3.5GW MENA PV market by 2015

The Middle East and North Africa (MENA) region will be installing nearly 3.5GW of solar capacity a year by 2015, led by Saudi Arabia and Turkey, according to a new report published by GTM Research.

The increase, from an almost negligible level today, reflects the wrenching shift from incentive-led markets in places like Germany and Italy to those with “fundamental solar drivers”, such as lots of sun, growing electricity demand, and high power prices.

Total power-generation capacity in the Gulf Cooperation Council, comprising the Arab states around the Persian Gulf, is expected to rise by at least 60GW over the next five years, fuelled by population growth, urbanization and economic expansion in the region.

The rapid blossoming of the MENA market, home to many of the world’s largest carbon emitters, offers vast opportunities for the ailing global solar supply chain – both on the PV and concentrated solar power (CSP) side. But the region will also be challenging market for many existing PV companies, which will need to forge local partnerships for cultural and political reasons.

The report, which predicts that MENA countries will account for 8% of global solar demand in 2015, was produced in association with the Emirates Solar Industry Association.

While the same basic factors will be behind growth in most MENA markets, a closer look at Saudi Arabia and Turkey – slated to account for 70% of MENA’s demand in 2015 – underscores important distinctions between them.

Fundamentally, MENA countries are split between oil producers and exporters, and the financial structure of projects and drivers for investment are very different for the two categories.

The principal motivation behind Saudi Arabia’s solar targets – 16GW of PV and 25GW of CSP by 2030 – is the desire to conserve valuable oil for export. According to some estimates, the kingdom is on track to become a net oil importer by 2030 on its current trajectory.

Sometime in the next few months, Saudi Arabia will publish initial documents related to its solar programme, with the first projects likely built in 2014.

The country has signaled that after several rounds of government-led tenders it will establish a feed-in tariff (FIT) to foster more competition.

However, the government’s desire to build up a domestic supply chain – coupled with a recent World Trade Organisation ruling against local-content requirements written into FITs – leads GTM to believe that Saudi Arabia’s FIT may never materialise.

“Ultimately, it is our belief that local content and economic development will be required to succeed in the Saudi Arabian market,” the report says.

On the other hand, Turkey is the first country in the region with a FIT already in place, and will be the first MENA market to experience significant PV demand.

In contrast to Saudi Arabia, Turkey’s push towards renewables is driven in part by its uncomfortable reliance on gas from Iran and Russia.

While the Saudi market will be centred on massive ground-mounted arrays and CSP plants, the commercial and industrial rooftop PV segments will form the basis of near-term Turkish demand.

Turkey has a formal 3GW solar target for 2023, but GTM believes it is likely to exceed that level of capacity significantly.

Other countries in the MENA region with ambitious solar targets include the UAE, Jordan, and Morocco.