Electricity transition in the Middle East and North Africa: a de-risking governance approach

Carafa, Luigi; Frisari, Gianleo; Vidican, Georgeta

doi:10.1016/j.jclepro.2015.07.012

Cited by 22 publications

(10 citation statements)

References 11 publications

(20 reference statements)

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“…The involvement of MDBs can contribute to the reduction of investment risks associated with financing, uncertainty about returns, and potential financial losses. In addition, the involvement of MDBs can further contribute to the reduction of subjective risks associated with investments into RES-E, which are connected to perceived barriers to project realization, and hence contribute to the so-called de-risking approach [9,22]. From the involvement of MDBs, private RES-E investors expect the following possibilities to reduce investment risks: competitive pricing, a favorable time and cost of bidding, an attractive internal rate of return, bankability, value for money, the lowest level of equity possible, debt sizing, and more generally, the sharing of risks through all project stages [28].…”

Section: The Role Of Investment Risk In Decarbonizing the Electricitymentioning

confidence: 99%

“…This will require the deployment of additional electricity generation capacities with volumes four times higher by 2030 and more than ten times higher by 2050 [7,8]. Given the high intensity of fossil fuel use in Morocco's current electricity generation portfolio, increasing electricity demand will also lead to higher fossil fuel import dependency, as well as to increasing levels of electricity-related carbon emissions [9]. Moreover, global warming due to anthropogenic climate change will drive cooling electricity demand up and potential impacts of climate change on the energy infrastructure might be large.…”

Section: Introductionmentioning

confidence: 99%

“…Investors' risk perceptions are particularly high for RES-E technologies [22]-which are characterized by high capital expenditures (CapEx)-and for developing countries [23]. This could lead to relatively high generation costs for some RES-E technologies (e.g., CSP) when compared to conventional technologies [9] and may eventually discourage capital intensive RES-E investments at scale [24].…”

Section: Introductionmentioning

confidence: 99%

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Morocco’s sustainable energy transition and the role of financing costs: a participatory electricity system modeling approach

et al. 2019

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Background: Morocco is facing major challenges in terms of its future energy supply and demand. Specifically, the country is confronted with rising electricity demand, which in turn will lead to higher fossil fuel import dependency and carbon emissions. Recognizing these challenges, Morocco has set ambitious targets for the deployment of renewable energy sources for electricity generation (RES-E). The realization of these targets will lead to a fundamental transition of the Moroccan electricity sector and requires substantial public and private investment. However, different risks constitute barriers for private RES-E investments and lead to high financing costs, which may eventually discourage capital-intensive RES-E projects.Methodology: While the existing literature has mainly focused on assessing the impact of financing costs on the economic competitiveness of individual technologies, the aim of this research is to assess the techno-economic feasibility of different electricity generation portfolios. To recognize the social dimension of the sustainable energy system transition, the electricity scenarios for Morocco have been jointly developed with stakeholders in a scenario building workshop in Rabat, employing a downscaled version of the open source electricity market model renpassG!S, augmented by a weighted average cost of capital (WACC) module.Results: In the stakeholder workshop, four different electricity scenarios for Morocco were co-developed. Each of these scenarios describes a consensual and technologically feasible future development path for the Moroccan energy system up to 2050, and comprises conventional fossil fuel-based technologies, as well as RES-E technologies in varying shares. Employing the downscaled renpassG!S model, we find that total system costs, as well as average levelized costs of electricity (LCOE) can be reduced substantially with low-cost financing. Conclusions:Our results indicate that de-risking RES-E investments can lead to cost competitiveness of a 100% RES-E-based electricity system with mixed-technology scenarios at marked financing costs. Therefore, we identify specific de-risking recommendations for Moroccan energy policymaking. In addition, we argue that participatory scenario modeling enables a better understanding of the risk perceptions of stakeholders, and can eventually contribute to increasing the political feasibility of sustainable energy transition pathways.

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Section: The Role Of Investment Risk In Decarbonizing the Electricitymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Morocco’s sustainable energy transition and the role of financing costs: a participatory electricity system modeling approach

et al. 2019

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“…Compliance has also been strict with penalties for delay and underperformance designated in the PPA agreements. Assessment of Morocco's 160 MW Ouarzazate Noor 1 CSP Parabolic Trough project has shown that the auction for the project was successful with 200 bidders engaging and a final awarded PPA of USD $0.189 per kWh, which was 25% lower than the price that had been projected by MASEN and the lowest CSP tariff ever achieved at the time of the award in 2012 [84]. The auction success is attributed to policy and financial derisking, achieved through:…”

Section: Morocco Renewable Energy Auction Case Studymentioning

confidence: 99%

Renewable energy policy trends and recommendations for GCC countries

Griffiths

2017

Energy Transit

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Policies to support the deployment of renewable energy technologies have been widely established for power generation, heating, cooling, and transportation. However, as renewable energy technologies have become increasingly cost-competitive and more widely deployed, policymakers have begun to focus their attention on the adaption of existing policies to reflect the rapidly changing economics of these technologies and the impacts they have may have on the energy systems in which they are deployed. Optimal renewable energy policies moving forward must, therefore, be context specific and tailored to the unique political, economic and social circumstances of the regional, national or sub-national energy systems in which they are to be applied. The Gulf Cooperation Council (GCC) is a region where each member country has stated ambitions and targets for renewable energy but deployment to date has been minimal. Therefore, GCC ambitions must be translated into actions via defined policies and regulations that reflect regional context, and thus have the highest likelihood of achieving success. This paper investigates current trends in renewable energy policy with the aim of identifying those that will be the most effective and feasible to catalyze renewable energy in GCC countries. The findings show that utility-scale renewable energy auctions are a primary mode of stimulating renewable energy deployment internationally and this mechanism is optimally aligned with catalyzing renewable energy deployment in the GCC countries. However, further evolution of regionally tailored renewable energy policy will be required as auction mechanisms gain traction and renewable energy becomes increasingly prominent.

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“…Further research, as in line with recommendations of Carafa et al, (2016) is needed to understand how policy de-risking could be implemented in developing countries, namely, through policy commitments to development of RES, or through improvement of domestic institutional capacities for realisation of these commitments, or how international concessional financing institutions can contribute to implementation of de-risking approach. Moreover, we suggest that further research is needed on how energy policy measures and improvement of institutions can be facilitated at the local governance level, as the actions of stakeholders at this level are frequently shaping the details of RES projects and their implementation.…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

De-risking policies as a substantial determinant of climate change mitigation costs in developing countries: Case study of the Middle East and North African region

2019

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Ambitious goals for climate change mitigation and energy security policies are driving deployment of renewable energy sources globally. However, the deployment of renewable energies at scale requires not only public but also private capital, such as foreign direct investment. Many countries with favourable conditions for renewables, such as the countries of the Middle East and North African region, are not attracting sufficient FDI. Risk perceptions of FDI stakeholders are one of the reasons. This paper discusses the de-risking approach as a possible tool to address subjective risk perceptions and assesses with a Computable General Equilibrium model macroeconomic feedback-effects of employing a de-risking strategy for FDI into a particular kind of RES-E, concentrated solar power, in the MENA region. Our results show that the application of de-risking approach reduces the costs for deployment of CSP, and therefore, also volumes of subsidies that would be needed to make CSP cost competitive with fossil fuel based electricity generation. This in turn leads to positive GDP and welfare effects in the MENA region. Our results allow us to recommend for energy policy the implementation of the de-risking approach as a potential consensual option with high political feasibility to reduce climate change mitigation costs.

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Electricity transition in the Middle East and North Africa: a de-risking governance approach

Cited by 22 publications

References 11 publications

Morocco’s sustainable energy transition and the role of financing costs: a participatory electricity system modeling approach

Morocco’s sustainable energy transition and the role of financing costs: a participatory electricity system modeling approach

Renewable energy policy trends and recommendations for GCC countries

De-risking policies as a substantial determinant of climate change mitigation costs in developing countries: Case study of the Middle East and North African region

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