The case for decentralized renewable energy solutions in the Middle East

Decentralized Solar Energy in EgyptDespite the abundance of indigenous energy resources in the Middle East and North Africa (MENA), energy systems in the region have become increasingly brittle over the past decade. Millions of people do not have access to affordable and reliable energy services, resulting in severe constraints for economic and social development. Millions of households in the region are still not connected to the national grid. This is particularly true for Sudan and Yemen, where only 40% of population are electrified. Other countries where people lack access to electricity include rural areas of Egypt, Libya, Iraq, and others.

Furthermore, current electricity systems are unable to ensure sufficient uninterrupted power supply. Millions of people who are connected to the grid experience regular power cuts due to production shortages. This often drives people to use diesel generators, which are usually inefficient and cause significant negative environmental and health hazards. For example, in Lebanon, blackouts range from three hours a day in Beirut to 12 hours a day in rural areas (Hasbani, 2011). About 90% of Iraqi households supplement the public utility network with private diesel generators. Estimates suggest that unofficial private capacity in Baghdad alone amounted to about 900 MW in 2009 (IEA, 2012). Other countries facing similar problems in the region include Egypt, Libya, Syria, Yemen, Sudan, Palestine, and others.

Retail electricity prices in some countries, mostly in energy dependent countries, are relatively high compared to the average household income. In Palestine, for example, the electricity bills amount to about 10% of the family income on average. This causes significant burden on the public purse as governments must subsidize power consumption for low-income people. Other countries with high electricity tariffs include Morocco, Jordan, and Tunisia. In these countries, not only does the residential consumer suffer due to high electricity prices, but industrial and commercial sectors are also impacted. High electricity prices make productive activities in these countries less competitive, which slows down socioeconomic development. Recent meetings with industrial sector actors in Jordan have revealed that many factories are considering relocating to other countries with lower retail prices of electricity.

Electricity in the region is mostly produced from petroleum and natural gas. Renewable energy, excluding large-scale hydroelectric, is underdeveloped and accounts for only 1% of total electricity generation. The need to mitigate economic, social, and environmental challenges of the region in light of rapidly growing demand for energy services and declining fossil-fuel reserves requires MENA countries to transition towards more sustainable energy systems.

Efforts to mitigate challenges

Countries in the region recognize the importance of shifting towards sustainable energy development. Governments have become more active over the past few years, undertaking steps to diversify the energy mix, increase security of supply, and decrease dependence on fossil fuels. Most countries in the region have shown commitment toward adopting renewable energy solutions through strategies, action plans, and targets. Countries such as Algeria, Egypt,  Jordan, Morocco, Palestine, Tunisia, and UAE went further and implemented specific renewable energy laws, regulations, and incentive mechanisms to encourage private investment in renewable energy projects. Other countries such as Kuwait and Lebanon have demonstrated public commitment by installing a number of government-owned renewable energy projects. These efforts have resulted in the addition of over 1 GW of wind and solar capacity in the region. This push has been aided by the availability of concessional financing from international financial institutions for utility-scale projects.

Decentralized solutions improve resilience

The focus by governments and financial institutions on utility-scale renewable energy power plants has left decentralized solutions virtually without support, although great potential exists for these applications in the MENA region. In fact, decentralized energy solutions are already competitive in countries where petroleum products are used to generate electricity such as in Jordan, Lebanon, and others. On top of financial feasibility, there are many more reasons why decentralized solutions are good for the region:

  1. There are many commercially viable decentralized solutions that do not require subsidies or financial incentives from government. Furthermore, decentralized solutions decrease the need for expanding and upgrading national grids, which is usually associated with significant capital expenditures for cash strapped governments.
  2. Decentralized energy solutions promote a participatory approach to harnessing renewable energies, where individuals and local enterprises move from being “consumers” to “producers” of energy. This participatory approach results in creating local jobs and, therefore, supports sustainable socioeconomic development in local communities. Furthermore, these solutions offer the opportunity to localize a greater portion of the supply chain.
  3. International experience has shown that decentralized energy production results in female empowerment. Due to lower formal education requirements, decentralized solutions offer disadvantaged, entrepreneurial women the opportunity to start their own energy businesses and generate income.
  4. Decentralized solutions promote local ownership of the renewable energy projects, which increases the likelihood that the equipment will be maintained and the energy produced will be used rationally.
  5. Decentralized solutions allow communities to harness local renewable energy resources that are not economically viable for large-scale projects. This results in a more diversified energy mix on the national level, which improves the overall resilience of the energy system.
  6. Decentralized technologies can be customized to local climatic and social conditions, solving many of the technological challenges that are faced by large-scale renewable energy projects.
  7. Decentralized energy solutions avoid many of the environmental challenges associated with large-scale wind and solar farms.

Why are investments lagging?

The participation of the private sector in providing decentralized sustainable energy solutions remains substantially limited, for the following reasons:

  1. Low awareness at all levels of the existence of these decentralized solutions particularly among energy end-users
  2. Very few business models have been developed for the deployment of these solutions beyond the traditional “retail model” of selling renewable energy equipment to end-users in exchance for a lump-sum cash payment
  3. Few success stories to demonstrate the viability of decentralized energy solutions
  4. Insufficient information about the risk profiles and potential benefits of these technologies
  5. Few financing options for decentralized energy solutions that meet the three A’s (Appropriate, accessible, and affordable)
  6. Weak local capacity not only in technical issues, but also in marketing and other business related activities
  7. Unfavorable legal, regulatory, and market framework in most countries


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