Turmoil Poses Uncertainty for Clean Energy Project in North Africa
Investors in clean energy in the Middle East and North Africa are wrestling with two complex calculations – will the political upheavals in the region seriously delay the construction of wind and solar projects, and will the buoyant oil price more-than-offset this by triggering a further rush to renewable power in all regions?
In the short term, the uncertainty over possible policy development in places such as Egypt and Tunisia looks likely to slow down the expansion of clean energy capacity in those and neighbouring countries. Ironically this effect may be least apparent in Libya, the current focus of international attention, since it is a laggard in renewable power.
The world’s eyes have been on the Middle East since protests started in Tunisia in January, and have continued to be as they rapidly spread to Egypt, Bahrain and elsewhere. The price of oil has risen sharply, impacted by the continuing tensions and on 28 February, it touched USD 114.50-a-barrel for front-month Brent crude. The Middle East accounts for 57% of the world’s proven oil reserves, so the unpredictable political events have raised concern about security of supply.
High oil prices tend to be seen as positive for clean energy, since they prompt policy-makers and investors to look at alternatives. However much depends on whether that high crude price is sustained – and what the knock-on effects are for coal and gas, the fossil fuels that more usually compete with renewable technologies for generation investment.
More immediate is the impact on clean energy in North Africa itself. The Egyptian authorities said last week that they are “optimistic” that investors will stand firm, and urged them to come forward to help build 500MW of wind power in the Gulf of Suez. The country will ask developers in March or April for expressions of interest to build two wind projects of 250MW each.
The invitation to bid for the projects in the Gulf of el Zayt, south of Cairo, was originally scheduled for January. However, that was postponed because of the unrest. The postponement may be only a minor hiccup and the Egyptian Electricity Transmission Company, which is managing the tenders, has announced that the first tenders will be released in later in Q1 2011 or early Q2.
The EETC said it remains hopeful of international investor interest in bidding, insisting that the situation has improved and that there will be “no further postponement.” Expected investment in each 250MW plant is about USD 500m, according to a project manager at the EETC.
German development bank KfW, which previously funded a number of Egyptian wind farms, financed a further 200MW in December 2010 and has confirmed in an email to Bloomberg News that it has no intention of changing plans.
Fichtner, a consultancy firm from Germany, is poised to sign a contract with the EETC to advise on the technical implementation of a separate, and earlier, 250MW wind tender and has been undertaking feasibility studies, the Egyptian organisation said. The Stuttgart-based consultant will assist the EETC for about two years on this wind park until it reaches financial close, which is expected in 2013. And while there has been disruption to works, things are gradually going back to normal and engineers are already back on site already, according to Thomas Prosy, Fichtner’s head of business development for the African market.
Out of the 10 companies shortlisted to participate in that first tender – only one company, Virginia-based electricity producer AES Corporation, has since withdrawn its application. Another shortlisted company, Enel Green Power, expressed confidence that Egypt will offer “reasonable investment conditions” in the future. Egypt already has 530MW of wind power installed, according to Bloomberg New Energy Finance data.
In Morocco, the government has targeted 2GW of wind power by 2020. This would build on the 375MW currently commissioned in the country. A further 100MW has already received financing. As it stands, there is already over 1.4GW of wind projects in the pipeline. Jordan aims to get renewable power up to 10% of electricity consumption by 2020 – with wind estimated to account for at least half of that.
Although a number of projects or tenders have suffered delays, the impact on the region may be limited, if the reaction of renewable energy agencies is anything to go by. International financial institutions remain engaged, with key players like the World Bank and European Investment Bank committing late last year to lend to projects in the region.
One group certain to be watching events intently is the consortium of companies and banks behind the long-term proposal to develop up to 400GW of solar power in North Africa, to supply 15% of Europe’s electricity by 2050. Prolonged instability could puncture interest in Desertec, whereas the spread of democracy to North Africa could reduce political risk.
In the short term, the uncertainty over possible policy development in places such as Egypt and Tunisia looks likely to slow down the expansion of clean energy capacity in those and neighbouring countries. Ironically this effect may be least apparent in Libya, the current focus of international attention, since it is a laggard in renewable power.
The world’s eyes have been on the Middle East since protests started in Tunisia in January, and have continued to be as they rapidly spread to Egypt, Bahrain and elsewhere. The price of oil has risen sharply, impacted by the continuing tensions and on 28 February, it touched USD 114.50-a-barrel for front-month Brent crude. The Middle East accounts for 57% of the world’s proven oil reserves, so the unpredictable political events have raised concern about security of supply.
High oil prices tend to be seen as positive for clean energy, since they prompt policy-makers and investors to look at alternatives. However much depends on whether that high crude price is sustained – and what the knock-on effects are for coal and gas, the fossil fuels that more usually compete with renewable technologies for generation investment.
More immediate is the impact on clean energy in North Africa itself. The Egyptian authorities said last week that they are “optimistic” that investors will stand firm, and urged them to come forward to help build 500MW of wind power in the Gulf of Suez. The country will ask developers in March or April for expressions of interest to build two wind projects of 250MW each.
The invitation to bid for the projects in the Gulf of el Zayt, south of Cairo, was originally scheduled for January. However, that was postponed because of the unrest. The postponement may be only a minor hiccup and the Egyptian Electricity Transmission Company, which is managing the tenders, has announced that the first tenders will be released in later in Q1 2011 or early Q2.
The EETC said it remains hopeful of international investor interest in bidding, insisting that the situation has improved and that there will be “no further postponement.” Expected investment in each 250MW plant is about USD 500m, according to a project manager at the EETC.
German development bank KfW, which previously funded a number of Egyptian wind farms, financed a further 200MW in December 2010 and has confirmed in an email to Bloomberg News that it has no intention of changing plans.
Fichtner, a consultancy firm from Germany, is poised to sign a contract with the EETC to advise on the technical implementation of a separate, and earlier, 250MW wind tender and has been undertaking feasibility studies, the Egyptian organisation said. The Stuttgart-based consultant will assist the EETC for about two years on this wind park until it reaches financial close, which is expected in 2013. And while there has been disruption to works, things are gradually going back to normal and engineers are already back on site already, according to Thomas Prosy, Fichtner’s head of business development for the African market.
Out of the 10 companies shortlisted to participate in that first tender – only one company, Virginia-based electricity producer AES Corporation, has since withdrawn its application. Another shortlisted company, Enel Green Power, expressed confidence that Egypt will offer “reasonable investment conditions” in the future. Egypt already has 530MW of wind power installed, according to Bloomberg New Energy Finance data.
In Morocco, the government has targeted 2GW of wind power by 2020. This would build on the 375MW currently commissioned in the country. A further 100MW has already received financing. As it stands, there is already over 1.4GW of wind projects in the pipeline. Jordan aims to get renewable power up to 10% of electricity consumption by 2020 – with wind estimated to account for at least half of that.
Although a number of projects or tenders have suffered delays, the impact on the region may be limited, if the reaction of renewable energy agencies is anything to go by. International financial institutions remain engaged, with key players like the World Bank and European Investment Bank committing late last year to lend to projects in the region.
One group certain to be watching events intently is the consortium of companies and banks behind the long-term proposal to develop up to 400GW of solar power in North Africa, to supply 15% of Europe’s electricity by 2050. Prolonged instability could puncture interest in Desertec, whereas the spread of democracy to North Africa could reduce political risk.
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