Amidst the high hopes surrounding the Middle East’s drive towards renewable energy, and solar power particularly, the reality is that the pace of deploying commercial procurements has been sluggish to date. Marc Norman writes from Dubai.
Jordan has an aim to increase the share of renewables in its energy mix from around 1% currently to 10% in 2020. The country, arguably the most active renewable energy market in the Middle East, has initiated the second round of its unsolicited proposals scheme that permits developers to submit renewable energy project proposals directly to the government.
This process has seen the Kingdom’s Ministry of Energy and Mineral Resources, or MEMR, seeking expressions of interest from qualified investors interested in developing renewable energy projects on a build, own and operate basis.
This round, which is restricted to wind and solar power, follows a first round of unsolicited proposals, in May 2011, which extended to an array of renewable energy sources such as wind, solar, waste and geothermal. The first round saw 34 applications including 12 wind projects, 15 solar photovoltaic projects, two concentrating solar photovoltaic projects and five solar thermal projects qualified initially. However, only two wind projects and 12 solar PV projects were eventually approved. The aggregate capacity of the two wind projects is around 200 MW, and the aggregate capacity of the 12 solar photovoltaic projects is also around 200 MW.
The launch of the second MEMR round prior to the completion of the first round has surprised the market, but it is consistent with Jordan’s aim to increase its share from renewables and reduce its dependence on imported energy – 97% of the energy it used in 2011 was imported.
International renewable energy developers should view Jordan as a place to plant a flag in the Middle East and eventually as a stepping stone toward other high potential, but currently less active, regional markets, including Saudi Arabia with its colossal programme to procure 54 GW of renewable energy facilities by 2032.
But, in the Middle East as a whole, few renewable energy tenders have recently come to market. At present, the key Middle Eastern renewable energy markets alongside Jordan, are Saudi Arabia, the United Arab Emirates, Kuwait and, with some reserve, Qatar.
The MEMR process
An applicant’s expression of interest to Jordan’s MEMR must include a description of both the applicant and the project, evidence of the applicant’s technical capability and experience and a demonstration of the applicant’s ability to raise debt and equity. The applicant must provide a project description, including the location with coordinates on a map, capacity and estimated generation per year and envisaged wind or solar power technology.
In the first round, MEMR chose to focus most of its efforts on the southern region of Ma’an and, in particular, a 9 km2 zone dubbed the Ma’an Development Area (MDA). The MDA is attractive because the applicable regulatory and administrative regime is more streamlined and flexible than would otherwise be in Jordan, and the fiscal regime is also more advantageous.
The MDA is also attractive from a resource standpoint. The area had been earmarked as the best location in Jordan for concentrated solar power projects by Lahmeyer International, a German-based technical advisor. MEMR’s initial focus in the first round was on concentrated solar power. In the second round, Jordan wants to shift the focus away from the Ma’an region towards the northern and eastern parts of Jordan. MEMR said explicitly in its expression of interest request that submissions for projects in those parts of the country will be prioritised.
The key driver behind this geographic shift is to ease the pressure on the already fragile grid in the southern part of the country. The grid in the northern and eastern parts of Jordan is currently less saturated.
But, the northern and eastern parts of Jordan may pose a number of challenges to wind and solar developers. First, there is no MDA equivalent; although, there are rumours that the granting of development area status for a specific parcel of land is being considered. Second, the northern and eastern parts of Jordan are more industrialised than the Ma’an region, which could lead to complications, particularly in terms of land rights and permits. Third, proximity to the border with war-torn Syria cannot be ignored; certain plots being targeted by developers are only around 25 km from the Syrian border, and even closer to the growing refugee camps inside Jordan.
A ‘reference price list’ prescribes the pricing mechanism for the purchase of electrical power from renewable energy sources in Jordan. It is issued by Jordan’s Electricity Regulatory Commission (ERC). The reference price list, which will be reviewed on an annual basis, sets a separate electricity tariff cap for electricity generated by wind facilities, solar photovoltaic facilities, non-photovoltaic solar power facilities, biomass facilities and biogas facilities, with solar projects receiving higher prices than wind projects.
Although Jordan has seen the most activity, Saudi Arabia is the market with the highest potential and, accordingly, the key focus of most market participants. By 2032, the Kingdom plans to issue procurements for 25 GW of solar thermal projects and 16 GW of solar photovoltaic projects worth more than $60bn, plus another 13 GW of wind, geothermal and waste-to energy plants.
In February this year a white paper was issued by the King Abdullah City for Atomic and Renewable Energy or K.A.CARE, Saudi Arabia’s renewable energy procurement agency. One month after the paper, K.A.CARE was due to issue both a draft request for proposals and a draft power purchase agreement marking the onset of an introductory procurement round of up to 800 MW of renewable energy facilities, including around 600 MW of solar and 100 MW of wind. To date, no such documents have been issued which means that the programme is already half a year behind schedule.
The roll-out of the programme depends on K.A.CARE’s financial empowerment. This, in turn, requires the approval of an implementing regulation by the Saudi Arabian Council of Ministers. Arguably, the deployment of the programme also hinges on garnering sufficient buy-in from Saudi Aramco. Sources say that Saudi Aramco’s increasingly apparent lack of buy-in on the programme has caused friction and may continue to do so. It is unlikely that tenders will be issued in 2013 for the programme.
There are opportunities beyond K.A.CARE, however. Saudi Electricity Company, the state-controlled listed electric utility, is set to launch tenders for two gas-fired integrated solar combined cycle projects in Dibba City. The solar power component of Dibba 1 IPP reportedly amounts to 30 MW. Saudi Electricity Company expects the project to be completed in 2016.
In 2014, Saudi Electricity Company plans to tender the Dibba 2 IPP, a 1.8 GW integrated solar combined cycle project. The solar portion has yet to be confirmed. Saudi Electricity Company expects this project to be completed in 2017. For each of Dibba 1 IPP and Dibba 2 IPP, the procurement will be undertaken on a build-own-and-operate model. The solar power technology, in each case, has yet to be confirmed.
United Arab Emirates
The two key markets in the United Arab Emirates are the Emirates of Abu Dhabi and Dubai. Each emirate has its own utility – the Abu Dhabi Water and Electricity Authority and the Dubai Water and Electricity Authority – and each develops and issues its own independent policies and procurements, subject to federal laws.
Abu Dhabi has an aim to generate 7% of its electricity from renewable sources by 2020 while Dubai has a 5% solar energy target by 2030. The key focus in the United Arab Emirates is solar power. Abu Dhabi has been at the forefront of renewable energy developments, last year commissioning the Shams 1 solar power project, a 100 MW solar thermal plant (pictured).
Shams 1 was precedent setting for a number of reasons, but mainly because it was the first utility-scale solar power facility in the Gulf to be procured on an independent power project basis. The project was developed largely on the basis of the Abu Dhabi Water and Electricity Authority independent power project model for conventional power. This model has been banked on numerous occasions and is arguably one of the Middle East’s most advanced independent power (and water) project models.
Masdar, a wholly-owned subsidiary of the Abu Dhabi government, is procuring the 100 MW solar PV Noor-1 project, which was intended to figure as the first phase of a 200 MW solar park. The preferred bidder has yet to be to be selected, however, and severe delays have caused uncertainty as to whether the project will ever follow through. Although in a regional context Abu Dhabi’s track record is impressive, from a forward-looking perspective, opportunities for renewable energy developers, at least in the short-to-medium term, are somewhat limited. The only concrete and notable development is the possible launch of a solar PV rooftop programme.
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This plan has been in the pipeline for several years, however, and is unlikely to be launched in 2013.
Dubai plans to source 5% of its power supply from solar energy by 2030. Last year, the Dubai Water and Electricity Authority launched the Sheikh Mohammed bin Rashid Al-Maktoum Solar Park. The project’s aim is to reach a capacity of 1 GW by 2030 using a combination of solar thermal power and PV. The first phase, a 13 MW photovoltaic plant, was awarded last year and has just been completed (see page 6).
The procurement of the first phase of the Solar Park was undertaken on a publicly financed engineering, procurement and construction basis. The Dubai Water and Electricity Authority recently divulged details on the procurement of the second phase of the solar park. The project will be procured on an independent power project model. Like the first phase, it will be a solar PV project. Its size remains uncertain, but it seems likely that it will be large – between 100 and 200 MW. Regrettably, no details have been provided on the timing for tender issuance.
Separately, Dubai is also planning to launch a solar PV rooftop programme. It appears to be in more advanced stages than Abu Dhabi, with reports suggesting that it is finalising legislation for the programme that would include a feed-in tariff. The programme launch date is uncertain, however, and some reports from the start of the year suggested that it had been shelved. In any event, Dubai’s solar rooftop program is unlikely to be launched in 2013.
Kuwait is one of the newest players in the Middle Eastern renewable energy sector. The country plans to generate 15% of its electricity from sustainable sources by 2030, and its key focus is on solar power and wind.
In June this year, the Kuwait Institute for Scientific Research, or KISR, announced that it had invited pre-qualified contractors to submit bids for three pilot renewable energy projects. This is the first phase of a planned 2 GW renewable energy project known as the Shagaya renewable energy park that, as a whole, is due for completion in 2030.
The first phase of the park, which is scheduled for completion in the second half of 2016, is being procured on an engineering, procurement and construction basis. The overall capacity of this initial phase is 70 MW, comprising a 10 MW wind farm, a 10 MW solar PV plant and a 50 MW solar thermal plant. The strong emphasis on solar thermal mirrors the approach of neighbouring Saudi Arabia.
The second and third phase projects will be procured on a build-own-andtransfer basis, with a 25-year power purchase agreement. KISR plans to procure 930 MW of solar power facilities in phase two and another 1 GW in phase three. It is not clear whether further wind power capacity will be procured in the second and third phases. The renewable energy park will be built on a 70 km2 area in Shagaya, a desert zone 115 km west of Kuwait City and near the country’s borders with Iraq and Saudi Arabia.
In parallel, the State of Kuwait’s Partnerships Technical Bureau is set to tender the Al Abdaliya integrated solar combined cycle project, a 280 MW power project with a 60 MW solar power component. The solar power technology has not been confirmed, and no time indication for tender issuance has been provided for the project.
Turning last to Qatar, the country plans to meet 20% of its electricity demand from renewable sources by 2030. The key emphasis is again on solar power. The only large-scale solar facilities currently in Qatar are a 780 kW solar PV rooftop system on the Qatar National Convention Centre and an 800 kW solar PV rooftop system on the student halls of the Qatar Foundation.
In 2012, Qatar announced plans to launch 1.8 GW of solar projects by 2014. A first phase of 200 MW was due to be tendered in the first quarter of 2013. Lack of progress has created uncertainty, however, and has led to some loss of confidence in the market.
Notwithstanding recent public spats, Qatar should be the host of the 2022 World Cup, which potentially creates a major opportunity for renewable energy players. The country has said publicly that the event would be the first carbonneutral World Cup and explicitly said that this would be accomplished by using solar power and other renewable energy sources to power and cool stadiums. Time will tell, but if this is to be things need to move quickly.