Chapter 11
Power Market Structure and Renewable Energy Deployment Experiences From the MENA Region
Emma Åberg*
Nurzat Myrsalieva**
Abstract
In almost all countries in the Middle East and North Africa (MENA) region, power sectors are characterized by a high degree of vertical integration and state control. However, several countries have undertaken reforms in order to open up the power market for private sector involvement particularly in relation to renewable energy (RE) sourced electricity generation. The majority of the MENA countries authorize RE private power generation for utility supplies (i.e., selling electricity to a single buyer). In contrast, very few countries authorize RE power generation for third-party sales, autoproduction, or export. What characterizes the MENA region in general when it comes to the possibility for private actors to produce electricity is a lack of clear signals from governments. Few projects have been established in practice and the RE share of installed capacity remains low. Current power market structure and support schemes require governments in the MENA region to be very active in stimulating private sector participation. In order to reach RE targets under current power market structures and schemes, it is crucial that governments increase the amount of tenders for PPAs and make sure to streamline these processes to become more certain and less lengthy.
Keywords
power sector
MENA
renewable energy
electricity markets
independent power producers
1. Introduction
In many parts of the world, electricity sector liberalization has been a hot topic of debate during the last couple of decades. In developed and developing countries, sector reforms have been associated with high expectations regarding positive impacts on the economical and technical performance of the power industry (Dyllick-Brenzinger and Finger, 2013). However, due to an energy situation historically characterized by vast amounts of cheap hydrocarbons, such prospects have been less interesting for the Middle East and North Africa (MENA), and in almost all countries in the region power sectors are still characterized by a high degree of vertical integration and state control.
Since the early 2000s several countries have undertaken reforms in order to open up the power market to private sector involvement. The reforms relate to a number of aspects, which differentiate the individual markets and their level of liberalization: unbundling of the power sector; introduction of independent electricity regulators; and opening up the market to private power generation for different purposes. This chapter serves to assess to what extent such reforms have taken place in the different MENA countries (Sections 2 and 3) and how such reforms affect the achievement of renewable energy (RE) targets (Section 4). Section 5 reflects the overall development and provides some policy recommendations to improve private sector participation in RE generation. It should be noticed that, due to the relatively late electricity sector reforms, the amount of studies on progress and results are particularly scarce when it comes to the MENA region.
2. Unbundling of the power sector
2.1. On the Reform of the Power Sector
Power markets worldwide have traditionally seen a high level of state ownership, monopoly, and vertical integration. High vertical electricity sector integration refers to a situation in which all stages in the electricity value chain (generation, transmission, distribution, and retail) are owned and operated by the same actor. Contrariwise, unbundling of the power sector defines a condition in which different segments of a system are separated into clearly defined entities. Many actors, such as the European Commission, see a separation of the different activities of the electricity system as one of the key preconditions for increasing transparency and fair competition in the power market. Specifically, unbundling ensures the promotion of private generation investments in a nondiscriminatory way through fair access to transmission and distribution for all actors (Manoussakis, 2009).
Unbundling of the power sector can take different forms in relation to the degree of vertical separation. At a general level, it is possible to distinguish between ownership, legal, functional, and accounting separation. The highest degree of unbundling is ownership separation, which refers to a situation in which all network infrastructure (transmission and distribution) is fully separated from the generation stage. In the remaining forms of unbundling, network activities and generation are to different extents separated, although still operating under the same ownership. Legal separation is the second strongest form of unbundling and is similar to ownership separation in the way that power sector activities are managed under companies that have separate boards and reporting systems, but operate under the same ownership. Functional separation requires network activities and generation to have functionally independent management units in which the transmission entity works in a nondiscriminatory way toward all power generation companies. The weakest form of unbundling is accounting separation, which requires the costs and assets associated with different activities to be reported separately.
It is important to note that there are some major controversies surrounding the debate on the advantages and disadvantages of unbundling and specifically in relation to the degree and type of unbundling. In Europe, the debate is focused around the importance of separating transmission from all sorts of generation activities. The European Commission claims that legal or functional separation is not sufficient to stimulate an acceptable level of competition within the electricity market (Gugler et al., 2013). In the Commission’s adopted package of energy proposals from 2009, ownership unbundling is highlighted as the preferred option of unbundling (Pollitt, 2008). The European debate to a large extent influences the MENA debate through various Euro-Mediterranean cooperation and integration initiatives. Nevertheless, distribution unbundling is likely to become an issue of debate in the near future, since the development of RE generation and smart grids raises the question of whether distribution unbundling favors or hinders innovation on this level (Meyer, 2012). Moreover, current disagreements and the fast development of RE and smart grids call for further and comprehensive discussions on what an unbundling of the electricity sector in the MENA region should actually look like.
2.2. Current Unbundling Situation in the MENA Region
In relation to RE deployment in the MENA region, there is general concern around the extent to which current distribution and transmission ownership arrangements can deliver transparent and nondiscriminatory access to the electricity grids. Some countries in the region have taken steps toward unbundling the electricity sector with different levels of ambition. Jordan is the country that is found to have come furthest in such development.
Since the establishment of General Electricity Law No. 64 in 2003, Jordan has put into operation a fully unbundled power sector characterized by ownership separation of generation, transmission, and distribution. One state-owned and three privately owned companies dominate the generation segment, in which 75% of total power generation is privately produced. Three private companies own and operate the distribution lines while the state-owned National Electric Power Company (NEPCO) owns and operates the transmission network (NEPCO, 2014). The General Electricity Law grants nondiscriminatory access to NEPCO’s transmission lines and the Renewable Energy Law from 2012 further obliges this company, as the single buyer in the market, to purchase all electricity produced, although without any priority access or priority dispatch for RE (Dii, 2014a).
While Jordan has implemented full ownership separation, most other countries with ambitions to unbundle have taken steps toward a legal or functional separation of their transmission operators. The most common way to accomplish such separation is to create a state-owned holding company with subsidiaries that separately operate the different activities within the power sector value chain. This type of unbundling can be found in Abu Dhabi, Algeria, Egypt, and to some extent in Saudi Arabia.
Abu Dhabi is seen as a pioneer when it comes to power sector liberalization in the United Arab Emirates given that Reform Law 2 from 1998 brought far-reaching structural changes including unbundling of the sector. All network activities and one power generation company are gathered as legally separated entities under a state-owned holding company, Abu Dhabi Power Corporation (Dyllick-Brenzinger and Finger, 2013). What distinguishes Abu Dhabi from other countries in the region is that a majority of the power generation has been privatized since the reform. However, a generation company still operates under the same ownership as the network companies. For this reason, the Abu Dhabi power sector cannot be categorized as fully unbundled. Dubai, which has the other dominating power sector in the UAE, is still characterized by a high level of vertical integration and has not been unbundled (IRENA, 2014).
In Algeria, Law 02-01 from 2002 provides for full ownership unbundling of the electricity sector. Until now, the country has implemented a form of legal or functional unbundling where generation and transmission have been separated into different branches under the state-owned holding company Sonelgaz Group. What makes Algeria different from other countries is its structuring of network activities. Transmission ownership and transmission operation have been separated and the distribution companies operate as single buyers. The transmission organization lays the foundation for a specific unbundling model, the Independent System Operator (ISO) model, which allows for a large number of transmission owners. However, studies of the Algerian power sector indicate that the process toward a higher degree of unbundling, including the creation of a market operator and an ownership separation, has halted. The law guarantees access to the grid without any priority access for RE projects. Once an RE project has been connected to the grid, priority dispatch is guaranteed by decree No. 06-429 from 2006.1
The Egypt Reform Law was adopted in 2001 and opens up a fully unbundled power sector. Today, the reform has reached an implementation level characterized by a form of legal or functional unbundling in which the Egyptian Electricity Holding Company (EECH) gathers all state-owned companies: one transmission company, nine distribution companies, and six large electricity generators. The transmission company operates as the single buyer and, even if not required by law, has in practice committed itself to purchasing all RE-generated electricity. In the network access contracts between the transmission company and the private power producer it is specified that RE electricity will have priority dispatch. Priority access and dispatch are foreseen to become a statutory reality in the new electricity law being drafted.
Saudi Arabia created the legal context for unbundling the power sector in its Electricity Law established in 2005. Except for a number of independent power producers (IPPs), all power actors are gathered under the Saudi Electricity Company (SEC). This is a joint stock company with a majority of its shares held by the Saudi government. Unbundling of the sector is progressing slowly but as an important first step the transmission company has been legally separated from any other power sector activities. The remaining power activities under SEC have reached the stage of accounting separation.
Another territory worth mentioning in this context is Palestine. Due to its particular situation, it imports most of its electricity needs from Israel directly via the distribution networks that are owned and operated by a handful of different municipally owned companies. There are no high voltage transmission lines and only one conventional power plant, which is not operating at the moment due to fuel shortage and its location in war-affected Gaza (Åberg, 2014). Nevertheless, there are prospects for high-voltage transmission lines – the Palestine Electricity Transmission Line Company (PETL) was introduced in 2010 – and power generation in the future. With such prospects in mind, the General Electricity Law No. 13 that was adopted in 2009 includes the legal context for unbundling the power sector (IRENA, 2014).
All countries in the MENA region that have committed to unbundling reforms are still in the process of implementing transparent and functional organizations and it is therefore a complex task to assess the extent to witch separate entities actually operate independently. The implementation of rather complex sector models takes time and the coming decade should be seen as a transitional period. For the enforcement of the legal provisions that are the basis for an open market, independent regulators will play a crucial role. All countries that have legally undertaken unbundling of the power sector have also established regulatory agencies. Agencies independent from political power and ministry control are generally recognized as a guarantee of regulatory commitment of a country, something that will promote investor confidence (Cambini and Franzi, 2013). Among the MENA countries, only the Jordanian Electricity Regulatory Commission (ERC) can be considered as somewhat independent. ERC is responsible for the enforcement of unbundling and can make decisions regarding tariff setting and third-party access of the grids without receiving approval or informing the government or parliament of its work (Cambini and Franzi, 2013). In contrast, the level of political independence of the regulatory bodies in Algeria, Egypt, Palestine, and Saudi Arabia has been shown to be low with the agencies mainly operating as advisory bodies to the governments which takes the final decisions on licensing, tariff setting, etc. (Cambini and Franzi, 2013; Åberg, 2014; Dyllick-Brenzinger and Finger, 2013) The regulatory body in Abu Dhabi has government representatives on its board and, for this reason, cannot be seen as administratively independent; however, it is said to have far-reaching regulatory powers in licensing and monitoring activities (Dyllick-Brenzinger and Finger, 2013).
As for the rest of the MENA countries and their power sectors, it is likely that some of them would to a certain extent fall under the category of accounting separation, at least in practice. Nevertheless, as long as no laws or electricity regulators have been established, these types of separations will not be considered unbundling (Table 11.1).
Table 11.1
Status of Power Sector Unbundling in MENA countries, 2014
| Country | Unbundling status | Electricity regulatory agency |
| Jordan | Ownership separation | Electricity Regulatory Commission (ERC) |
| Palestine | Ownership separation | Palestinian Electricity Regulatory Council (PERC) |
| Egypt | Functional or legal separation | Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) |
| UAE (Abu Dhabi) | Functional or legal separation | Abu Dhabi Regulation and Supervision Bureau (RSB) |
| Saudi Arabia | Functional or legal separation | The Electricity and Co-Generation Regulatory Authority (ECRA) |
| Algeria | Functional or legal separation | Commission de Régulation de l’Electricité et du Gaz (CREG) |
3. Renewable energy and private sector participation
Another important aspect of a liberalized power market is the level of private participation. While private participation in transmission and distribution remains very restricted, many MENA countries have opened up for private engagement in the power generation sector. Private participation in power generation activities exists in various forms, which are most often determined by law. It is possible to distinguish between private power generation for utility supply, third-party sales, direct export, and self-consumption. With the exception of the latter, which is sometimes referred to as autoproduction, all types of private power generation fall under the concept of IPPs.
IPPs typically build, own, and operate power plants to sell electricity either to the utility or to a third party. While the first option is a common and sound means for private actors to operate, third-party sales offer additional incentives for investors (Dii, 2013). A third-party supply option can be particularly appealing for larger industrial and commercial actors that have specific electricity needs that can be best satisfied by a third party. In any case, IPPs are particularly dependent on some sort of insurance, which guarantees that their generated electricity is being purchased to a fixed and long-term price (IRENA, 2014). A means by which states can provide such a guarantee and enable IPPs investment in RE projects are through public competitive bidding processes, direct proposal submissions, or feed-in tariffs, which all result in power purchase agreements (PPAs) with the state-owned utility (IRENA, 2014). In the case of third-party sales, a purchase guarantee needs to be assured via a bilateral agreement directly between an IPP and one or several large electricity consumers (Dii, 2013). The same type of bilateral agreement would apply for the unusual situation of direct export of electricity to another country. In addition, all IPPs need nondiscriminatory access to the grid in order to transport their electricity to their customers; such conditions need to be assured through legislation and regulated grid-transporting tariffs. Consequently, the overall number of IPPs in the market usually reflects the level of liberalization and competition as well as access to the market for private developers (RCREEE, 2013).
Private actors that generate electricity primarily for self-consumption (autoproducers), typically at large industrial sites, have often been seen as exceptions under traditionally strict state electricity monopolies. In the MENA region, autoproduction companies have often been state owned and not connected to the grid. Therefore, early autoproducers should not be seen as a sign of liberalization in the same way as IPPs (Dyllick-Brenzinger and Finger, 2013). Today, self-generation of RE can be an attractive way for households, private industries, and commercial actors to protect themselves from rising electricity prices and to a certain extent also against power outages. In order to encourage self-generation, the regulatory framework should allow RE-generating companies to feed any potential electricity surplus to the grid under some sort of net metering scheme. In addition, power-generating actors should be allowed to locate their RE generation plants outside their premises with the right to use the grid for wheeling of electricity to any area of use.
Most MENA countries allow for some sort of private participation in power generation activities and 17 out of 18 investigated countries have adopted legislation authorizing IPPs and/or autoproduction. Libya, which is the only country with a fully closed electricity sector, has a new electricity law underway which will open up for private participation also in this country. However, private sector participation in power generation remains limited in relation to RE-sourced electricity. While many countries have IPPs producing conventional electricity, Morocco and Abu Dhabi are in fact the only countries in which private actors own and currently operate renewable power plants (IRENA, 2014) (in Morocco in the form of a 50-MW wind park that has been in operation since early 2000 and in Abu Dhabi in the form of a 100-MW concentrated solar power (CSP) plant in operation since 2013 (MEMEE, 2009)). However, a number of RE IPP projects are now in the pipeline in Egypt, Jordan, Abu Dhabi, and Morocco.
In order to increase the share of private participation in the electricity sector, both overall legal structures and support mechanisms are needed. Previous studies of large-scale private participation show that support mechanisms directly affect the amount of private capacity being installed, while overall legal structures determine whether to invest or not in the first place (Fox-Penner et al., 1990).
3.1. Renewable Energy for Utility Supply
The majority of MENA countries authorize private power generation for utility supply (i.e., selling electricity to a single buyer). While direct proposal submissions are allowed only in 2 countries, 14 of the 18 MENA countries have introduced public competitive-bidding processes. Six of these 18 had officially announced tenders for some sort of RE project by the first quarter of 2014 (Fox-Penner et al., 1990).
What characterizes the MENA region regarding the possibility for private actors to produce electricity for utility supply is a lack of clear signals from governments. In most of the countries, private actors are fully dependent on government announcements of tenders and as a general rule competitive-bidding processes are only planned for one or two projects. To increase certainty for investors there need to be clear targets and predictability around the total number of RE projects to be developed through PPAs.
Egypt, Morocco, and Saudi Arabia are the only countries that have set targets for total installed capacity of RE to be developed through the IPP competitive-bidding approach. Morocco is well on track toward meeting its targets, which are to develop 1000 MW of solar and 1000 MW of wind power through competitive bidding (RCREEE, 2013). Some 350 MW of wind power and 160 MW of CSP have been awarded PPAs and the right to sell electricity to the utility ONE. As a second phase of both the solar and wind programs, another 850 MW of wind power and 300 MW of CSP are now in the tendering process.
Compared with Morocco, Egypt has seen large delays in its plans to develop 2500 MW of wind power through competitive bidding. Tenders were planned to be launched in blocks of 250 MW and the first of these tenders was issued in 2009. The project saw 10 bidders prequalify, but was later interrupted due to events linked to the revolution. In the last couple of years, the National Renewable Energy Authority (NREA) has talked about a relaunch of the 250 MW projects, as well as tenders for other PPA projects. Despite these ambitions, no announcements of competitive biddings have been made; instead, Egypt has launched an auction for the concession of land designated for private wind power projects. However, the auction differs from the previous projects in the way that it does not allow the sale of any electricity to the utility EETC. As a complementary measure to increase power generation for utility supply, Egypt moved forward with its long-awaited feed-in tariff scheme in 2014. The scheme will be applicable for projects up to 50 MW and allow both households and commercial actors to sell electricity to the utility companies.
Comparable with the Egyptian case, announcements of planned tenders have also been delayed in Saudi Arabia. In 2012, the country launched very ambitious RE targets that were followed up by a White Paper specifying the framework for three tendering rounds for PPAs with the state-owned Sustainable Energy Procurement Company (SEPC). The tendering rounds would allow for the development of between 5500 MW and 7800 MW of RE. The first introductory round was supposed to be launched in late 2013 but no official announcements have yet been made.
In addition to these countries, Jordan, UAE, and Tunisia are interesting cases despite the fact that they have not announced any targets for their competitive-bidding processes. Jordan encourages private participation in producing electricity for the grid, both through competitive biddings and direct proposal submissions for PPA. Jordan and Palestine are in fact the only MENA countries allowing direct proposal submissions. In Jordan, a total of 252 MW of solar and 90 MW of wind power projects have been awarded PPAs with utility companies. At the beginning of 2014, a 400-MW combined solar and wind tender was launched, but later interrupted due to grid problems and a rejected grid improvement grant from one of the Gulf Cooperation Council (GCC) countries. A relaunch can be expected as soon as solutions to the grid problems are found. In the UAE, Abu Dhabi was the first Emirate to announce and award a PPA tender for a RE power plant. Since 2013, a 100-MW CSP plant has been operating successfully; new tenders and a feed-in tariff scheme are expected in the near future. The last year witnessed promising steps toward possibilities for IPPs to produce electricity for the grid in Tunisia. The new RE electricity law that was adopted in September 2014 opens up the way for competitive bidding for private projects larger than 10 MW and for a feed-in tariff support for projects less than 10 MW. However, after being adopted the law was overridden by the constitutional court on the grounds of violations of certain constitutional articles. Nevertheless, there seems to be no disagreement on the actual content of the law, which is expected to be slightly revised and adopted again.
3.2. Renewable Energy for Third-Party Sales
In countries that allow for third-party sales and the possibility of establishing bilateral agreements between IPPs and large electricity consumers, new innovative business models have emerged and overcome some important barriers for both small and large-system RE deployment (Kollins et al., 2010). Yet, a very limited number of countries in the MENA region authorize private participation in the electricity generation sector for this purpose. Despite a more liberal approach toward private participation in general, the issue of third-party sales seems to be a sensitive political topic in many of the countries in the region.
Today, Algeria, Egypt, Morocco, Saudi Arabia, and Syria* authorize such a power generation option. In Morocco, Law 13-09 allows RE IPPs to sell electricity directly to large consumers and bypass the single buyer ONE. However, this option is to some extent being hindered by the fact that the medium-voltage grid has not yet been fully opened to third-party access. Despite these obstacles Morocco was able to apply this model in practice. In January 2013, the NAREVA Holding Company commissioned three wind projects with a total capacity of 200 MW to supply power to large industrial customers (Rouaud, 2013).
Egypt is relatively close to applying third-party sales in practice. Egyptian law allows for third-party sales from IPPs and the New and Renewable Energy Authority (NREA) has, in the first half of 2014, announced and awarded concessions for land in the Gulf of Suez earmarked for 600 MW of wind power. A private actor who intends to sell electricity to third parties was awarded the contract. The third-party option in Egypt seems to have been developed as an alternative to competitive-bidding plans that have been heavily delayed. Considering the low electricity tariffs in the country, it is unclear if the project will receive any type of economic support from the government.
Third-party sales would theoretically be possible in Saudi Arabia; however, this option is not part of the RE agency K.A.CARE’s plans and it is perceived to be difficult to develop projects outside this plan (Dii, 2014b). Similarly to the Moroccan and Saudi Arabian cases, third-party sale is legally addressed in Algeria (Law 02-01), but legislative availability has not led to any project so far.
3.3. Renewable Energy for Direct Export
A hot topic of debate during the last five years has concerned the export of RE electricity, particularly to Europe. Various cooperation projects on the interconnection of countries have taken place, but power export and import activities remain highly unregulated in MENA countries. As a result, the possibility for private actors to produce RE for export to other countries is very limited and all electricity-exporting activities that currently occur in the region are performed by national utilities (Dii, 2013). The region sees only few countries currently addressing RE electricity export in their legislation. These countries have a rather restrictive approach and at present not enough details have been specified to make export possible in practice.
The countries that legally address RE electricity exports are Morocco, Jordan, Algeria, and Tunisia. Law No. 13-09 in Morocco allows for export of RE-produced electricity by using the national grid and interconnections. Morocco foresees that any IPP that aims to export will be subject to technical approval by the state-owned utility ONE; however, details are still missing and transmission costs for exporting have not been specified. In Jordan, the General Electricity Law specifies that import and export is to be handled on a case-by-case basis relying on authorization by the Council of Ministers. In Algeria, the regulatory framework allowing RE electricity export exists but is not fully developed regarding the authorization procedure and other specifications. The national regulator will be the authorizer with the right to deny any approval if local electricity demand is not fulfilled. Tunisia has specified the conditions for RE-sourced electricity export in its new electricity law that is waiting to be adopted. According to Tunisia’s National Agency for Energy Conservation (ANME) export will be allowed under the new law but grids have to be built by the developer. The requirement for private actors to build their own grids will most likely constitute a great barrier to deployment of RE for export. The remaining MENA countries do not seem to foresee private export of RE as an option in the near future.
3.4. Renewable Energy for Self-Consumption
Actors generating RE electricity for their own consumption depend on some sort of regulatory possibility to feed surplus electricity to the grid whenever their electricity load profiles differ from their generation profiles. While many countries authorize self-generation in general, this chapter only considers countries that have schemes in place that allow feeding excess electricity to the grid under some sort of net metering scheme. Today, six countries, Jordan, Egypt, Lebanon, Tunisia, Palestine, and the UAE, have such schemes, which have seen different levels of success.
Jordan allows for self-generation and net metering through Law No. 13 adopted in 2012. The scheme states that projects up to 5 MW can be connected to the grid and use the net metering scheme to offset electricity consumption from the utility. Any projects with a larger capacity are handled on a case-by-case basis. The net metering scheme allows for any excess electricity at the end of the billing period to be purchased at a preferential price. Such monetary purchase of electricity usually provides an extra incentive for private investors; however, Jordan has set a restrictive cap on installed capacity and this results in very small quantities of excess electricity available for purchase. In a detailed case study of the Jordanian net metering scheme performed by the Regional Center for Renewable Energy and Energy Efficiency (RCREEE) in cooperation with Lund University, it was shown that the regulation fails to specify important details, which has resulted in difficulties and misinterpretations. A major uncertainty concerns how the industrial sector’s time-based electricity tariffs will be taken into account in the offsetting calculations. Presently, some 300 solar PV systems have been installed under the net metering option in Jordan.
Egypt adopted a net metering decree at the beginning of 2013. However, this scheme only applies to smaller scale solar PV projects connected to the low-voltage grid and no projects have yet been implemented. No mechanism that allows for larger autoproducers has been established, although the first RE self-producer project, an Italgen wind farm in the Gulf El Zayt near the Red Sea, is currently under construction. This wind farm with a capacity of 120 MW is expected to generate 500 GWh/year, and will satisfy approximately 35% of Suez cement factory electricity needs (RCREEE, 2013). It is unclear how this project is being supported by the government and if it will be allowed to sell excess of electricity to the grid.
In Tunisia, the overall details for self-generation with the possibility to feed excess electricity to the grid is determined in Law 2004-72 and its modification found in Law 2009-7 for energy conservation. It allows private actors to feed surplus electricity to the low-, medium-, and high-voltage grids under a net metering scheme. The scheme targeting the residential sector has been very successful in stimulating deployment of RE systems for self-generation; more than 2600 solar PV systems had been installed as of the end of 2013. However, the net metering scheme targeting the commercial and industrial sector has not been sufficient to stimulate investments even though it allows for monetary compensation of surplus electricity within the limits of 30% of what is being produced annually.
In territories with very high electricity tariffs, such as Palestine, a net metering scheme could be a very good way to incentivize private investments. This has been recognized by one of the distribution companies, Jordanian Electric Power Company (JEPCO), which has introduced its own net metering possibility for self-generation. No support mechanism for self-generation exists on a state level at the moment. However, Palestine’s interruption of its feed-in tariff scheme has led to revision of the country’s strategy to stimulate private RE generation, and a net metering scheme can probably be expected in the near future.
Morocco is the only country with large-scale, grid-connected RE autoproducers in practice: 32 MW belonging to Lafarge Ciments and 160 kW belonging to a shrimp-processing factory. These autoproducers were established as a result of a specific investment program launched by the country’s utility operator ONE in 2006. The EnergiPro program allowed industrial groups to produce their own electricity up to a capacity of 50 MW and the utility company guaranteed the purchase of excess electricity at preferential rates equivalent to 20% above the peak tariff (RCREEE, 2013). This specific program ended in 2012 and autoproducers are no more eligible to benefit from these incentives. However, a net metering scheme is under development at the time of writing this chapter.
4. Renewable energy shares and targets
The overall share of RE-sourced electricity in the MENA is relatively low in comparison with the region’s RE generation potential. By the end of 2014, total regional share of RE-installed capacity in MENA reached about 5%. The great majority (4%) of installed RE capacity comprises hydropower, which saw large deployment some decades ago. The total share of both wind and solar power is negligible compared with hydropower, although it does have significant growth targets attached. The only countries with any considerable, yet very small, amounts of installed wind and solar power are Egypt, Morocco, and Abu Dhabi. With the inclusion of Jordan, these countries also have the largest amount of RE capacity in the pipeline. While almost all countries have some sort of strategy for the development of RE, only a few have officially adopted RE targets. Among the countries that have the most ambitious targets and plans are Egypt, Morocco, and Jordan. These are all net importers of energy and have been heavily affected by rising fuel prices and increasing domestic electricity demand (Table 11.2).
Table 11.2
MENA Renewable Energy Targets, 2014
| RE targets | Target date | |||||||
| Wind (MW) | PV (MW) | CSP (MW) | Biomass (MW) | Geothermal (MW) | Total | |||
| MW | % | |||||||
| Algeria | 50 | 280 | 325 | 0 | 0 | 660 | 6 | 2015 |
| 270 | 800 | 1,500 | 0 | 0 | 2,570 | 15 | 2020 | |
| 2,000 | 2,800 | 7,200 | 0 | 0 | 12,000 × 25,000 | 40* | 2030 | |
| Bahrain | 0 | 0 | 0 | 0 | 0 | 0 | 0 | None |
| Egypt | 7,200 | 1,320 | 0 | 0 | 11,320** | 20* | 2020 | |
| 0 | 700 | 2,800 | 0 | 0 | 3,500 | 2027 | ||
| Iraq | 50 | 200 | 50 | 0 | 0 | 300 | 2 | 2017 |
| – | – | – | – | – | 5 | 2030 | ||
| Jordan | 1,200 | 500 | 100 | 50 | 0 | 1,850 | 10† | 2020 |
| Lebanon | 60–100 | 10 | 0 | 15–25 | 0 | 125–165‡ | 12 | 2015 |
| Libya | 260 | 124 | 0 | 0 | 0 | 384 | 3 | 2015 |
| 600 | 344 | 125 | 0 | 0 | 1,069 | 7 | 2020 | |
| 1,000 | 844 | 375 | 0 | 0 | 2,219 | 10* | 2025 | |
| Morocco | 2,000 | 2,000 | 0 | 0 | 6,000§ | 42¶ | 2020 | |
| Palestine | 44 | 45 | 20 | 21 | 0 | 130 | 10* | 2020 |
| Syria | 1,000 | 2,000 | 1,300 | 250 | 0 | 4,550 | 30 | 2030 |
| Sudan | 680 | 667 | 50 | 68 | 54 | 1,582†† | 11¶ | 2031 |
| Tunisia | 1,500 | 1,900 | 300 | 300 | 0 | 4,000 | 30¶ | 2030 |
| Yemen | 400 | 8.25 | 100 | 6 | 160 | 674.25 | 15¶ | 2025 |
| UAE – Abu Dhabi | – | – | – | – | – | 1,500 | 7 | 2020 |
| UAE – Dubai | – | – | – | – | – | 3,000 | 15 | 2030 |
| Saudi Arabia | 9,000 | 16,000 | 25,000 | 3,000‡‡ | 1,000 | 54,000 | 30 | 2032 |
| Kuwait | – | – | – | – | – | – | 15 | 2030 |
| Qatar | – | – | – | – | – | 1,800 | 20 | 2024 |
Source: RCREEE (2013).
* Electricity generation.
** Including current installed capacity of hydro.
† Primary energy.
‡ Including 40-MW hydro.
§ Including 2000-MW hydro.
¶ Installed capacity.
†† Including additional 63-MW hydro.
‡‡ Waste to energy.
To increase the installed capacity of RE, most countries are dependent on a combination of both public and private investments. Many MENA countries have laid the foundation for private participation in conventional power-generating activities and should be able to create significantly better conditions for RE private generation without making any major structural changes in the short term. Under current market structures, all MENA countries need to promote a higher degree of legal certainty through further developing, implementing, and enforcing the existing legal frameworks. This includes the development of detailed secondary regulation to support current general electricity laws as well as enacting new specified RE laws. In the MENA, where power sectors are still characterized by a high level of vertical integration, it is particularly important to regulate RE grid access details and transmission costs. The countries that have come farthest oblige the single buyer to purchase all RE electricity produced; however, such a guarantee is not enough to stimulate investment certainty. The nature of solar and wind technologies in combination with few storage options requires that developers can feed their electricity to the grid at the time of generation; this can only be assured by regulating priority dispatch. The obligation for the single buyer to purchase RE electricity should in turn always be combined with priority access, which ensures that RE projects are granted priority if several actors are requesting access to the grid in a certain location. If not, there is a potential risk that RE projects that request approval for grid connection are being delayed. To further increase legal certainty, an electricity regulator with responsibility for tariff setting, license issuance, and overall power sector monitoring should be established. It has been shown to be challenging for a number of MENA countries to transfer responsibility to the regulator and this might have to be done gradually.
5. Conclusion – policy implications
In addition to increased legal certainty, most MENA countries need to improve and diversify the possibility for the private sector to participate in RE power generation activities. As shown in this chapter, most countries in the region allow private participation through utility supply but very few enable RE power generation for third-party sales, export, or self-generation. The focus on PPAs for utility supply, mainly through competitive-bidding processes, has put the private sector in a situation in which it is heavily dependent on the government to take initiatives for tenders. With that being said, it should be stressed that PPA tendering is an important and good way to stimulate large-scale RE projects, given that the processes are effectively executed. Conversely, the situation today shows that tendering processes in many countries have proved to be complex and lengthy, causing great delays and uncertainty among investors. This situation can be improved through streamlined tendering processes instead of a case-by-case approach. More streamlined and predictable tendering processes will hopefully encourage governments to announce more tenders, something absolutely necessary to meet ambitious RE targets. Good experiences from RE tendering for PPAs can be found in Morocco and this knowledge must be spread to the rest of the region.
As for other options for private actors to participate in RE power-generating activities, self-generation and alternative utility supply options seem to be most relevant in the near future. Export alternatives have been given a lower priority due to increasing domestic electricity needs and lower interest from European countries to import RE-sourced electricity from MENA. Likewise, third-party sales have been given a lower priority due to the fact that enabling this option seems to be a rather sensitive topic even among countries that have come far in their power market liberalization process. However, an alternative that becomes particularly interesting with rising electricity prices is self-generation under a net metering scheme. Net metering schemes with the possibility to sell surplus electricity to the grid are suitable ways of encouraging both small- and large-scale electricity consumers to become RE producers. It is however a somewhat complex task to design net metering schemes suitable for different contexts and consumer segments. Experiences in Jordan and Tunisia show that regulated grid access details and standardized authorizing and licensing procedures are crucial. A handful of MENA countries have experience in the net metering field, and sharing that experience within the region could be a very good start. A complementary option should be to proceed with alternative utility supply options such as direct proposal submissions and feed-in tariffs.
In addition to the measures mentioned to strengthen current structures, it is important for all countries to focus on how their power markets can become more open and transparent. Some actors would argue that full unbundling of the power sector would be needed to guarantee transparency and nondiscriminatory access to grids. However, it is recommended to investigate at the regional level how and if the MENA region would benefit from different levels of power market unbundling. As shown earlier, there are major disagreements on the topic of unbundling and most recommendations done in the academic literature and by the European Commission have not taken into account the fast development of RE and smart grids. Before moving on with unbundling, these aspects should be investigated.
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