MARKET I OPINION
specific to the renewable energy sector is vital. Although a majority of countries in the area have made progress towards establishing policies and the legal and regulatory frameworks essential to supporting renewable energy development, their extensiveness varies considerably across the region.
The knock on effect of this is that it creates ambiguity for those companies attempting to access the MENA domestic energy markets.
Leading the way in this respect is Jordan, as it has developed a clear renewables programme. This programme includes a feed-in tariff structure and specific laws to specifically support the sector.
Additionally, it has set out a flexible tender process under which renewable energy projects can be developed in response to Government tenders or proposed directly to the Government by developers. On-site generation is also promoted. Investors have expressed a great deal of interest in Jordanian renewable energy projects, primarily due the certainty created by the well-defined programme there. Investors also see Jordan as a passage towards other potentially more lucrative - but currently less active - MENA markets, such as Saudi Arabia.
Debt financing – encouraging signs The ability to find debt financing for projects also fluctuates markedly throughout the region. The countries without significant natural resources typically have somewhat lower credit ratings
than those countries that do. This impacts upon the capacity of some banks and financial institutions to provide assistance. An important role will be played by the development banks, export credit agencies and multi-laterals.
Vitally, a number of these bodies have already shown a willingness to invest in the region, including to nations with lesser credit ratings. For example, both the European Investment Bank and the International Finance Corporation have provided a considerable amount of debt to facilitate the funding of projects in Jordan and Morocco.
Conclusions
Overall, although there are obvious challenges facing the MENA renewable energy sector, the progress demonstrated over the last two years is promising. This is highlighted by the fact that according to the International Energy Agency’s World Energy Outlook 2012, the share of power generated through renewables is set to climb from just 2% in 2010, to 12% by 2035.
When considered in conjunction with estimates by the World Bank that by 2040, the total investment needs of MENA’s energy sector will exceed $30bn a year – or about 3% of its projected GDP – this is extremely encouraging. Our opinion, based principally on the drivers which make renewables a credible solution, is that the region represents a market on the brink of success.
©2014 Permission required. Angel Business Communications Ltd.
Issue V 2014 I
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