IEA's Renewables 2020 Analysis and Forecast to 2025 with a Focus on the MENA Region
Written by Christy- Belle Geha, Intern at the Issam Fares Institute’s communications office
The Issam Fares Institute for Public Policy and International Affairs (IFI) at the American University of Beirut (AUB) hosted an online conversation with Yasmina Abdelilah, energy analyst at the Renewable Energy Division at the International Energy Agency (IEA) moderated by Marc Ayoub, researcher at the Energy Policy and Security Program at IFI. Titled “IEA's Renewables 2020 Analysis and Forecast to 2025 with a Focus on the MENA Region," the virtual discussion took place on Monday, December 14, 2020.
The conversation revolved around IEA's report, “Renewables 2020" that provides detailed analysis and forecasts through 2025 on the impact of Covid-19 on renewables in the electricity, heat, and transport sectors. In addition, the report aims at exploring historical data and forecasts for all sectors and technologies. In this context,, the talk shed the light on the key takeaways of Renewables 2020, the lessons learned from this COVID-19 era, and the forecasts for the next five years with a special focus on the Middle East and North Africa (MENA) region and its leading countries.
The renewables' sector, having shown a 7% growth in 2020, has been resilient in electricity this year in light of the pandemic, but demand shocks have hit heat and transport, according to Abdelilah. She noted that the most impacted sector is transport.
Furthermore, Abdelilah explained that while global energy demand is set to decline by 5%; renewables demand will increase by 1%, thanks to almost 7% growth in electricity generation. Bioenergy use in industry and transport gets the biggest hit.
“The first indicators we decided to look at, were equity performance and global auctioned renewable capacity," noted Abdelilah. “Publicly traded wind and solar companies continued to attract investors and have outperformed the overall energy sector, and countries worldwide have auctioned record levels of capacity, led by China, India, and Europe."
Additionally, resuming construction activity led to 18% forecast revision for 2020 since our May update.
“Additions will increase 10% in 2021, the fastest since 2015 but renewables' resilience will be re-tested in 2022 due to policy deadlines and financing challenges," she indicated.
Abdelilah's presentation also proved that wind and solar photovoltaics' (PV) combined installed capacity will surpass that of natural gas in 2023, given that common policy schemes drive 80% of expansion over 2020-2025 (mostly auctions and administratively set tariffs) but corporate PPAs, merchant plants, unsolicited projects and combinations drive 20% thanks to lower costs.
"Solar PV accounts for 70% of MENA's renewable capacity growth between 2020-25," she said. “Half of the total growth is in the top three countries, namely the United Arab Emirates (UAE), Saudi Arabia, and Egypt."
While specifically focusing on the MENA region, Abdelilah stressed on the fact that solar PV growth triples due to cost-effectiveness, and that two-thirds of MENA's solar PV growth between 2020-2025 will be from net fossil fuel exporters due to PV's increasing cost effectiveness, and in part due to cost reductions achieved in competitive auctions.
She also emphasized the wind expansion, at a slower pace, especially that net fossil fuel importers will account for three-quarters of the wind growth between 2020-2025.
"Auctions become the largest policy driver, but lengthy tender procedures and grid constraints remain challenges," she insisted.
Then, Abdelilah mentioned the fact that policy uncertainty remains an immense challenge in this energy market. She also foresees efficient use of renewable heating (via solar heaters on the rooftops) and solar cooling in the MENA region.
“Pump storage has potential in Egypt," she added. “There's also small potential for hydropower in Jordan and Morocco. On the other hand, UAE and Morocco are the top markets driving the growth in CSP."
She later focused on the boost given to renewables by the removal of subsidies on oil and fuel.
“Maximum utility of the electricity sector comes in being price effective, clear, and with transparent regulations to set long-term plans," she concluded.