New regional research by GTM Research focusing on the Middle East and Africa (MEA) has forecast solar installations to skyrocket by 170% this year and continue accelerating to install more than 83 gigawatts (GW) of new solar capacity between 2018 and 2023.
GTM Research published the Middle East and Africa Solar PV Regional Market Outlook 2018 last week, revealing that demand is expected to grow by 170% in 2018 to 3.6 GW, led by Egypt, the United Arab Emirates, and Morocco. However, as with most GTM Research material, it is locked behind a significant pay-wall, which means the official details from the report are slim.
Fortunately, report author Bejmain Attia, a solar analyst with GTM Research, took to Twitter to expand on his “latest deep dive” into the MEA region.
Specifically, while the report’s brief summary says that, “Post-2020, the region will mostly see slower, more measured growth to 2023 as tender schemes enter multiple rounds and industry learning and regulatory adaptation catch up,” pre-2020 is going to see tremendous growth, blowing out to 20 GW in 2020.
The MEA region is primarily dominated by utility-scale solar projects — with notable exceptions in the United Arab Emirates and Jordan — and has a 12.3 GW utility-scale pipeline worth of under contract or under construction projects, plus approximately 21 GW worth of pre-contract projects set to go.
“In MENA, procurements are huge, prices are low, bidding competition is fierce, EPC margins are compressed, COD timelines are long, and execution risk is relatively low,” said Attia on Twitter. “Rising oil prices are pushing petrostates to displace domestic fuel consumption.”
Speaking to me via email, Attia added that, “Simply put, very large projects in Egypt, Morocco, Iran, and the UAE are driving growth in 2018-2019.” In addition, “In 2020, we’ll see ~9 GW of demand from emerging regional markets across MEA as one-off tendered utility-scale projects come online in a big wave, spiking MEA’s total demand to over 20 GW in 2020.
“Algeria’s 4 GW tendered projects with heavy local content requirements will also likely come online in 2020,” Attia added. “Post 2020, the market will dip 21% in 2021 as it cools off from ramping up and begins to enter a period of more stable growth through 2023.”
In addition to impressive capacity growth, Attia forecasts the levelized cost of energy (LCoE) for both utility-scale and distributed solar will fall by approximately 30% by 2022 in key markets across the region, and there are already countries reporting “ultra-low bids” such as in Saudia Arabia, the United Arab Emirates, Egypt, and Kuwait — a trend Attia predicts could continue with more sub $30/MWh bids in the near-future.
However, a note of caution, as Attia sees pipeline attrition across Sub-Saharan Africa as notably high with development timelines of between four to six years due to “slow-moving regulators, skilled labor shortages, and policy uncertainty.” That being said, Attia predicts that “nascent African markets will mature in 2020” and install over 6.4 GW through to 2020.
As for distributed solar growth, Attia explained that the outlier-growth in the UAE and Jordan was due, “First and foremost [to] tariff subsidy reform.”
“In most of the Middle East, retail electricity prices are so heavily subsidized that there is still no headroom for behind the meter solar projects to offer any bill savings or meaningful payback periods,” Attia continued. “In other words, the price ceilings for bankable behind-the-meter solar in these markets are artificially low in most segments because of highly-subsidized retail electricity tariffs.
“Part of Dubai’s Clean Energy Strategy was the creation of the Shams Dubai program, which is designed to facilitate the installation of solar panels on every roof in the city by 2030 and offers streamlined site assessment, permitting, and matchmaking, along with a strong NEM framework and rising slab electricity tariffs. Rooftop PV costs have declined nearly 45% since 2014, and customers typically have paybacks in the 3.5 to 5 year range, so adoption rates are picking up quickly. There are 323 MW of NEM interconnection requests for residential and commercial solar in the Emirate to date. This is the largest DG pipeline in the Middle East–we expect the UAE to cross 300 MW installed DG capacity by the end of 2019.
“In Jordan, last year the National Electric Power Company (NEPCO) removed the system size cap on net metered projects and power quantities NEPCO is obligated to buy,” Attia added. “A customer is allowed to cover up to 100% of electricity consumption at retail rates, and T&D companies are required to compensate NEM system owners for up to 10% of annual consumption at a premium rate of 120 fils/kWh (~US $0.17/kWh). NEPCO also allows commercial wheeling in exchange for a capped fee, which has been a key selling point for industrial customers.”
“In short, solid NEM frameworks and streamlined permitting procedures in both markets help local installers have a bankable value proposition, and headroom in retail tariffs allows bill savings above 30% in most cases,” Benjamin Attia concluded. “Though it’s important to note that even in the UAE and Jordan, by 2023, non-utility-scale installations will still represent only 12 and 18 percent of total market composition, respectively.”