MENA needs to invest $302bn over next five years to meet rising electricity demand
As governments in the Middle East and North Africa (MENA) are prioritising investments in the power sector, the region will need to invest $302 billion in the next five years to feed the rapidly rising demand for electricity, according to estimates by APICORP Energy Research for the period 2017-2021.
''Of this, $179 billion will be needed to add 138GW of generating capacity, while the rest should be invested in transmission and distribution (T&D). In the GCC, governments have coped well with the rising demand for electricity. Besides adding to the capacity, some countries have also recently increased electricity prices and introduced some limited power sector reforms,'' said the April report, entitled 'MENA Power Investment: Finance and Reform Challenges Persist'.
''In the Mashreq region, inadequate investments and instability have weighed on the power sector and persistent blackouts continue to put pressure on governments to act, while in the Maghreb region renewable-energy projects are at the forefront of long-term government plans to diversify power-generation capacity and reduce fuel import bills. But investment in the power sector will continue to be a challenge due to finance constraints and tight government budgets,'' the report mentioned.
The monthly analysis stated that electricity demand in the MENA region has been growing rapidly, driven by population growth and urbanisation, rising income levels, industrialisation, and low electricity prices.
Looking ahead, it noted, these factors will continue to place greater demand on the electricity-generation capacities. MENA economic growth has slowed compared with the historical highs, but the International Monetary Fund still expects an increase of 3.2 percent in 2017, rising to 3.6 percent in 2021. The region’s population is also expected to grow at an average rate of 2 percent per year in that period.
To meet the rising demand, MENA power capacity will need to expand by an average of 7.4 percent each year between 2017 and 2021, which corresponds to an additional capacity of 138GW. This would require $179 billion of investment in the generation capacity and a further $123billion for T&D.
''Governments have been accelerating their investment plans and our estimates show that 97GW of capacity additions are already in the execution stage,'' it added.
''The GCC represents 43 percent, or 157GW, of current MENA power generating capacity. Despite this large capacity, the GCC will require $81 billion for the addition of 62GW of generating capacity and another $50 billion for T&D over the next five years. However, declining oil revenues and large budget deficits mean that GCC governments can no longer continue to support the provision of cheap power. Subsidy reforms announced in late 2015 are part of a programme that aims to liberalise domestic energy prices over the medium term.
"The region is also placing greater emphasis on renewable energy. The UAE recently announced a nationwide power strategy which aims to have 50 percent clean energy by 2050. Solar power features heavily in its plans and is expected to account for 25 percent of the generation mix once a $13.7 billion (5GW) solar park is fully commissioned in 2030. Saudi Arabia also recently unveiled its latest renewable-energy initiatives. The programme will aim to develop 10GW of solar and wind energy by 2023," the report stated.
According to the report, the UAE needs to invest at least $35 billion to meet the 17GW capacity addition needed over the medium term. ''The UAE is pushing strongly to diversify its energy sources in the power mix; we estimate that 10.4GW of capacity additions are already in execution. Much of the power is generated using natural gas, but Abu Dhabi’s Barakah nuclear-power plant will see four reactors come online between 2017 and 2020, contributing 5.6GW in total," the report read.
Follow Emirates 24|7 on Google News.