The nations at the nexus of the continents of Europe, Asia and Africa, along with those along the strip of land between the Sahara Desert and the Mediterranean, have long been pivotal for global energy development.
The Middle East and North Africa (MENA) region is also blessed with a quantity of annual sunlight which until recently has been more of a liability than an asset, as large areas of the region’s land is too dry for agriculture.
However, all of that is changing. Direct radiation exceeding 6 kWh/m2 per day in many regions makes for awesome solar potential. Recent decreases in the price of solar technologies coupled with rising electricity demand in these growing nations, if coupled with the right policies, could make the region a hub for solar expansion.
This report by Solar Server will explore both the current state and future potential of solar technologies in the MENA region, a land where the energy from the sun and the energy in deposits in the ground have an unusual relationship that may hold the key to growing solar markets and industries.
PART 1: WHY MENA?
Over the last century, economic development in MENA has hinged on the region’s petroleum and natural gas deposits. The region produces more than a third of the world’s petroleum, at roughly 2.5 million barrels of crude oil per day, as well as 55 billion cubic feet per day of dry natural gas, 20% of the global total. However, only 381 million persons inhabit the region, roughly 6% of the total global population.
As a region with such rich fossil resources, it is not surprising that these fuels are also used for the vast majority of the region’s electricity generation, usually at a heavy discount to market prices.
As petroleum prices continue their inevitable increase, the subsidies offered by governments must also increase if electricity and fuel are to be kept cheap, at ever-larger opportunity costs for exporting nations. Some nations in the region are dependent upon imported fossil fuels for their electricity generation, and similarly are motivated to find alternatives to the high and variable cost of generation.
These economic calculations are further impacted by growing populations and energy use in the region.
“As the population continues to grow (in most MENA countries over 50% of the population is below the age of 25) and as hydrocarbon reserves start to get depleted, the region’s leaders are looking at alternative sources of energy,” notes Emirates Solar Industries Association (ESIA) Chairman Vahid Fotuhi.
The promise of solar
A natural answer to this issue is another rich resource in the region. “The most obvious option is the sun,” states Fotuhi.
Traditionally, this has meant concentrating solar power (CSP) technologies. Due to the technological similarity of some CSP steam turbines to conventional natural gas turbines, CSP can be seen as more familiar than other renewable energy technologies. With integrated energy storage, the technology can also provide baseload and on-demand generation.
- The greatest currently operational solar capacity in the region is in the form of hybrid CSP/natural gas plants, such as the Ain Bni Mathar ISCC solar thermal power station in Morocco. Image source: Abengoa
Another option is to combine CSP with natural gas generation, which provides cheaper electricity than CSP on its own and can increase operational flexibility without storage. All three operational CSP plants in the region are hybrid CSP/natural gas systems.
Solar photovoltaic (PV) technology offers its own distinct set of advantages. PV can be deployed at a smaller scale than CSP, with less capital cost. PV plants can also be deployed very quickly, and in a wider range of conditions, including on rooftops inside cities and very close to centers of demand.
As recently as 2009, levelized cost of electricity (LCOE) estimates for the two technologies were roughly similar. However, due to sharp declines in the cost of PV over the last two years, including an estimated 40% decline in PV module costs in 2011, PV now has a distinct cost advantage on an LCOE basis.
This cost advantage not only gives PV an edge over CSP, but over traditional fossil fuel technologies as well. The Emirates Solar Industries Association (ESIA) and Pricewaterhouse Coopers (PwC) explored this issue in a recent report, finding that when oil prices fall below USD 80 per barrel or liquefied natural gas (LNG) prices fall below USD 13/million BTU (MMBTU), solar PV becomes cheaper on an LCOE basis in the region.
As of mid-June 2012, oil prices in the region were near USD 100 per barrel. LNG prices rose to USD 18/MMBTU in mid-May 2012, and have been under pressure due to demand from Japan, following the closure of the nation’s nuclear power plants.
“PV costs have fallen so dramatically over the past year or so, and that has brought it into a range where it is competitive with conventional fossil fuel generation in many cases,” states Manaar Head of Consulting Robin Mills, lead author of the ESIA/PwC report “Sunrise in the Desert”.
The cost advantages of solar are even sharper when considered as a solution to peak power needs. ESIA Chairman Fotuhi estimates that in markets where LNG is imported, solar power is more attractive than natural gas generation for peak power production when the cost of LNG rises above USD 5/MMBTU.
In the long run both PV and CSP offer solutions for the MENA region. Much of the region experiences intense peak demand that closely matches the daily output curve of PV technology. And as is the case in other regions, the dispatchable nature of CSP coupled with thermal storage can make the technology valuable to grid operators in a way that PV is not.
The U.S. Department of Energy’s National Renewable Energy Laboratories (NREL) has reached the conclusion that this combination of peak power supply from PV and dispatchable power from CSP allows for greater integration of these resources than PV on its own. There is no reason why this should not hold true for the MENA region.
Thin film versus crystalline silicon
Due to these cost decreases, PV has begun to attract significant interest. Which begs the question for developers of which PV technology is most appropriate for the region.
Due to competitive per-watt module costs and lower BOS costs due to higher module efficiencies, crystalline silicon (c-Si) PV technology has enjoyed a resurgence in the last year over thin-film options. C-Si also enjoys the benefits of wider familiarity.
However, thin-film technologies offer distinct advantages for deployment in the region, including lower temperature co-efficients than crystalline silicon, meaning better performance in the region’s hot climate.
Multiple pilot projects by thin film market leaders are currently in progress to evaluate this potential. In June 2012, First Solar announced that it has joined the King Abdullah University of Science and Technology in a program to explore PV technology in the region. This includes building a 3.2 kW pilot plant using its PV modules on the coast of the Red Sea, which will test any performance of the company’s cadmium telluride PV technology under very high temperatures.
Solar Frontier has also provided thin film modules for a 36.4 kW pilot PV project with oil refiner Takreer in Abu Dhabi, UAE, which will measure output over a one-year period to evaluate its copper indium gallium diselenide (CIS or CIGS) technology.
PART II: CURRENT STATUS AND FUTURE PLANS
Current state of CSP and PV generation
Until recently, the MENA region has been characterized more by potential and ambitious goals than by progress on the ground in building PV and CSP capacities.
- The Kuraymat hybrid CSP/natural gas plant has the largest CSP capacity of any operational plant in the region at 25 MW out of 150 MW total generating capacity
There are currently three operational utility-scale hybrid CSP/natural gas plants in the region, Algeria’s Hassi R’mel, Egypt’s Kuraymat, and Morocco’s Ain Bni Mathar plants. However, in all of these plants the CSP component is a small portion of the overall power output, with the highest proportion at 17% in the Kuraymat plant, incorporating 25 MW of CSP in 150 MW of total generation.
In part due to subsidized retail electricity and a lack of policy frameworks for residential-scale PV, the region has shown a preference for commercial and utility-scale PV plants. Currently the largest PV plant in the region is Enviromena’s 10 MW PV plant in Masdar City, Abu Dhabi, UAE, which the company commissioned in 2009. The plant comprises 50% First Solar CdTe thin-film modules and 50% c-Si technology.
A number of other projects have been approved or are under construction, however timelines have often been marked by significant delays.
A joint venture between Masdar, Abengoa and Total is currently building a 100 MW CSP plant in the UAE, which reached financial close on March 7th, 2012. The Shams 1 plant uses a parabolic trough design, and the companies expect to complete the plant in 2012.
- Solar Frontier’s Al Midra project is also the largest PV canopy project under construction in the world; Image source: Solar Frontier
The most advanced large PV project is likely a 10 MW solar canopy project using CIS modules supplied by Solar Frontier at Saudi Aramco offices. When completed, the Al Midra project will also be the largest carport PV project globally, however Solar Frontier has not supplied a precise expected completion date.
Progress in the region is not limited to PV and CSP. Riyadh, Saudi Arabia currently boasts the world’s largest solar thermal plant at 36,300 square meters, with commissioning announced in April 2012. The plant provides hot water for an estimated 40,000 students at Princess Noura Bint Abdulrahman University for Women.
Masdar is also evaluating solar thermal technology at its Masdar City project, and has installed a field of TVP Solar thermal panels as a pilot project.
Projects and ambitions
The limited state of current installed solar capacities has not inhibited those both locally and internationally who are looking at the potential of the region from thinking big; in some cases, very big. Several projects are worth highlighting for their ambitious nature.
The most ambitious of these is the Desertec, a project to build a network of CSP, PV and wind farms across the MENA region and export the electricity to Europe via high-voltage DC lines. This vision is being advanced through both Desertec Industrial Initiative GmbH and the non-profit Desertec Foundation.
The Desertec plan has hinged on very large CSP projects and high-voltage DC transmission lines linking the MENA region and Europe, including subsea transmission across the Mediterranean. Among these large CSP plants, NurEnergie is planning a 2 GW CSP project in Tunisia.
As a leading state in the region for renewable energy development, the UAE is also conducting two ambitious projects, which are confined in geography if not in scale.
- The Mohammed bin Rashid Al Maktoum Solar Park will have both PV and CSP components
The largest project announced to date in the region is Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, which aims for 1 GW of PV and CSP generation by 2030. The USD 3.2 billion, 48 square kilometer park is the personal project of Current UAE VP and Prime Minister/Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum, for whom it is named.
The project will begin with a 10 MW PV plant scheduled for completion in 2013. Dubai’s Electricity and Water Authority is currently evaluating bids by selected contractors to build the plant.
This is not the first such project in the UAE, and follows on the Masdar City project, a planned city which will rely entirely upon renewable energy for its electricity needs. Masdar City’s planners are aiming for a population of 45,000 to 50,000 inhabitants, as well as 1,500 businesses. The city’s first tenant is the Masdar Institute for Science and Technology.
- Masdar City is planned to run entirely upon renewable energy, and currently houses a 10 MW PV plant, the largest operational PV plant in the Middle East.
Masdar City is currently home to the region’s first utility-scale PV plant at 10 MW as well as a pilot solar thermal plant, with plans to expand the solar thermal component.
The enormous scale of these projects might lead some to speculate that they have little chance of being completed. However, the immense capital resources possessed by the UAE and other Gulf states differentiate these projects from the similarly ambitious plans of less affluent nations.
The Moroccan Solar Plan
Morocco has made nationwide plans for solar expansion, and in 2009 set a goal to build 2 GW of CSP in the nation by 2020. The Moroccan Agency for Solar Energy (MASEN) plans to build CSP plants at five sites: Ouarzazate, Ain Bni Mathar, Foum Al Oued, Boujdour and Sebkhat Tah.
Morocco has perhaps the most reason of any nation in the region to pursue solar, given its lack of local fossil fuel resources. The purchase of imported fuel represents an enormous cost in Morocco, which must be borne by consumers and the government in the form of subsidies.
So far only one hybrid CSP/natural gas plant has been completed at Ain Bni Mathar, though media have speculated that the Moroccan government will soon announce the winning bidder for the 160 MW CSP plant in Ouarzazate, which is expected to be online in 2014.
Barriers to development: transmission, skills, politics and policies
Industry analysts have identified a number of barriers to developing the solar potential of the MENA region. Building new solar facilities will in many cases require extensive new transmission, as many prime sites, particularly for CSP projects in North Africa, are located far from population centers.
Due to the lack of existing solar markets, there is also a lack of personnel in the region with experience developing and building solar plants, a problem which is being addressed by research and academic institutions in Saudi Arabia, the UAE and other nations.
- Demonstrations in Egypt marking the beginning of the nation’s revolution. While many in the PV and CSP industry have expressed concern over political instability, the ESIA states that any disruptions to solar development plans in affected states are temporary. Image source: Muhammad Ghafari
According to a survey conducted by PV Insider and CSP Today in 2012, political cooperation is now the largest concern of potential developers, at almost 60% of respondents. This represents an increase over the same survey in 2011, doubtless due to the impacts of the Arab Spring, which Desertec officials have noted make its work more difficult.
The ESIA has downplayed such concerns, noting that as the region returns to stability, new governments will be likely to support solar development as well.
“The Arab Spring has caused the countries that have been affected by the political upheaval to revisit their solar plans and make necessary adjustments,” notes ESIA Chairman Fotuhi. “In most cases this will cause a delay in how projects get tendered and awarded. But this is only temporary. Once the new regime is in place their solar aspirations will set march again.”
The ESIA does identify the development of policy as a major issue for the region, noting that in the past large projects have taken the lead on policy development.
“Slowly but surely, the necessary policies and regulations are being put in place to establish a healthy long-term solar industry,” states Fotuhi. “Some jurisdictions are ahead of others.”
Fotuhi states that he expects Saudi Arabia and Dubai to unveil a complete set of regulations for the solar Sector by the spring of 2013, and notes that Morocco’s has already acheived this with the launch of MASEN.
Prices and fossil fuel subsidies
Even more important than the development of new policy may be the reform of existing policies, and Robin Mills of Manaar calls subsidies for fossil fuel generation a “key issue” for the development of solar power in the region. While exact figures vary from year to year, consumption subsidies in developing nations represent the bulk of fossil fuel subsidies globally, and most MENA nations employ some form of subsidy for fossil fuel use.
These are perhaps the most extreme in Saudi Arabia, where natural gas is supplied to power plants at USD 0.75/MMBTU and petroleum at USD 2.7 to 4.3 per barrel, a small fraction of market prices.
“I think the most significant at the moment is getting the pricing of oil and gas and electricity right,” states Mills. “Because at the moment, we have subsidized pricing, and different prices for different users and utilities. It obscures how competitive solar power is.”
These subsidies can come at different points in the production of electricity, including subsidized fuel inputs and subsidized electricity from that fuel.
Mills notes that end-user subsidies need not be a barrier to the development of solar power, as a utility still has the same issue of optimizing generation whether that comes from solar power, fossil fuels or another source. However, subsidized fuel inputs not only distort the competitiveness of solar, but come at an opportunity cost to governments.
Ultimately, the elimination of subsidies for fossil fuels is a political problem. Recent riots and civil unrest in Nigeria following the elimination of consumer fuel subsidies provide a potent example of how this process can go wrong.
“There are a lot of bad ways to cut subsidies, and it is never easy, but there are ways that are more politically acceptable and are a bit more graduated,” notes Mills.
As a result of these factors, solar power looms large in the future of the MENA region, both due to the opportunity costs for oil producing nations and the fuel purchase costs of those nations that must import fuel. The ESIA estimates that the opportunity cost to Saudi Arabia alone of burning crude oil for electricity generation is roughly USD 50 billion annually.
Other solutions to the MENA region’s increasing demand for electricity simply do not offer the advantages that solar does. Nuclear generation is not only costly, but involves very long devleopment timelines, and will not provide relief to rising and fluctuating fossil fuel prices in the near future.
- The ESIA and PwC note that different nations will have different motivations to move to solar, depending upon their relationship to fossil fuel production and consumption. Image source: ESIA, PwC
The ESIA estimates that the first adopters for Solar power will be the UAE, Saudi Arabia and Morocco, and ESIA’s Fotuhi has also mentioned Jordan and Dubai. All of these nations have potent economic reasons for adopting solar technologies, and none of these nations have been seriously affected by the Arab Spring uprisings.
The form that future solar development takes may vary. Morocco and other North African nations have shown a strong interest in CSP, whereas a number of PV demonstration projects are under way in the Persian Gulf and Jordan. However, other technologies and other uses of existing technologies than generating electricity are also proving popular, as evidenced by the solar thermal installation at Princess Noura Bint Abdulrahman University, and a number of solar water desalination projects.
Whatever the final forms are, if experience and existing plans are any guide, the final deployments of solar will be on a truly grand scale, and the very large projects currently underway such as the Mohammed bin Rashid Al Maktoum Solar Park are promising to bring both investment and interest to the region.
“We’ve already started seeing many international solar companies inquire about opening a branch office here,” notes ESIA Chairman Vahid Fotuhi. “This is good news, both for local talent in search of a career in the solar sector and local contractors looking to partner with established solar companies.”
But ultimately, the expansion of solar in the MENA region comes down to dollars and cents.
“Saudi Arabia burns over 500,000 barrels of crude oil a day for power generation, which is a huge amount, half a million barrels a day, and 6 billion dollars a month, in terms of crude oil prices,” notes Fotuhi.
“That money could go to solar power generation, which requires no fuel. And that’s exactly why the officials in Riyadh are looking up towards a brighter future.”