Finergreen is a financial advisory boutique specialising in renewables and energy efficiency projects.
Renewable energy is fast becoming a core part of Middle Eastern countries’ strategy to diversify away from fossil fuels, creating a promising growth opportunity for the renewable industry.
“Governments have understood that shifting from a pure oil-driven economy to an energy mix comprising renewables makes more economic sense,” Poussard states.
Nonetheless, not all the countries in the region are moving at the same pace, as the impact of reducing subsidies is different in the context of each local economy.
“Removing oil subsidies for local consumption can heavily impact consumers’ appetite, and this can have a negative effect in economic growth,” Poussard adds.
A slow down for some
Despite initial ambition, a few countries are slowing down renewables deployment for technical reasons. For example, auctions and new licenses have been suspended in Jordan until the Jordanian government has assessed the capabilities of its power network.
“In Lebanon, among other events, the current political situation has resulted in tenders being on a standstill, however, energy and infrastructure are still core priorities, and governments are working hard to keep up the pace of development,” Poussard says.
Aggressive competition in the bidding process is another challenge players will need to take into consideration, especially when it comes to solar developments.
In October 2019, a record-low bid led by Saudi developer ACWA Power was reportedly submitted for the Dubai Electricity and Water Authority’s tender for the fifth phase of the landmark Mohammed bin Rashid Al Maktoum Solar. The 900MW solar tender allegedly attracted a bid of US$16.953 per MWh.
“There is less appetite from second-tier IPPs in the medium-term. Even top tier players will be more cautious and selective in the tender they decide to participate in,” Poussard adds.
Contrary to solar tenders, in which there is less room for innovation and technology cost reductions are subject to the race for economies of scale, wind tenders have more room for added value and technical improvements to achieve better pricing.
Distributed renewables are the opportunity in disguise
“The commercial & industrial (C&I) market is booming, and is offering alternative opportunities for smaller developers,” Poussard says.
For example, Dubai Electricity & Water Authority (DEWA) has launched the Shams Dubai initiative, which aims to deploy solar energy in buildings, as part of the Distributed Renewable Resources Generation programme to support its ambitions to make Duai a landmark smart city.
“Large-scale projects are at the forefront because of their size, but there is a lot of appetite for distributed solar, spanning from private-wire PPAs to rooftop solar projects for big factories,” he adds.
More than 125MW of solar capacity has been added so far under the Shams net metering programme since its 2014 launch, and the programme is gaining momentum. For example, in September 2019, Nestlé inaugurated the UAE’s largest ground-mounted private solar PV facility of 5.5MW alongside its Al Maha factory in Dubai and Port operator DP World is developing 20MW solar PV on rooftop and carpark premises, boasting the largest rooftop PV project in Middle East.