Following on from our update in February 2013, in this article, we consider the latest renewable energy developments in the following countries: Libya; Saudi Arabia; Tajikistan; and United Arab Emirates.

Click here to view the February 2013 update titled, Renewable energy across the MENA region.

Libya
Overview of the industry

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The previously targeted 10% of the country’s capacity as a solar energy source has been pushed up a further 10% as Libya looks to power a fifth of the nation via renewable energy by 2020. In addition, in April this year, it was announced that the Renewable Energy Authority of Libya (REAOL) was considering installing solar cooling plants on all government buildings in an attempt to reduce the high costs of air-conditioning over the summer months. Further, REAOL has commissioned feasibility studies for building a 100 megawatts concentrated solar power plant in Sebha, a 50 megawatts CSP plant in Ghadames, and a 15 megawatts photovoltaic plant in Shahat. Moreover, Libya has adopted plans to build wind farms across the country, in 13 locations including Tarhunah, Meslatah and Dernah. In addition, the Ministry of Electricity and Renewable Energy announced in late April 2013 that they are preparing tenders for two new solar plants.

Libya placed itself on the map for renewable energy during the Global Energy Forum, held in Dubai in April 2013. During the Forum, the Libyan Deputy Prime Minister, Awad Al-Borasi held talks with Shaikh Ahmed bin Saeed Al Maktoum, the head of the Dubai Supreme Council of Energy, in relation to collaboration on sustainable energy projects. The focus was on Libya’s non-fossil fuel energy plans, including wind and solar power.

However, renewable energy projects face a number of legal, bureaucratic, financial and even cultural difficulties. To date, Libya has lacked the necessary legislation in order to facilitate projects of this nature. However, it is hoped that this will change as the Ministry of Electricity and Renewable Energy is working on a new Electricity Bill as well as some renewable energy legislation. Furthermore, it has been reported that REAOL is drafting a national energy efficiency plan due to be opened for public discussion in the coming months which should provide some further insight into the projected structure of the country’s plans.

One key issue that needs to be considered by the national energy efficiency plan is the quantities of energy subsidies. Historically, energy prices have been highly subsidised in Libya. At present, the Libyan government pays out nearly USD 11 billion of subsidies every year, half of that for power and fuel.1

According to reports, gasoline prices are among the lowest in the world leading to expenditures on fuel and electricity subsidies that are equivalent to more than 11% of GDP, about USD 1,500 per capita.2 The heavy energy subsidies create an uneven playing field for competing technologies like renewable energy. However, as the experience of other countries in the MENA region has shown, sudden liberalization of energy prices can be a challenging task. For example, in 2012, an attempt by the Jordanian government to lower subsidies on fuel prices resulted in protests in the country. Therefore, any economic reform and structural adjustment programmes to deal with energy subsidies will need to be introduced in a gradual and careful manner to give the public sufficient time to prepare and adjust.

Another important issue that should be taken into account in developing the renewable energy sector in Libya is to create incentives for renewable energy. Such incentives can range from carbon credits and renewable energy certificates to tax incentives and feed-in tariffs. In the Libyan context, small-scale feed-in tariffs could possibly be used as a starting point.

Saudi Arabia
Overview of the industry

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Following the release of KA CARE’s renewable energy “White Paper” in February 2013, it is expected that the draft form of the Power Purchase Agreement (PPA) and the Request for Proposal will be released by the end of this year. According to the White Paper, The PPA will have a 20-year term, with payments made to the project based on metered electricity, and with the price indexed to the US Dollar/Saudi Arabian Riyal exchange rate. Other key features of the PPA will include:

  • governed by Saudi law and subject to dispute resolution in Saudi Arabia; and
  • requirements for training, job localisation, and research and development.

In the meantime, work has begun on the installation of approximately 70 monitoring stations across the country to measure the potential of energy production from sun, wind and geothermal sources by collecting weather and air data. These results aim to provide investors with guidance on where to locate and build renewable energy-related plants as the KSA government attempts to source the required USD 109 billion in order to achieve its goals.3 The findings are due to by published in a national atlas by the end of the year.

The White Paper also proposes that, after 2 years of operating under the PPA, all developers are required to submit a job localisation plan giving a breakdown of the workforce in their proposals. Within this plan, local content is a key criterion and will be scored with points awarded in the evaluation of proposals. The White Paper states that proponents must achieve 20% local content to be able to receive any points at all. Clyde & Co, has recently made a submission to KA-CARE on the potential implications of imposing high local content thresholds in light of Saudi Arabia’s international trade obligations.

In August, it was announced that the UAE and Saudi Arabia have forged a renewable joint venture to construct a portfolio of solar energy projects with a total investment of over USD 1.5 billion to develop 1,000 MW of projects.

Tajikistan
Overview of the industry

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Tajikistan is a landlocked country located in the south-east of Central Asia, with a territory of 143,100 km². Tajikistan borders Afghanistan to the south (border length is 1,030 km), China to the east (430 km), Kyrgyzstan to the north (630 km), and Uzbekistan to the north and west (910 km). Dushanbe is Tajikistan’s capital city.

Tajikistan has a population of 7.73 million, and its GDP of USD 903 per capita is one of the lowest of any former Soviet republic.

Since gaining independence from the former Soviet Union in 1991, Tajikistan has been plagued by a civil war which ended in 1997, deterioration of living standards, a population-wide increase in poverty, and severely damaged and depleted supplies of energy.

However, the country has seen signs of strong economic growth over the past few years. It joined the World Trade Organisation in January 2013.

The law on the use of renewable energy resources

In recent years, Tajikistan has taken significant steps to develop renewable energy sources. In 2007, the Government of Tajikistan adopted the “National comprehensive program to target the widespread use of renewable energy sources, such as the energy of small-rivers, solar, wind, biomass, and underground sources for 2007-2015” (Renewables Program).

The Renewables Program defines Tajikistan’s policy on energy efficiency and renewable energy. It also envisaged a legislative scheme for renewable energy which (among other things):

  • offers incentives to both consumers and producers of renewable energy; and
  • allows imports, on preferential terms, of equipment and the corresponding components that are needed for renewable energy use.

In addition, under the Renewables Program, the Government of Tajikistan is required to make favorable conditions for the creation of joint ventures for progressive production technology, producing modern cells and solar energy plants as well as other forms of renewable energy.

In 2010, the Law on the Use of Renewable Energy Resources (LURER) was passed. It defines “renewable energy sources” to include solar, wind, biomass and water (river).

The LURER is not sufficiently clear on the rights and entitlements of the prospective developers and only provides a general framework for the administration of the renewable energy projects.

The key features of the LURER are as follows:

  • Priority for renewable energy projects is given to very remote areas with low population densities where grid reinforcements or new connections are not considered feasible and to areas suffering from power supply shortages;
  • Developers are permitted to renew and enhance the existing equipment and technologies for the purpose of their renewable energy projects in accordance with the applicable laws and regulations; and
  • Feed-in tariffs to be determined in accordance with generation costs of each project.

Hydropower

Hydropower accounts for nearly 95% of the power produced in Tajikistan. There is an estimated potential of 527 KW billion of which only 5% is currently being used, with a further 50% known to be technically possible with current technology. It is further estimated that Tajikistan has 4% of the world’s hydropower potential, so in the drive to make global energy production greener and renewable, this is a significant asset, and hence is a priority for the Government to develop.

The Government has identified 22 run-of-river hydropower plants (HPP) for development with an estimated total installed capacity of 13,000 MW ranging in size from 90 MW to 2,100 MW. Despite the magnitude of the hydropower potential, HPPs have several limitations. Most significantly, lower river flows and cold weather reduce winter electricity generation, particularly from non-storage HPPs. As a result, there are strong seasonal fluctuations in power production, the lowest being during winter (from October to April/May) when the demand for electricity is greatest and sometimes exceeds capacity.

Sangtuda-1 HPP (670 MW) and Sangtuda -2 (220 MW) are the two key hydropower project in Tajikistan. In March 2013, Tajikistan’s Energy and Industry Ministry announced that it was planning to build nine mid-sized hydro-power stations on the Surkhob and Khingov rivers.

In the meantime, additional measures to bring demand and supply into balance are being considered. In fact, the Government of Tajikistan is now committed to developing alternative sources of energy as a mid-term solution to power shortages particularly given that over the past year, Uzbekistan, Tajikistan’s primary gas source, has repeatedly disrupted its supply to Tajikistan for various reasons.

Solar power

Tajikistan is naturally endowed with favourable conditions for solar energy. Solar irradiation is especially high in mountainous regions which form 93% of Tajikistan’s territory. The average total length of sunlight per year is 2,500-3,000 hours. The maximum length of sunlight (more than 3,000 hours) is found in the southern part of the Republic (meteorological station Pyanj- 3,029 hours), and also in Eastern Pamir (meteorological station Karakul - 3,166 hours).

Recent studies show that solar energy can meet 60-80% of the needs of the country’s population for 10 months of a year.

Despite plentiful sunlight in Tajikistan, solar power has not been developed on any significant scale. Installed capacity is practically absent. Only in 2012, Tajikistan’s first grid connected solar panel system was supplied to medical facilities in Dushanbe. The PV modules, which were installed by Kyocera Corporation, will generate approximately 196 MWh of electricity annually.

Despite the slow progress, it is generally accepted that Tajikistan has an abundant potential to utilize solar energy (particularly for small scale applications), which, if realized, can be used as an intermediate or even long-term solution to combating power supply shortage.

Wind power

The wind potential suitable for power utilization (peaks and slopes of mountains) seems likely to be about 10-15% of the territory.

Currently, there is no operational wind energy capacity in Tajikistan.

United Arab Emirates
Overview of the industry

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The UAE continues to push forward on plans to create more renewable energy sources. In March 2013, Shams 1, the largest solar power plant in the UAE and the MENA region, was inaugurated. At a capacity of 100 megawatts and an area of 2.5 square kilometers, this project exemplifies the UAE’s commitment to developing sources of renewable energy to help satisfy the needs of growing populations and economies.

Dubai is also taking significant steps to drive up the level of renewable energy in the coming years. By 2030, Dubai plans to source 5% of its energy from renewables.4 It is planned that the renewable component will come primarily from solar power via the Mohammed bin Rashid Al Maktoum Solar Park.5 The Dubai government has awarded the first-phase construction contract to a US-based company with a modest 13-megawatt photovoltaic plant opening later this year. Dubai is also in the process of approving plans to allow homeowners to set up cost-effective solar panels for domestic use and to feed electricity into the grid.6

The realisation of these large-scale projects will require substantial amounts of money. Historically, however, relatively limited financing has been available for renewable energy projects for various reasons including policy related issues (e.g. undeveloped regulatory framework and regulation uncertainty) and perception of high investment risks by financiers. However, recent developments in the financial modelling of renewable energy projects indicate that these limitations may be alleviated in the near future, especially for Abu Dhabi government-owned companies.