Opportunities around the cornerAssessing market development in the MENA region

David Williams, Senior Consultant, Strategy & Policy < david.williams@gl-garradhassan.com >

Co-authors: Usama Said Khalid Klabi

DRAFT

MENA, a region with…

Contents:

• … fast growing demand for electricity • costly alternatives • strong resource • increasingly supportive policy

– all on our doorstep….… too good to be true?

1. The Ambition2. The Drivers3. The Barriers4. The Opportunity

DRAFT

The Ambition

Morocco• 42% RES-E• 2-2.2GW

wind

Algeria• 15% RES-

E• 270MW +

“exports”

•2020 Plans add up to at least 13 GW• Equates to 1.8 GW /yr – more than current total

installed•But will this be realised?

Egypt• 20% RES-

E• 7.2 GW

Lebanon• 10%

RES• 1.2 GW

S.A.• 9 GW

by 2032

U.A.E.• 7%

RES-E (Abu Dhabi)

Jordan• 10%

RES• 1.2 GW

Iraq• TBC

Syria• TBCTunisia

• 2.7GW by 2030

Libya• TBC

IEA forecasts MENA region will see

7%of power supplied by renewables in 2030

DRAFT

1. Demand for power

Population growth and improving economies

give a forecasted

7%CAGR in GDP growth to

2017

Creating a forecast of

7%annual increase

in power demand to 2020

Capacity Shortages

are noted across the region – particularly for

peak demand

The Drivers

DRAFT

2005

2006

2007

2008

2009

2010

-400

-300

-200

-100

0

100

Net I

mpo

rts as

% o

f Ene

rgy U

se

2005

2006

2007

2008

2009

2010

-400

-300

-200

-100

0

100

Net I

mpo

rts as

% o

f Ene

rgy U

se2. Energy Security

The Have Nots…

Lebanon (+ 97%)Jordan (+ 96%)Morocco (+ 95%)

Tunisia (+16%)Egypt (-21%)Syria (-27%)

The Haves….

UAE (-184%)S. A. (-218%)Iraq (-233%)Algeria (-273%)Libya (-362%)

…not all are so resource-rich

…often dependent on limited supply sources

…but must consider rising domestic demand and declining production - “don’t get high on your own supply!”

The Drivers

DRAFT

3. Costly alternatives

…oil remains widely used for power production in the region - plants run from both Heavy Fuel Oil (at global oil prices costing upwards of $120/MWh) and middle distillates (upwards of $150/MWh)

The Drivers

0 10 20 30 40 50 60 70 80 90 100

% of oil in electricity generation

Lebanon

Iraq

Libya

Saudi Arabia

Syria

Egypt

Morocco

Jordan

Tunisia

Algeria

UAE 2

2

9

11

20

21

50

55

59

93

94

Chart of Oil in Electricity Generation ClassificationDominantHighNotableLowVery Low

About Tableau maps: www.tableausoftware.com/mapdata

2%

2%

11%

9%

20%

21%

50%

59%55%

93%94%

Map of Oil in Electricity Generation

DRAFT

Ma p show s th e m ean w ind speed in [ m/ s ] at a height of 50 m a.g .l.over the actual la nd surface. R esu lts w er e obtained w ith the KAM Mm esoscale m ode l, with a g r id reso lution of 7.5 km . Te rra in featureslike hills and esca rpm ents m ay enh ance the w ind s peed locally.

Political boundarie s e tc. f rom Wo rld Da ta B ank I I .Co astlines and lake s from W or ld Vector Sho re line.Co m piled and plo tted a t R isø N ational Laboratory,as part of th e "W ind Atlas for Egypt" project.0 50 100 150 200 250

0 100 200 300 400 500 600 700 800 900 1000 1100 1200

Easting [ km]

2400

2500

2600

2700

2800

2900

3000

3100

3200

3300

3400

3500

3600

North

ing

[km

]

NW M7

Hurghada WETC

Abu Simbel

El -Mathany

El- Gala laAlexandria

Nuweiba

Nabq

Katamaya

Zafarana

Saint Paul

Ras Ghareb

Gulf o f El- Zayt

Kharga

Dakhla Sout h

Shark El-Ouinat

El A rish Port Said

El-Suez

Abu Darag

Hurghada AP

Kosseir N

Kosseir S

Sidi Barrani

Ras El-H ekma

Ras Sedr

NW

Farafra

Asswan

Lake Nasser

Toshka lakes

Red Sea

Medi terranean Sea

22°N

23°N

24°N

25°N

26°N

27°N

28°N

29°N

30°N

31°N

32°N

25° E 26°E 27°E 28°E 29° E 30°E 31°E 32° E 33°E 34° E 35°E 36°E 37°E

0 .0 4 .0 4 .5 5 .0 5 .5 6 .0 6 .5 7 .0 7 .5 8 .0 8 .5 9 .0 9 .5 10. 0

4. Strong Resource

The Drivers Egypt map based on dedicated measurements identified 10 m/s + sites on

Red Sea coast…

… positive signs elsewhere but limited ground-based measurements available

AlgeriaSaudi Arabia

ESMAP

Measurement initiatives underway with:

DRAFT

5. Green Agenda, diversification, export, industrial policyThe Drivers

S.A.UAE

9 other

MENA countrie

s

German

y0

5

10

15

20

25

30

35

Tonn

es C

O2 /

Capi

ta

“Develop inter-related national industries” K▪C▪Care, Saudi Arabia

“Tenders … give privilege to local components” NREA, Egypt

“Jordanian origin…20% increase on tariff” Electricity Regulatory Commission, Jordan

Create EU markets for desert power

Ensure transmission

Facilitate desert power generation

Create NA markets for desert power

Create ME markets for desert power

DESERT-TECH

DRAFT

1. Overall Capacity (although growing quickly)

The Barriers

≈2. Grid Infrastructure (but developments are planned)

• GCC Interconnection Authority

• Maghreb Countries Interconnection Project

DRAFT

3. Market Liberalisation – single buyers and subsidies

The Barriers

4. Political Risk

• Quantity is controlled and planned by single state-owned buyers• Public build or “BOO” style competitive tenders on public land

common (Egypt, Morocco, Jordan)• Subsidised electricity puts financial pressure on off-taker• Government guarantees required

• Project often in remote areas• Only states on the Arabian Peninsular free of travel warnings• Has influence on cost of financing and contractor options

5. Institutional capacity• Issues noted in Egypt and Jordan

DRAFT

Role for European players

Site Development•Restricted but

opportunities exist•Major international

utilities interested in Egypt

•More niche players in Jordan

Turbine Supply•Clear opportunity•Local content desired but

markets too small for domestic WTG supplier

•Preference for European turbines but Chinese competition is possible

O&M•Under turbine supply

during warranty•Public-owned sites

looking to take on themselves after warranty

•Could see domestic competition

The Opportunity

DRAFT

Thank you

David.williams@gl-garradhassan.com

DRAFT