Technological advances and government climate targets are seeing a boom in global renewables investment. The MENA region is seeing a sea change but Africa trails due to financing and infrastructure.
The MENA region has become an attractive investment opportunity for renewables due to its abundant resources in solar and wind. Estimates for 2020 saw renewable energy investment of $35 billion per year by 2020. The MENA region has also received some of the lowest renewable energy prices awarded globally for solar PV and wind energy. This is understandable when you compare the climate to that of the harsh North Sea in the UK. Logistics operations become costly and construction can be halted by extreme weather.
Saudi Arabia, which was at the heart of the global crude oil industry, has been making strong moves into the solar energy space in recent years. Saudi Arabia has one of the world’s highest solar irradiation in the world, which has been estimated at 2,200 thermal kWh of solar radiation per m2. The country has also launched a Vision 2030 document that sets out a strong regulatory and investment framework to assist the development of the Saudi solar energy industry, which will be partly funded by the $2 trillion sovereign fund.
Saudi Arabia are being forced to adapt in the same way that fossil fuel majors are having to change their business models. Aggressive climate targets by governments are also aligning with social pressures on investment funds to divest from fossil fuels and companies or countries have to follow the early-adopters or be left behind.
The chart below highlights the expected growth by country/region into 2024 and if we base the figures on a per capita basis, the MENA region is actually in a strong position for investment and growth.
Among the MENA countries, there are crude oil outliers who are making early moves into the renewables sector. Morocco has been one of the countries that has emerged as a role model for the region. The government set an ambitious target of 2GW of solar and 2GW of wind power by 2020 and the commissioning of the Nour-1 Solar project was a boost towards that goal. Despite the country still having ties to crude oil, they are actively involved in preparing for a life beyond fossil fuels.
Renewable energy is also in its early stages in the natural gas hub of Qatar. Solar PV and concentrated solar power are well-suited to the local climate and big efforts are already ongoing to tap Qatar’s vast potential in this area. The country also sees moderate wind speeds which can be used for small wind turbines to produce small amounts of electricity at remote locations.
Middle East’s Largest Wind Farm Reaches Halfway Stage
Saudi Arabia’s largest wind farm project has reached the halfway stage with the 400-megawatt (MW) project being developed by a consortium which is led by EDF Renewables and Masdar, two of the world’s leading renewable energy companies.
The project is the largest in the Middle East and the installation of the first turbines began on the site, located 900km north of Riyadh, in August 2020.
The project is another hint that the renewables majors are moving beyond the domestic sources as they seek diversification. One reason for this is the move of companies such as BP into the UK wind sector, which saw the company paying a huge fee for the rights to a new project in the Irish Sea. As the fossil fuels leaders try to play catch up, the bidding has increased, and MENA projects will become more attractive to global firms.
Investors in Africa Focus on Transition with Energy Crisis
The Middle East is moving more smoothly to the use and development of renewables but the African nations are looking at a slower transition with the help of natural gas and fossils.
The power of vertically integrated utility companies is likely over after the problems at South Africa’s Eskom. In the post-pandemic world, it has been suggested that all of the 50 plus African utilities are technically insolvent. The risks to power supplies have grown from this and
The outlook for the MENA region, like all world regions, will follow a lot of the same trends as oil and gas investments. Infrastructure and political stability will rule over the abundance of resources and investors will flock to the Middle East first.
The majority of African governments never fully recovered from the 2014 oil slump and have been pressured ever since to balance the books. They don’t have the freedom to tap sovereign wealth funds, and this will slow the moves towards carbon free energy in Africa.
For the African region there will likely be a transition where coal can still be used if it is combined with the latest carbon capture and storage technology, while natural gas could be used for larger energy needs, while domestic needs are addressed by small-scale solar.
Global Green Energy Trends Predict a Big Future
Global green energy trends are highlighting a tectonic shift towards renewables and the MENA region will attract investors for its resources and investment potential.
The US Energy Administration reported that the end of 2020 saw consumption from green energy sources exceeding coal for the first time in 134 years.
These types of trends are becoming common place and the sun looks to be setting on the oil industry. The previous world leaders in the crude space will now be sweating on their energy dominance and we may be witnessing the end of global energy exporting powers, where countries are domestically focused. This will be a blessing for the energy importers, but a curse for the exporting regions. The Middle East will continue to be attractive to the major project developers, but Morocco has shown the way for African nations and independents to follow.
The MENA region is still hot on the heels of other regions as it seeks to reinvent itself as a green energy power.
