CSP Library

MENA Assessment of the Local Manufacturing Potential for Concentrated Solar Power (CSP) Projects

Publishing date: December 2010

Concentrated Solar Power (CSP) is a renewable energy technology which, after some period of stagnation, has started to penetrate the energy market in recent years, in particular in Spain and the United States of America, but also in the Middle East and North Africa (MENA) and other regions of the world. To run CSP projects in MENA competitively in the short and medium term, a portfolio of different support schemes for CSP plants is necessary, including climate finance and concessional loans, revenues of solar electricity exports to Europe, and national incentives (like long-term power purchase agreements (PPA), feed-in tariffs or tax rebates).

As a concrete step towards the realization of these strategies, a “MENA CSP scale-up Investment Plan” (MENA CSP IP) was prepared by the World Bank (WB) and the African Development Bank (AfDB), and was endorsed the Clean Technology Fund (CTF) Trust Fund Committee on December 2, 2009. It is a landmark climate change mitigation program aiming at co-financing nine commercial-scale power plants (totaling around 1.2 GW) and two strategic transmission projects in five countries of the MENA region (Algeria, Egypt, Jordan, Morocco and Tunisia, the so called “MENA CTF” countries in the rest of this report). The vision is of the Mediterranean MENA countries ultimately becoming major suppliers and consumers of CSP-generated electricity. The MENA CSP IP is conceived as a transformational program, leading to the installation of several GW of CSP capacity in MENA by 2020 based on the 1.2 GW triggered by the MENA CSP IP. The first projects are expected to start commercial operations by 2014, and to initially supply domestic markets in MENA countries.

To facilitate the establishment of such a basis for CSP it is necessary that the countries perceive a benefit from the technology for their economic development. MENA could become home to a new, high potential industry in a region with large solar energy resources. If the CSP market increases rapidly in the next years, the region could benefit from significant job and wealth creation, as well as from sufficient power supply satisfying a growing demand, while the world’s renewable energy sector would benefit from increased competition and lower costs in CSP equipment manufacturing.

Looking at the more general context, the transformational opportunity from local manufacturing in MENA countries could benefit from the following interrelated factors:

•    MENA CSP is well-placed to benefit from the massive scale-up of concessional climate financing envisaged under UNFCCC (and recently reaffirmed by the Copenhagen Accord). The CTF allocation for the MENA CSP IP could be the seed money for a financing scale-up. This would greatly help the economies of scale in CSP manufacturing which would allow CSP to become one of the first competitive renewable energy technologies that is available most of time.
•    MENA CSP is central to the high-level political agreement between MENA and the European Union to make solar energy trade a fundamental pillar of MENA-EU economic integration, and therefore presents a major opportunity for MENA to earn export revenue.
•    MENA CSP could be key to the realization of the EU's GHG emissions reduction and energy security objectives. The April 2009 EU Renewable Energy Directive, with its provisions for the import of renewable energy to achieve the mandatory renewable energy targets of EU member states, is a first step in that process. Likewise the Desertec Industry Initiative and the Transgreen/Medgrid Initiative.
•    MENA's oil-producing countries are embarking on CSP investment programs to liberate oil and gas from the power sector for higher value-added uses and exports, and longer-term for CSP energy export.
•    The MENA CSP IP could benefit from the recent Cancun agreements which have opened the way for a much larger funding frame. The climate conference of Cancun agreed on a Green Climate Fund of $100bn a year of climate funding from 2020 that will be generated from a "wide variety of sources, public and private, bilateral and multilateral, including alternative sources". This could include a range of mechanisms such as auctioning of carbon credits and levies on international aviation and shipping.

The combination of these factors could uniquely advantage MENA as a global location of choice for CSP production and, while creating demand for installed capacity, could strongly drive local manufacturing.

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