnant hydrocarbon production and high and increasing energy and electricity demand, renewable energy may partly reduce domestic gas consumption for electricity generation, enabling higher gas exports in the medium and long term. Additional revenues are paramount to carry out an effective economic diversification and to further invest in the renewable sector, which may make Algeria a “green energy production” and “technology” hub in the region, further diversifying the country’s economy. Thousands of jobs may be created in the manufacturing sector as well as in high-skilled positions, and this favorable climate may further incentivize investments in the country also in other sectors with high potential, such as tourism. This may be particularly beneficial as Algeria’s economic and regulatory environment was not quite conducive to attracting investments. The World Bank ranked Algeria 157 out of 190 countries in terms of ease of doing business.

Although its regulatory framework was updated with the introduction of a reverse tender scheme, Algeria is still facing challenges in attracting investments also in its renewable sector. For instance, while the first reverse tender scheme called for a total capacity of 150 MW in 2019, offers were submitted for a 90 MW capacity (Hochberg 2020).

Moreover, Algeria needs to address energy inefficiency, which leads to fast-growing consumption underpinned by its growing population. To meet such a consumption increase, Algeria traditionally prioritized the construction of fossil fuels power plants, taking advantage of its resources. Now the time has come to foster energy efficiency along with renewable energy sources. This requires a revision of the energy prices, although this process could be stalled by political impediments given the country’s critical political situation.

To conclude, Algeria has set increasingly ambitious renewable targets. However, several factors have prevented a full and successful development of renewables in the country. A more investment- friendly environment will be crucial to draw foreign public and private investments into Algeria’s renewable sector, which requires political consensus. Nevertheless, current political and economic constraints may undermine this task and may lead Algeria’s political establishment to focus on short-term policies instead of structural reforms to enhance investments and fully exploit the country’s renewable potential.

4.2 Tunisia

• Targets and Projects

The energy sector and rather challenging economic conditions are highly intertwined in Tunisia. A considerable share of the large national trade deficit is due to the low and decreasing levels of energy security, mostly dictated by its high dependence on imports to satisfy a growing domestic energy and electricity demand. The deployment of renewable energy sources offsets these issues by enhancing in loco production, which explains why Tunisia has ramped up the development of renewable energy in the last few years. In 2012, within the framework of the Tunisia Solar Plan (TSP), the country announced that renewables would cover 12% of its electricity mix by 2020 and 30% by 2030, envisaging the installation of 3.6 GW of capacity from renewable energy sources with total investments amounting to roughly €3 billion (UNDP 2018). In 2019, Tunisia’s capacity reached 5.8 GW, which is heavily reliant on gas. At the end of 2019, natural gas accounted for 86% of total capacity (5 GW), while the rest comes from oil (7%), wind (6%) and hydro (1%). Renewables accounted for 3.5% of the power mix, missing the 2020 target.

Like in other countries of the region, Tunisia’s power sector was dominated by the state-owned electricity and gas utility STEG. In 1996, Tunisia introduced a law that entitled private operators to produce electricity, under public concessions, up to a quantity not exceeding 12.5% of the present volume. To accomplish its renewable objectives, achieve decarbonization and cope with its increasing electricity demand, Tunisia took some steps to boost “green” electricity and attract foreign investors by introducing favorable legislative reforms. In 2015, the Parliament passed Law No. 2015–12, which aimed at enhancing private investments for renewable development and liberalizing the market for the access, network and transport of electricity generated from renewable energy sources. The 2015 Law established a framework that allows private investments in large scale renewable energy projects. Three regimes could be applied on a large scale: self-production, IPP for the local market and for exports (Nouicer and Dhakouani 2020).

More in detail, the 2015 law envisioned electricity production divided in authorization or concessionary regime. The authorization regime regards self-consumption and small renewable projects for a maximum capacity of up to 10 MW for solar PV and 30 MW for wind energy, while the concessionary regime tackles higher capacity renewable projects for both the domestic market and exports. Further legislative reforms have mostly focused on easing the path for self-consumption investments. Indeed, Law No. 2019–47 and Law No. 2020–105, which were passed in 2019 and 2020, respectively, allowed the establishment of a project company that sells electricity to eligible self-consumers. Regarding the authorization regime for small-scale renewable projects, three rounds were launched for solar and wind energy projects, resulting in a total of 12 projects granted for 10 MW each of solar PV, 4 projects granted for 30 MW each of wind and 6 projects in evaluation phase of 10 MW each of solar PV (Renewable Energy Solutions for Africa Foundation 2020).

Regarding the concessionary regime, a tender process was launched in 2017 with a capacity of 140 MW of wind and 70 MW for solar PV under the form of a PPA with STEG as the off taker (UNDP 2018). However, in 2018, STEG still operated all renewable projects, which amounted to a total capacity of 244 MW for wind, while no utility-scale solar PV was present in the country. A leap forward was taken in the summer of 2018 when Tunisia issued a call for tender for a 500 MW solar PV and a 300 MW wind plant with the aim of attracting foreign investors to the country (Demony and Goncalves 2019). Despite the relatively few offers (59) received, in December 2019 the Tunisian Ministry of Mines and Energy announced the five winners of the tender: 300 MW of the project were attributed to the Norwegian developer Scatec Solar, which would sell electricity to STEG thanks to the lowest bid to build a 200 MW facility in the Tataouine Governorate. The Norwegian utility was also awarded other projects of smaller capacities. Other two projects, of 100 MW each, were won by the consortium led by ENGIE and the Moroccan NAREVA and by the consortium led by the Chinese TBEA and the Emirati AMEA Power (Bellini 2019b). As of 2021, numerous solar projects have been launched. Tables 4.11 and 4.12 summarize, respectively, the main solar PV and wind projects tendered and/or developed in Tunisia. Regarding the 300 MW wind energy projects, in 2021, while the Kebili wind power plant (100 MW) was frozen, the Nabeul wind park was in the bidding phase. Nevertheless, numerous other wind projects have been announced or envisaged in the country. Around 3.5 GW of solar capacity are planned. With PPAs already signed, five power plants (with a combined capacity of 520 MW) are in more advanced stages of development: the 100 MW Kairouan solar park, the 120 MW Gafsa solar park, the 50 MW Sidi Bouzid solar, the 50 MW Tozeur solar park, and the 200 MW Tataouine solar park.

Table 4.11 Solar projects in Tunisia, 2021

Table 4.12 Wind energy projects in Tunisia in 2021

Tunisia is the fifth biggest wind power producer in Africa and the Middle East. At the end of 2019, its wind capacity reached 245 MW, thanks to the commissioning of the 55 MW Sidi Daoud wind park between 2000 and 2009 and two other wind parks built near Bizerte with a combined capacity of 190 MW between 2009 and 2014. Moreover, STEG is planning to commission three wind parks in the next years: 80 MW in Jbel Tagba (2021), 120 MW of Jbel Abderrahmane (2021–22), and 100 MW in El Kef (2024). Given this context, a further step to incentivize renewable energy would be to include Independent Power Producers (IPPs) in the development of renewable projects. To date, one IPP accounts for 20% of electricity production and STEG for 78%, while transmission, distribution and sales are under STEG monopoly (Detoc 2016).

All in all, Tunisia enacted regulatory and legislative changes that contribute to attracting foreign investments, even though further opening of the energy and electricity market would be beneficial to further incentivize the renewable energy sector at both local and international level.

• Scenario

The 2030 renewable target—3.6 GW of renewable capacity installed by 2030 (30% of the country’s electricity mix)—is quite ambitious for Tunisia, as only 325 MW of renewable capacity were installed at the end of 2019, representing 4% of the country’s electricity mix. Due to this limited share of renewable energy in the power mix, the country did not achieve its 2020 target. Nevertheless, the country has stepped up its efforts in the last few years to boost its renewable energy potential and capacity, by promoting regulatory reforms especially for decentralized renewable and tendering large-scale renewable energy projects.

Political consensus will be crucial for strategic projects that require strong institutional support. Despite Tunisia being traditionally represented as a successful story of the Arab Spring, in 2021 the country experienced a major political turmoil culminating with President Kais Saied’s decision to freeze Parliament and dismiss the government. However, political uncertainties were already an issue as the country saw the succession of 11 energy ministers over the last decade while several ministries have been reorganized and reshuffled (Bennis 2021). In order to exploit its renewable potential, a stable and clear political and regulatory framework will be crucial. Furthermore, budgetary constraints could prevent the government from issuing sovereign guarantees that could otherwise enhance the creditworthiness of renewable projects. Indeed, the negative impact of the Covid-19 pandemic on the country’s global economy and energy sector may slow the pace of renewable energy deployment in the short and medium term, further exacerbating weak macroeconomic and investment outlooks.

This context may be particularly relevant for the renewable sector, as numerous renewable energy projects that are planned to be commissioned in 2022–2024 were undertaken in 2020–2021, at the peak of the economic crisis. Indeed, in 2020, Tunisian real GDP contracted by 8.8%, with a fiscal deficit of 10% that contributed to a rise in public debt from 71.8% of GDP in 2019 to 87.2% of GDP in 2020 (The World Bank 2021). Worsening economic conditions also have a strong negative impact on unemployment—already a major concern before the pandemic (14.9%)—which reached 17.4% at the end of 2020, the highest level since the “Arab Spring” of 2011. This current framework, also exacerbated by increasing vulnerability, may represent a great challenge for the new government led by Hichem Mechichi, appointed in September 2020.

The Covid-19 pandemic also heavily affected electricity demand, as businesses and industries were shut down, resulting in a 20% reduction in demand in April 2020, compared to the same month in 2019. STEG did not curtail electricity production coming from renewable energy sources. Also gas demand substantially decreased, as 70% of the country’s natural gas demand is used for electricity generation (representing more than 98% of the country’s electricity mix). In April 2020, natural gas demand was 26% lower than in the same period in 2019. This enabled STEG to rely 34% less on natural gas imports, which represented a benefit for a country heavily dependent on gas imports (Nouicer and Dhakouani 2020). Renewable energy sources would also significantly contribute to the reduction of STEG’s energy deficit.

All in all, despite the current economic contraction, Tunisia should continue to move forward towards the wider deployment of renewable energy sources, as they are also likely to bring great economic advantages in the medium and long run. Thanks to its strategic geographic location, Tunisia would be able to export electricity coming from renewable energy sources to Italy and Europe, given its ambitious targets by 2050. Europe should be interested in increasing clean electricity imports from its southern neighbors, given their enormous renewable potential. By doing so, the EU would achieve more easily its own decarbonization targets and at a lower cost (since in particular the solar resource base in North Africa is higher than in Europe). It would need to pursue and widen its climate diplomacy, supporting and spurring broader decarbonization efforts across the Mediterranean region. The conditions to create a “green” power exchange are favorable, as a 600 MW bilateral power interconnector between Tunisia and Italy—Elmed—is expected to be completed by 2027. The project has a total estimated cost of €600 million and it is identified as a Project of Common Interest (PCI). Moreover, Tunisia is also relatively well connected with Algeria and Libya as explained before. As these power interconnectors are employed only in exceptional circumstances, there is room for enhancing power exchanges between neighbors, even though the power demand profiles of these countries are quite similar (OME 2021).

In conclusion, Tunisia could have a setback for the development of renewable energy dictated by the current political and economic challenges. The country could also exploit its strategic location, at the crossroad of West and East Mediterranean clusters and Europe, to boost green power trade. In order to fully exploit the country’s renewable potential, Tunisia has to focus its investments in upgrading its infrastructure. Indeed, the greatest potential of renewable projects—especially solar PV—is in the south of the country. The north–south interconnection should therefore be strengthened to accommodate renewable development with an overall grid expansion. Regarding the domestic development of renewables, Tunisia has partially improved its legal framework, even though it still has to address issues such as financial sustainability, energy subsidy reforms and political consensus.

4.3 Morocco

• Targets and projects

Morocco has been at the forefront of renewable energy adoption and development for the whole MENA region, as electricity coming from renewable energy sources (solar, wind and hydropower) accounted for more than 34% of its total electricity mix in 2018. Morocco also expressed its high commitment for renewable energy sources and fighting climate change by hosting COP22 in Marrakesh in 2016. The development of renewable energy projects addresses numerous issues the country faces, primarily very low levels of energy self-sufficiency for an increasing domestic energy and electricity demand. As mentioned in Chap. 3, energy consumption has been rising since 2010—around 3% average annual growth—despite growing at a slower pace compared to the previous decade. Thus, it is likely that energy consumption will also increase in the mid-run, in coherence with the current trend.

Morocco’s political commitment for renewable energy and the fight against climate change led to the publication of the National Energy Strategy in 2009 with the target of 42% of installed power capacity from renewable energy sources by 2020 (with 14% each for hydropower, solar and wind energies). This target was envisaged to be reached by installing 2 GW of capacity for each renewable source (hydro, solar and wind) by 2020. A few years later, at the COP21 in Paris, the target was extended to include 52% of total installed power capacity renewable sources by 2030: 20% from solar, 20% from wind and 12% from hydro (IEA 2019b). As of 2020, the Kingdom has total installed renewable capacities amounting to 3.88 GW, specifically 1.77 GW of hydropower (unchanged capacity since 2010), 1.41 GW of wind, 704 MW of solar energy (540 MW of CSP and 194 MW of solar PV) and 7 MW of bioenergy. To offset rapid increases in energy and electricity demand, at the COP21 Morocco also focused on energy efficiency measures, with a target to decrease energy consumption by 12% by 2020 and 15% by 2030, compared to a baseline scenario. Nevertheless, Morocco has also enhanced its energy self-sufficiency and electricity production capacity with the construction of a new 1.4 GW coal power plant. A divergence in energy policy seems to arise, which is partly explained by the Kingdom assigning top priority to meeting domestic energy and electricity demand.

In order to attain these ambitious targets, Morocco established ad hoc institutions to manage and oversee renewable projects. The Moroccan Agency for Sustainable Energy (MASEN) is responsible for the Moroccan Solar Plan and set the target of 2 GW of installed solar capacity, both PV and CSP, by 2020 and 4.8 GW by 2030. This Agency has successfully accomplished the development of the Ouzarzate CSP complex, comprising Noor I (160 MW) in 2016, Noor II (200 MW) and Noor III (150 MW) in 2018. MASEN also managed the construction and operationalization of the first solar PV plants—Noor IV (70 MW), Noor Laâyoune (80 MW) and Noor Boujdour (20 MW) (Khatib 2018). In 2020 and 2021, the Kingdom proceededs with the call for tender and interest of numerous high-capacity solar PV projects. For instance, in January 2020, MASEN issued a call of expression of interest for a 400 MW solar PV plant, which is part of the first phase of the Noor PV II project—comprising numerous solar projects in eight different sites (Bellini 2020e). In 2021, the deadline for the call of tender of Noor PV II was extended until the end of August 2021. Numerous other solar projects have been tendered over the last five years (Table 4.13). In 2019, solar accounted for around 4% of the power mix.

Table 4.13 Main solar energy projects completed or commissioned in Morocco

Morocco holds high potential in wind energy, contributing to the promotion of the Moroccan Integrated Wind Program. Under this Program, Morocco aims at installing 2 GW by 2020 and 5 GW of wind capacity by 2030. Wind accounted for 11% of the power mix in 2019. Even though over the past decade Morocco has rapidly increased its wind capacity from less than 300 MW in 2010 to 1.4 GW in 2020 (Table 4.14), it did not reach its target.

Table 4.14 Main wind energy projects in Morocco

The strong increase was possible, among other things, thanks to the 300 MW Tarfaya wind complex, the largest in Africa, which has been developed through a joint venture between the French ENGIE and the Moroccan NAREVA Holding company. Several other wind projects have also been awarded, amounting to a total combined capacity of 850 MW. These projects have attracted foreign and leading companies in this sector as they have been developed by a consortium of NAREVA Holding, ENGIE, ENEL Green Power and Siemens Wind Power (Oxford Business Group 2020e).

Furthermore, hydropower is a key element of renewable energy sources for the Kingdom, accounting for nearly half (47.8%) of the electricity generated from renewable energy sources in 2018 (Ameur et al. 2019). Indeed, hydropower was the first renewable source adopted and deployed by Morocco, probably thanks to the lower costs and lower technology needed compared to wind or solar energy. The target of 2 GW of hydropower capacity was to be reached through the installation of new dams, which, however, mainly concern water management, and the construction of a 464 MW Pumped-Storage Power Plants (PSPP). This technology has been devised not only for power generation, but especially for the storage of solar and wind energy (Boulakhbar et al. 2020). Overall, hydropower generation has gained momentum in the last decade thanks to several Pumped-Storage Power Plants (PSPP: Afourer (in construction) with 465 MW capacity, M’Dez El Menzel (in design) with a 170 MW capacity and Abdelmoumen (in construction since 2018) with a 350 MW capacity (Vedie 2020). Nonetheless, hydropower is particularly vulnerable to climate change as its output varies annually depending on precipitation levels.

To better accommodate large shares of renewable capacity, the Kingdom has carried out changes to the energy regulatory setting. Prior to 2012, l’Office National de l’Electricité et de l’Eau Potable (ONEE), the national utility in charge of electricity production, transmission grid and the majority of distribution, was the sole responsible for buying, selling, importing and exporting electricity. The national regulatory change Act No. 13-09 in 2012 opened up the market to the free exchange of electricity coming only from renewable energy sources. In other words, private green electricity developers were allowed access to the national grid, producing electricity from renewable sources and buying it in the market. Thus, since Act No. 13-09, two parallel electricity markets coexist: the liberalization of the electricity market from renewable sources and the IPP scheme contract for the conventional electricity market. In 2016, Morocco decided to further strengthen the liberalization of the electricity market from renewable energy sources with Act No. 58-15, an update of Act No. 13-09. Indeed, the newly passed law envisages, among other provisions, the development of a low-voltage electricity market (i.e. rooftop solar PV) and the trade of surplus electricity from renewable sources to ONEE (up to 20% of the annual generation) (Khatib 2018).

Large-scale renewable projects, in line with most other countries in the MENA region, are usually envisaged in the framework of international tenders, with IPPs. Under this scheme, bidders sign PPAs with ONEE, which will buy electricity produced from the project for the following 20–30 years. These schemes have contributed to diminishing the cost of electricity produced (i.e. for NOOR III solar project) and to introducing the expensive CSP technology during peak times.

All in all, Morocco has become a frontrunner in the renewable energy industry across the MENA region. Its strong political commitment towards energy transformation is driven by energy security concerns, economic opportunities and climate ambitions. Therefore, Morocco has designed an attractive framework for the development of renewable energy sources.

• Scenario

The pipeline of renewable energy projects completed, commissioned or tendered demonstrates Morocco’s efforts to widely adopt renewable energy and to become a leader in the sector in the West Mediterranean cluster, in the MENA region, and in Africa. Morocco did not attain its 2020 renewable energy targets, as installed capacities of hydropower (1.77 GW), wind (1.41 GW) and solar (704 MW) were below the 2 GW objective for each of these sources. These 2 GW targets per renewable source are likely to be attained in the next couple of years. Indeed, in 2020, the renewable share of electricity capacity amounted to 34%, below the 42% target set. In the medium and long run, it is likely that the deployment of renewable energy sources will continue and the 2030 target may well be timely attained. The country will need to install 10 GW of additional capacity over the period 2018–2030, consisting of 4.6 GW of solar, 4.2 GW of wind and 1.3 GW of hydro.

Morocco seems on track to achieve its 2030 renewable target—52% of electricity coming from renewable energy sources—thanks to the numerous renewable projects tendered. The attainment of 52% of renewable energy sources in the electricity mix and the increased adoption of smaller local renewable units (decentralized energy sources), thanks to the opening up of the electricity market, pose the great challenge of integrating renewable energy in the grid (Eberle 2020). It is thus paramount for Morocco to ensure grid stability and flexibility in order to truly become a key player in the renewable energy field. Indeed, the grid has to be adapted in order to keep up intermittent electricity production with a lower utilization rate, following the widespread use of decentralized energy sources, entailing self-consumption.

Morocco’s power system network was mostly constructed over 50 years ago, with the integration of new technological elements over the years. The majority of the network is not in good condition and in need of an update, being subject to stress conditions resulting from water infiltrations and extreme temperatures. The National Agency for Electricity and Water (ONEE) reinforced the grid in 2019 and 2020, but it is not deemed sufficient to keep up with the high levels of electricity from renewable energy sources envisioned in the 2030 objective (Boulakhbar et al. 2020). In addition, in Morocco, variable renewable energy sources (solar and especially wind energy) are situated in remote locations, far from large consumption areas. There is thus an urgent need to step up grid modernization efforts to allow the transmission and distribution of electricity coming from renewable sources from locations at the extremities of the grid to high-consuming regions, without encountering significant congestion problems. In order to ensure flexible production to offset renewable intermittency and enhance grid stability, Morocco will have to devise some solutions, such as storage, decentralized production, increased and active grid management.

Morocco is also striving to complement its intermittent renewable energy production with gas, as it plans to build and commission a new LNG terminal in Jorf Lasfar by 2025 with a capacity of 7 bcm per year for an investment of $4.5 billion. Additional imported gas will then be partly used in a new combined cycle power plant, for a total capacity of 2.4 GW (MEED 2019). Meanwhile, Morocco is expected to start import gas from Spain through the GME in reverse flow.

Another way to efficiently integrate renewable energy production in the grid regards the enhancement of interconnections, as electricity exchanges enable the balance between supply and demand. Morocco is in an ideal position at the crossroads between Europe, North Africa and West Africa. It could therefore take advantage of its renewable energy production for export to these markets. Regarding international interconnections, Morocco is linked to Spain with two submarine AC interconnections (Map 4.5). The first one (700 MW) was deployed in August 1997, while the other was put into operation in July 2006 doubling the total transfer capacity to 1400 MW. As of 2021, it is the only interconnection between the North and South of Mediterranean countries (OME 2021). The Kingdom is already interconnected with Algeria (1.2 GW) (The World Bank 2017), while projects are on the table to interconnect Morocco with Portugal (1 GW), with Mauritania and to build a third interconnection line with Spain (700 MW) (OME 2021; Tsagas 2019). Map 3.6 highlights Morocco’s main planned or operational cross-border interconnections. Moreover, particularly relevant and ambitious is the plan of the British company Xlinks to connect Morocco with the UK directly with a submarine cable, without using Spanish or French grid infrastructure, which would then satisfy 6% of UK’s electricity demand (Xlinks n.d.). Indeed, Xlinks is planning to build a 10.5 GW renewable energy complex (7 GW of solar capacity and 3.5 GW of wind) in Morocco, which would be connected to the UK power network via a 3800 km high voltage direct current (HVDC) transmission line. Low LCOE for the solar and wind power plants in Morocco justifies cable losses, which are expected to be between 10 and 12%. An investment of about £18 billion is estimated for this project.

Map 4.5

Source Authors’ elaboration on Boulakhbar et al. (2020)

Operational and planned interconnections.

Overall, these interconnection projects are particularly promising and would represent a “win–win” solution for all parties involved, as excess electricity from renewable energy sources could be exported without compromising the grid due to considerable congestion issues. This is why at COP22 the EU countries signed a declaration regarding these possible electricity exchanges with a “Roadmap for Sustainable Electricity Trade” (Boulakhbar et al. 2020). However, as discussed in Chap. 3 (Sect. 3.3.3), Morocco has also boosted its coal capacity with the construction of a new coal power plant (Cap Ghir Safi) with a capacity of 1.4 GW, thus the country’s electricity exports may not be completely “green”.

In conclusion, Morocco may be considered quite on track to reach its 2030 renewable targets. Nevertheless, it has to face some challenges related to the high percentage of electricity coming from renewable energy sources. For this purpose, it aims to strengthen the grid, which may not yet be sufficiently strong, despite several upgrades in the last couple of years. Overall, Morocco is also striving to solve issues concerning the intermittency of renewable energy production by strengthening interconnections and enhancing gas imports, as they are deemed a necessary source to accompany renewables in the energy transition.