MENA region’s demand for power is witnessing fast growth due to increased activities in the industrial and construction sectors. As of September 2018, the total value of MENA power projects is estimated to be worth US$ 6.2 Bn.
Between 2018 and 2022, Arab Petroleum Investment Corporation (APICORP) estimates that MENA power capacity is expected to expand by an average of 6.4% per year, corresponding to additional capacity of 117 gigawatts (GW) to meet increases in demand. This is likely to require US$ 152 Bn of investment in generation capacity and an additional US$ 108 Bn for transmission and distribution (T&D). The MENA governments are expanding their investment plans and APICORP estimates reveal that 91 GW of capacity additions are presently in the execution stage. Overall, the MENA region needs to invest US$ 260 Bn in the power sector from 2018 to 2022 (APICORP estimates).
Currently, the MENA region is increasingly shifting its focus towards renewables (solar and wind resources) as a means of diversifying its power generation mix. The region has an attractive market for renewables due to abundant availability of solar, wind resources, and nuclear power. According to a recent IRENA report, the region is anticipating renewable energy investment of US$ 35 Bn per year by 2020.
Low prices of solar energy have led policy-makers, regulators and industry leaders to take a number of steps to increase and accelerate the use of solar power throughout the MENA region. Recently, the MENA region received some of the lowest renewable energy prices awarded globally for solar PV and wind energy, according to industry experts. The growth prospects for solar power in the MENA region remain positive, with over 12 GW of solar projects in the pipeline, according to Middle East Solar Industry Association (MESIA).
The GCC region has the highest level of investment in power infrastructure, public and private, of any group of countries worldwide. Rapidly growing population and urbanisation, rising income levels, and industrialisation are the market drivers for the rise in electricity consumption in the GCC region. According to APICORP Energy Research, the GCC represents 47% or 151 GW (of current MENA power generating capacity) and the region is expected to require US$ 55 Bn for additional 43 GW of generating capacity and US$ 34 Bn for T&D over the next five years.
The UAE and KSA are expected to be the market leaders with expected investments worth US$ 33 Bn and US$ 21 Bn, respectively. Investments in GCC’s power sector will continue to remain a priority with the private sector increasingly playing a significant role.
Energy storage systems are also becoming attractive in the GCC as it forms a crucial component in the development of smarter grids. The GCC countries’ grid inter-connectivity is expected to generate US$ 33 Bn in investments, economic and energy savings over the next 25 years.
Required MENA investment from 2017-2021 in US$ Bn
Note: T&D-Transmission and Distribution. Source: APICORP Energy Research, April 2018
Renewable energy is expected to play a vital role in the GCC’s economic diversification plans. It forms a lucrative option for electricity generation capacity in the GCC, which has reached US$ 2.1 Bn in 2018 and is expected to be worth US$ 25 Bn in 2022, according to the GCC Renewable Energy Industry Forecast 2018-2022 report.
Moreover, the deployment of renewable energy in the GCC has steadily increased among policymakers, regulators, and operators. The GCC region’s deployment and investment could reach US$ 16 Bn in 2020, according to a report by Strategy& Middle East. The report adds that the cumulative total of US$ 40 Bn could be invested in the GCC between 2016 and 2020 if correct decisions and policies are adopted.
Over the last two decades, the Public Private Partnership (PPP) model has become the most attractive financing mechanism for the GCC power market. The GCC region appears best suited for PPP opportunities considering the sustained lowered hydrocarbon prices. While a few countries are more advanced than others in the legislative process, supported by authorised institutions, the others seem to be focusing on exploring this project delivery model.
Source: MENA Power Industry Outlook bt Ventures Onsite for Middle East Electricity