IN DEPTH: Middle East sees the light

The oil-rich countries of the Middle East and North Africa (Mena) have often seemed like the last places on Earth that would embrace renewables — with cheap, plentiful fossil fuels, why bother with more expensive and less predictable energy sources?

Yet every single nation in the Mena region — including Iran, Iraq, Syria and the Palestinian Territories — now has renewables targets in place, with 50GW of installations expected by 2020, rising to 107GW by 2030, according to the International Renewable Energy Association (Irena).

Saudi Arabia, which is almost entirely dependent on oil for its electricity, is expected to unveil a 1GW renewables tender and a long-term programme in the coming months, after announcing that it intends to spend $109bn on solar projects by 2032 to meet at least a third of its electricity demand. Morocco, which has no indigenous oil, wants to source 42% of its power, or 6GW, from green energy by 2020, while the small Arab state of Djibouti has vowed to be 100% reliant on renewables by the same year.

“In the last two years, renewable energy has transformed from a niche interest to a regional phenomenon [in the Middle East],” says Arthouros Zervos, chairman of the REN21 global renewables network.

This turn towards renewable energy has three main drivers, the first of which is the sheer amount of solar irradiation that falls on the region — often twice the amount of kWh per square metre as in Germany, which is the world leader for installed solar capacity.

Secondly, electricity demand across the region is growing rapidly, leading to ever more fossil fuels being burned for electricity production — depleting oil and gas reserves and causing CO2 emissions to rise. Fuel that is burned at home is fuel that could have been exported, and many of the oil states would like to rein in this drain on public finances — especially as, in many cases, it is cheaper to generate electricity from solar panels than fossil fuels. Renewable energy would also act as a hedge against future oil and gas price rises.

“As [Saudi Arabia’s] domestic economy and population grows, more and more of that oil is being consumed domestically, rather than being exported,” says Browning Rockwell, executive director of the Saudi Arabia Solar Industry Association. “Renewables makes sense.”

In Saudi Arabia, solar has achieved grid parity, and the state oil company, Saudi Aramco, has been talking openly about the need to replace domestic fossil-fuel power plants with PV. Indeed, it has already saved money by swapping diesel generators for solar panels on the country’s Farasan Island.

“The government solar plan is moving very slow, and we are hearing about it for some time, but it’s not maturing as fast as it should,” Gasem al-Shaikh, head of energy unit at Saudi Binladin Group — which aims to win solar construction contracts— recently told Bloomberg. “The country can’t wait. We are burning more liquids every year, and that’s why Saudi Aramco is now taking the lead.”

The third driver for the renewables push is that some countries, including Saudi Arabia, the UAE and Qatar, are hoping that they can diversify their economies by creating a thriving renewables manufacturing industry.

Abu Dhabi has led the green charge with its zero-carbon Masdar City, attracting industrial giants GE, Siemens and Mitsubishi to set up bases there, with Irena waiting to move into its new under-construction headquarters. German PV manufacturer Solon recently moved its headquarters from Berlin to the emirate of Fujairah, where it has a 150MW module factory and its parent company Microsol is based.

Qatar has indirectly bought a 29% stake in Germany’s SolarWorld, and is building a polysilicon factory in the emirate, while Saudi Arabia’s forthcoming renewables programme is expected to entice many manufacturers to build factories in the kingdom, due to the local-content requirements and the scale of the opportunities.

US-based SunEdison is known to be looking into building a $6.4bn, 3GW vertically integrated factory in the country.

“We will bring our downstream solar PV development expertise to the region, and will partner with the kingdom to build a large and dynamic solar-energy industry,” says SunEdison chief executive Ahmad Chatila.

Thin-film giant First Solar also seems keen to build a plant in Saudi Arabia.

“We strongly believe that a healthy market can only be developed by having a localised value chain in the country and we are open to opportunities for such local collaboration,” says Raed Bkayrat, First Solar’s vice-president for Saudi Arabia. “While I cannot comment on specific opportunities, I can say that we are focused on growing our presence in the country and that any decision on manufacturing would be demand-led.”

Bkayrat points out that the first stage (13MW) of the company’s 100MW Mohammed bin Rashid Al Maktoum Solar Park in Dubai was built using about 50% local content — such as the racks, transformers, cables and switchgears — despite no requirements to do so.

Japan’s Solar Frontier has opened an office in Al Khobar, Saudi Arabia, and believes that its thin-film modules may give it an edge over its crystalline-silicon rivals.

“The region’s climate presents challenges for solar technology,” explains Solar Frontier vice-president Atsuhiko Hirano. “The intense heat and sand of the region requires the system, including the solar modules, to have the highest quality and durability.

“Our own CIS thin-film modules, thanks to a low temperature coefficient and precision engineering, have been proven to deliver reliable and affordable performance... even in hot desert conditions.”

Saudi Arabia has a strong infrastructure for renewable-energy projects, says Imtiaz Mahtab, regional managing director of Air Liquide. “It has a lot of engineering companies, and banks are ready to finance it. It means the mechanism to produce renewable energy is there... but the policy has to be streamlined,” he says.

In February last year, Saudi Arabia released a White Paper that set out its “proposed competitive procurement process” for its ambitious renewable-energy programme.

The rules involved a complex points system under which authorities would award power-purchase agreements, with points given for the financial capability of the developer and the financial plan for the project; the developer’s experience; the status of the development; and the extent to which the project would use locally sourced equipment and labour.

The accompanying local-content requirements have been pored over by international investors, with the consensus being that they were too stringent to attract solar companies to the kingdom.

Individual local-content targets were set for each major component of each technology — for instance, for polysilicon PV, it called for 100% of wafers and inverters to be built in the kingdom, yet only 50% of the content of cells and modules.

Since the release of the White Paper, there has been no official word on the programme, although Vahid Fotuhi, president of the Middle East Solar Industry Association (Mesia) recently revealed that a revised plan would be unveiled in the coming months, along with a 1GW tender by the end of this year.

“What is very important and will become evident in the weeks and months ahead is that it will no longer be just KA Care [the kingdom’s key renewables institution] running the show,” Fotuhi told the Menasol 2014 conference in Dubai last month. “There are going to be other new organisations emerging which will also play a role in the implementation of solar in the kingdom.”

Saudi Arabia is not alone in needing to firm up its regulatory frameworks.

Steve Griffiths, Mesia’s research director, says: “Regional challenges still exist for achieving the widespread development of solar, including a lack of supportive policy frameworks, subsidies for fossil-based power generation and access to financing.”

However, generally speaking, the solar industry is excited about the opportunities in the region.

“We see a tremendous amount of potential across the Middle East,” says Ahmed Nada, Middle East vice-president at First Solar. “We are looking at developments across the region, particularly in countries such as the UAE, Saudi Arabia, Jordan and Egypt, among others.”

Keith Bullen, associate at global law firm Baker Botts, adds: “We are seeing a lot of roundtable discussions on manufacturing in the region, and people are really gearing up for this market. I think everybody believes it will happen.”