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TEI - Energy Outlook

MENA’s Growing Power Sector

With growing electricity demand and consumption in the Middle East and North Africa (MENA) region, governments have prioritized investments in power generation capacity and transmission and distribution networks.

The population growth and urbanization, industrialization, rising income levels and low electricity prices are the major contributing factors for the abundant power sector opportunities being created in the region.

MENA’s growth in the installed generation capacity in 2017 was 5.4% over 2016; this is expected to rise at 6.2% a year to reach about 547 GW by 2025. At the end of 2017, the installed capacity in the region reached 363.9 GW.

Arab Petroleum Investments Corporation (Apicorp) expects that MENA region will continue to invest greatly as the region strengthens the global scope of its energy sector. In 2017, $29.4 billion power contracts were awarded. As per the report, the MENA region requires a combined $260 billion worth of investment in electricity generation, transmission and distribution over the next five years.

The GCC is driving investment in the region. It is planning new electricity generation capacity of over 66 GW by 2025, a 47.1% increase from current installed capacity of 140 GW, to meet the electricity demands of growing populations, expanding economies and climatic changes.

Governments are investing in several major conventional and alternative energy power projects alongside important energy reforms taking place. Energy security and diversification of the energy mix has become a priority.

Sustainability and energy efficiency are top agendas. At the same time, digitalization will be playing an essential role in the future energy landscape, harnessing value out of data, improving productivity and creating new business opportunities.

As the share of renewable energy increases, the region will have more centralized and distributed power systems while energy storage will gain importance.

Power generation from renewable energy represented about 7% of total MENA electricity generation capacity in 2017. Solar power is gaining momentum and is forecasted to account for the biggest share of renewable power by 2025.

Nuclear power projects are also being developed in the region with Abu Dhabi and Saudi Arabia amongst the firsts to plan commercial nuclear reactors.

Procurement models are changing, too. The public-private partnerships (PPP) model is likely to provide much of the investments in delivering additional power generation capacity in the coming years. The private sector financing models will help ease the strain on government finances and produce affordable electricity on a commercial scale. By 2025, IPPs and IWPPs will deliver 58.3GW of additional power generation capacity in the MENA region.

The rising trend towards change within the regional power sector including policy and price reforms will continue to be at the forefront of governments’ strategies to cope well with the increasing electricity demand and make the sector more efficient and sustainable.

Pallavi Agrawal