In North Africa, the renewables sector has great growth potential, but the market needs to be improved: rules, political stability and depowering the fossil sector.

The Benban Solar Park in Egypt is the fifth largest in the world. A pharaonic project, so to speak, built about 40 km from the great Aswan Dam, a marvel of modern engineering. Located in the heart of Egypt's southern desert, the 1650 MW project was completed in late 2019 and is now a key contributor to Egypt's energy mix. 
The Benban Solar Park is a part of Egypt’s Nubian Suns Feed-in Tariff programme, which is a major initiative influencing private sector capital and expertise, and currently reaching the goal of generating 20% electricity from renewable resources by the end of 2022. This is an extremely important achievement, given that Cairo has planned to achieve 40% energy from renewable sources by 2035. "Egypt's energy sector reforms have opened a big window for private investment", said World Bank President David Malpass during a visit to Benban Solar Park.

A new renewables era in the Mediterranean?

For many investors, the realisation of Benban was an important signal, and there is now starting to be talk of a new window of investment opportunities opening in the southern Mediterranean, especially in two key countries, Egypt and Morocco (not covered in this article is Israel, which has a target of 30% renewables by 2030 and an investment of $22 billion).

For many energy analysts, North Africa is an elite location for renewable energy, offering space, solar exposure and reduced bureaucracy. In the long term, they speculate it will be a major hub for hydrogen from electrolysis, taking advantage of surplus production from photovoltaic sources. "We are seeing interesting growth in many countries, Morocco, Egypt, Jordan," explains Francesco La Camera, director general of IRENA, the International Renewable Energy Agency, an intergovernmental organisation that supports countries in their transition to sustainable energy, "as renewables are reconfirmed as the cheapest form of energy production in 2022".

The growth potential of renewables is enormous, given that the region currently remains heavily dependent on fossil fuels. "Today, 3-4% of energy in the North Mediterranean region is produced by renewables," says Roberto Vigotti, secretary general of the Res4Africa Foundation and a leading expert on the North African renewables market. "Growth rates are low. If we look at what has happened in the last ten years, globally 1,360 gigawatts have been added, compared with only 14 gigawatts in the southern Mediterranean, which is about only 1%". There are many reasons for this slow development: the lack of national energy authorities, an uncertain regulatory framework, and the absence of a roadmap that would concretise goals. "Exchanges of energy and know-how are also limited, due to political and infrastructure issues", Vigotti continues. "In addition, all public energy companies are loss-making and inefficient".

Although still heavily dependent on the fossil fuel industry, the region has political, social and economic stability interests related to climate change. "Although they have historically emitted less than European countries, these countries need to do their part", Vigotti explains. By the end of the century, daytime highs in the MENA region could reach 50°C, with 200 days of exceptional heat every year. Cities in the region may become uninhabitable before 2100. The region has almost continuously been subject to drought, with the current dry period the worst in 900 years. This situation might be a push factor for migration, generating between 10% and 20% of total migration in the region.

Political stability and clear rules

The regulatory framework, especially for foreign investment, is crucial, and although improved in recent years according to interviewees, especially in Morocco and Egypt, strong fossil fuel interests in the region have every incentive to preserve an unclear development framework (especially in Libya and Algeria, two fossil energy giants). “ Clear rules are needed for both European and African investors", Vigotti continues. "Otherwise, with the risk that the cards are changed when the bidding is open, investors will no longier pareticipate. We need transparency, speed and bankability".

The macroeconomic picture is also negatively impacted, particularly the negative effect of the generous fossil fuel subsidies that states provide, both to support industry and to subsidise the population's energy consumption. "We need plans to transition from the fossil fuel industry to renewables, with plans to reskill workers", Vigotti continues. “This region has a tremendous opportunity to leapfrog some of the problems already encountered on European electricity markets, where renewables have been imposed on a market designed based on fossil fuels. MENA countries could embed vital lessons in the design of their own electricity markets”. It is, therefore, up to diplomacy to work to improve conditions to develop the renewables market and foster cooperation between private European companies with those in North Africa.

Support is also needed from multilateral investment banks for grids. "In North Africa, there is considerable room for off-grid projects and mini-grids in particular", explains La Camera, while "transmission network infrastructure needs to be carefully developed". Currently, there is a high rate of unreliability in the grids of countries on the southern shore of the Mediterranean, with widespread brownouts and blackouts. Res4Africa recently launched a project, Grid4Africa, to create a better public-private role in grid management, with improved stewardship of existing grids and assistance from digital technologies, from drones to smart meters, to improve grid performance. But much remains to be done.

READ ALSO: Climate and circular economy for a thriving Mediterranean region

The case of Morocco

Morocco has a total installed generating capacity of about 11,000 MW; of this, 4,030 MW consists of renewables. An additional 4,516 MW of renewables is under construction or planned.

King Mohammed VI, who has ruled the country for 23 years, has always been a strong advocate of solar and other renewables. Forbes dubbed him “a new kind of sun king”. The goals include exporting energy to Portugal and Spain, developing hydrogen plants and expanding the country’s grid with a third connection to Europe, flowing both ways. The country is currently the most appealing investor destination.

In addition to setting long-term targets (and enshrining the right to sustainable development in the constitution), Morocco sought to provide the legal and regulatory framework to roll out its broader transition strategy, aiming first and foremost at market creation. Since then, subsequent legislation was passed that allows tendering and auctions for large-scale solar and wind projects, encouraging private investments in the sector. Other enablers of success have focused on fostering investor and lender confidence by creating competent “one-stop-shop” agencies, including the Moroccan Agency for Sustainable Development (MASEN); ensuring strong institutional off-takers; and increasing institutional capacity. This is surely a successful example that could become a model for many Arab countries.


An article by Emanuele Bompan