Renewable Energies in the Middle East and North Africa
Policies to Support Private Investment
The combined effects of the economic crisis and the recent popular uprisings in parts of the Middle East and North Africa have brought social and economic challenges back to the centre of attention of policy makers. For governments searching to create jobs, to satisfy the growing energy demand of their populations and to diversify their economies, the appeal of renewable energies is strong. However, the right policy framework and support need to be put in place if the region wants to attract private investment in the sector and reap the benefits of its favourable resource endowment, especially as regards solar and wind energy.
This report makes the case for a stronger deployment of renewables in the Middle East and North Africa and identifies the appropriate support policies required to stimulate the necessary private investment. An assessment of existing policy frameworks in the region and examples from OECD good practice are used as pointers to help guide policy makers in their choices.
The analysis contained in this report suggests that support policies targeting the life cycle of renewable energy projects such as feed-in tariffs and power purchase agreements are more effective and less distortive than policies subsidising the initial investment, such as cost reductions. The optimal incentive scheme provides investors with stability through a guaranteed but declining minimum return while imposing enough market risk to foster technological progress.
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Executive summary
Between 2001 and 2011, world consumption of primary energy rose from 9 434 million tonnes of oil equivalent (Mtoe) to 12 275 Mtoe, an increase of 30.1%. The International Energy Agency (IEA) forecasts an increase in global energy demand from 12 132 Mtoe in 2009 to 16 961 Mtoe in 2035 – an increase of 33.6%. In its pessimistic scenario, assuming that current policies are maintained with no new climate mitigating elements added, energy demand is forecast to increase by 51% by 2035.
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