Released at an event in Paris on 20 March 2013, this report makes the case for stronger deployment of renewable energy in the MENA region, and identifies the appropriate support policies for MENA governments to work towards this goal.
The combined effects of the economic crisis and the recent popular uprisings in parts of the Middle East and North Africa have brought social and economic challenges back to the centre of attention of policy makers. For governments searching to create jobs, to satisfy the growing energy demand of their populations and to diversify their economies, the appeal of renewable energies is strong. However, the right policy framework and support need to be put in place if the region wants to attract private investment in the sector and reap the benefits of its favourable resource endowment, especially as regards solar and wind energy.
This report makes the case for a stronger deployment of renewables in the Middle East and North Africa and identifies the appropriate support policies required to stimulate the necessary private investment. An assessment of existing policy frameworks in the region and examples from OECD good practice are used as pointers to help guide policy makers in their choices.
The analysis contained in this report suggests that support policies targeting the life cycle of renewable energy projects such as feed-in tariffs and power purchase agreements are more effective and less distortive than policies subsidising the initial investment, such as cost reductions. The optimal incentive scheme provides investors with stability through a guaranteed but declining minimum return while imposing enough market risk to foster technological progress.
This report was prepared by the Task Force on Energy and Infrastructure within the framework of the MENA-OECD Investment Programme.
Why invest in renewable energy in the MENA region?
Energy demand is expected to continue to rise in MENA above the world average from 2010 to 2030:
> Energy consumption in MENA has risen on average by 5.2% a year since 2000
> Demand for electricity is further spurred by a growing population, increasing at a regional average of around 2% a year since 2008
The MENA region has one of the highest solar and wind energy potentials in the world:
> The Atlantic and Red Sea coasts and some parts of the Sahara Desert have potential for large-scale wind farms, as the wind speed in these areas exceed 6.9 meters/second
Renewable energy creates much-needed jobs:
> To produce the equivalent quantity of megawatt hours, solar photovoltaic plants use on average seven times more labour than coal-fired plants according to the UN and the ILO
> Wind power uses on average 1.83 times more labour than natural gas
Renewable energy contributes to economic and inclusive growth by:
> Encouraging the transfer of skills and technology from foreign investors
> Bringing electricity to rural and under-developed areas
> Increasing women’s economic empowerment