The timing is good, for today, the region faces a supply challenge as energy demand is set to surge in the next 40 years. But thanks to abundant sun and wind, the region has a rare supply opportunity too.
Electricity demand in several MENA countries is expected to double by 2050. Using fossil fuels to meet that demand is not an option. Several MENA countries are not oil producers and must find alternatives for their energy security. Even in those countries that are, subsidies on fossil fuels already lead to wasteful consumption and fossil fuels are a primary cause of climate change. So, for its own long-term energy security, MENA must think not solely of its fossil fuel resources, but mixing them with renewable sources too.
Less than 0.3% of MENA's electric power capacity is nowadays generated by renewable sources; in Sweden, for instance, the corresponding figure is about 30%, mostly from biomass and hydro. Some 10% of Spain's total energy supply comes from renewable sources, with wind and hydro each accounting for a fifth of that.
The potential for expansion and spin-offs would therefore be great. Non-oil producing countries like Morocco would greatly reduce their energy dependence on imports by developing solar and wind capacities, while oil-rich nations could manage their increasingly scarce fossil fuel reserves more sparingly.
Human capital would also benefit from investing in renewables. The IEA estimates that building a concentrated solar power plant is likely to create eight to ten jobs per megawatt of equivalent electrical solar capacity. Building electrical solar capacity brings skills and learning in technology such as mirrors, heat receivers, and turbines. A single gigawatt would generate not just energy, but thousands of skilled jobs too. That means more highly qualified local scientists and engineers working in the region, with more skills and more valueadded jobs injected into the economy.
But environmental sustainability is probably the most obvious and certainly the most urgent motivation for investing in renewable energy. Electricity in the MENA region is now based on fossil fuel and accounts for 28% of the area's greenhouse gas emissions. One study from DLR, the German Aerospace Centre, shows that if today's energy mix remains unchanged, CO2 emissions from the MENA region could nearly triple over the next three decades, from 770 million tones per year today. A turn to solar and wind energy would slow the rise in CO2 and, if combined with lower transport emissions, possibly result in an actual decrease in emission levels.
The sun is the most obvious of MENA's renewable resources. In desert areas, the energy from the sun is double that recorded in Paris. MENA is a region where Direct Normal Irradiance, the indicator used to measure the sun's energy, averages in excess of 1,800 kWh per square metre per year-enough for concentrated solar power and more than enough for regular photovoltaic production.
The land required to produce solar energy is large for most temperate countries, but not for deserts; 15,000 square km (about half the Nevada desert) would supply all of the US's needs, for instance. In the MENA region, where desert land is also in abundance, a solar thermal plant the size of Lake Nasser (about 5,000 square km) could supply energy that is equivalent to the annual oil production of the entire Middle East. Ambitious, but is it feasible?
For now, the production of solar energy in the region is patchy. The UAE's Masdar, a subsidiary of the Mubadala Development Company, owned by the state of Abu Dhabi, is leading the way by developing a 100 MW concentrated solar power plant, known as SHAMS 1. As with all such sources, it has been certified for the Kyoto Clean Development Mechanism, thus allowing fortrade in carbon markets. The company has even designed an emission-free city and set up a renewable-energy institute.
Algeria, Egypt and Morocco are developing Integrated Solar Cycle Combination plants that use solar power to save in fossil fuel-generated power. Morocco's Ain Beni Mathar has 20 MW of solar power that contributes to a 470 MW total, Algeria's Hassi R'Mel project has a capacity of 150 MW with a solar share of 35 MW, and Egypt's Kuramyat uses 30 MW of solar for a total capacity of 150 MW. Solar irradiance is MENA's biggest potential energy resource, and could transform the region into a world solar energy supplier.
Winds of change
But solar energy isn't the only comparative advantage of MENA countries. Wind velocities in the 8-11m/sec range regularly sweep the Gulf countries, as well as Egypt and Morocco. Egypt's potential capacity through wind power is estimated at 20,000 MW, Morocco's at 6,000 MW.
In fact, both of these countries are already harvesting their wind. Morocco has four sites with a total capacity of 1,000 MW, while Egypt plans to recoup 2,000 MW by 2010. Egypt's Zafarana project, which is expected to produce about 300 GWh/a, can serve as an example for the rest of the region. And Egypt has set itself an ambitious target of producing 12% of its electrical power from wind farms by 2020. Tunisia meanwhile has four wind farm sites with a total capacity of 120 MW, and Jordan has a 40 MW farm.
Investors drawn to the region are attracted by plentiful sun and wind, but also by lower costs. Electricity from concentrated solar power in the MENA area is currently around 25% cheaper than in Spain for instance, and the IEA expects that differential to continue into the near future.
Two Euro-MENA collaborations are now in the works. One project, launched by the Desertec Foundation in Berlin and 12 companies, nine of which are German though there is one Algerian firm, will build solar plants and transmission infrastructure to deliver solar energy to both MENA countries and Europe. The €400 billion project is expected to supply 15% of Europe's electricity demand from some 20 locations around MENA by 2050.
Another project, known as the Mediterranean Solar Plan, aims to link Europe's renewable-energy technology with MENA's renewable-energy resources. Europe will invest in plants and buy back some of the output, helping to achieve the 20% share of renewable energy earmarked for its energy mix by 2020. The Mediterranean plan aims to achieve a capacity of 20,000 MW by that time, mostly from solar energy, for an estimated investment of at least €60 billion. Some 70 pilot project proposals have been submitted.
Not everyone is happy with these renewable energy projects, with some critics dismissing them as a form of energy colonialism, arguing that Europe could develop cheaper renewable energy sources, such as wind, hydro and biomass, on its own territory. Another high hurdle to jump, both for the Mediterranean Solar Plan and Desertec, will be putting in place the transmission network to deliver MENA electricity to Europe. Current networks linking Spain with Algeria and Morocco have a capacity of only 600 MW, which is far short of the mark. Technology is not really the obstacle; what is needed is investment.
The IEA puts investment costs in a range of US$4,200 to US$8,400 per megawatt for concentrated solar power plants, depending on labour and land costs, technologies, the quality of the solar resource, and the sizes of storage and solar field; generally, the more storage needed, the higher the costs.
As with the Desertec project, public financing for the Mediterranean Solar Plan will need private funds if it is to work. Funds could be attracted through investment tax credits and by trading certifi cates of emission reduction, which were formulated under the Kyoto Clean Development Mechanism.
The World Bank is ready to play a part through its Clean Technology Fund. This $5 billion fund is overseen by a 16-member Trust Fund Committee that includes representatives from Egypt and Morocco. A regional investment plan under the fund will be formulated with the aim of attracting as much as $750 million to support the Mediterranean Solar Plan.
Such initiatives testify to the potential of the MENA region as a future major supplier of renewable energy. If the hurdles can be cleared, then the region may enter a new period of historic engineering feats for the world to admire. MF
© OECD Observer, No. 275, November 2009