MENA’s renewable energy performance will surge over the next five years, IEA says

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WHAT WE’RE TRACKING TODAY

TODAY: Lots of green finance updates + MENA’s renewables performance in the spotlight

Good morning, friends. We have a brisk issue this morning with some green finances updates affecting Egypt and a deeper look at the forecast for MENA’s renewables performance. But first…

THE BIG CLIMATE STORY OUTSIDE THE REGION- The EU issues its most ambitious climate action roadmap yet: The EU Commission recommended a landmark proposal to push down 90% the bloc’s greenhouse gas emissions by 2040 compared to 1990 levels in parliament yesterday, outlining a roadmap with annual investments of up to EUR 1.5 tn between 2031 and 2040. The EU proposes slashing fossil fuel use by 80% in the energy sector by 2040 compared to 2021 and expanding carbon capture capacity to 280 mn tonnes by the same timeframe. The proposal will kick off months of talks that could take up to a year before the European Parliament approves the strategy.

Revising the draft to appease EU farmers: A previous draft had set a target for the agriculture sector to reduce 30% of its non-CO2 emissions by 2040 from 2015 levels to comply with the meet the new climate goal, but after weeks of protest by farmers against EU green policies’ impact on the bloc’s agricultural sector’s competitiveness, the commission removed the goal from the final draft.

WATCH THIS SPACE-

#1- KSA + Switzerland set to launch a multi EUR bn fund with an eye on green investments: In collaboration with an undisclosed Swiss investor, Saudi Arabia is planning to launch a fund worth bns of EUR to finance netzero investments across the kingdom’s logistics, finance, and industrial sectors, the Saudi Gazette reports, citing comments made by Investment Minister Khalid Al Falih during a bilateral roundtable. KSA’s Industry and Mineral Resources Minister Bandar Alkhorayef and Swiss Federal Councillor Guy Bernard were also present at the roundtable, which saw both countries discuss partnerships aimed at helping the kingdom secure some USD 1.8 tn in international funding for clean power projects. Saudi Arabia is cumulatively targeting USD 3.3 tn investments for “mega projects” across various development sectors, including aviation and green energy, Al Falih said.

#2- Egypt’s Gabal El Zeit wind farm stake sale is nearing: Egypt will finalize the 580 MW Gabal El Zeit wind farm stake sale before the end of March, Egypt’s Planning Minister and Sovereign Fund of Egypt (SFE) Chair Hala El Said told Asharq Business. We last heard Gabal El Zeit and the 545 MW Zafarana wind farm stake sales would be wrapping up in 1Q 2024.

Where do things currently stand? The SFE has reportedly appointed Belgium-headquartered engineering and consultancy firm Tractebel to act as a consultant for the sale of stakes in the Gabal El Zeit farm and the 545 MW Zafarana wind farm. A number of local and foreign investors have shown interest in the two farms — Saudi Arabia’s Acwa Power, the UAE’s Alcazar Energy, UK-based private equity outfit Actis, and our friends at Egyptian renewables firm Infinity.

#3- Jordan has reportedly appointed a consultancy firm to conduct a study aimed at improving investment terms for renewable energy-centered PPAs, Al Ghad reports, citing a government official. Earlier this week, cabinet approved a draft law to establish frameworks to facilitate the power purchase of renewable power generated by households and businesses.

Just in time: Although the government’s investment and legislative environment spurred USD 4 bn in financing towards its green sector between 2008-2023, developers say high tariffs and land prices are stifling further growth, Al Ghad writes. AJOD 2 (c. USD 2.8) government tariff — agreed upon after several revisions — on each KW produced from renewables, along with limited land allocations for clean power developments which drive up costs, are limiting the growth of the national renewable energy sector, Kawar Energy Company Director Hana Zaghloul told the news outlet.

#4- EU agrees on first set of ESG rating rules for companies: The European Union has agreed on its first set of rules to oversee the environmental, social and governance (ESG) ratings of companies, which are used by investors to assess their sustainability performance, Reuters reports. The new rules — which will require ESG raters to be authorized and supervised by the European Securities and Markets Authority — aim to increase transparency and prevent greenwashing, as well as encourage more analysis on the impact of ESG factors on the company's financial performance. The deal is expected to come into force after it gets formal approval in 2025.

This came as no surprise: This comes a week after the International Ethics Standards Board for Accountants (IESBA) released a new international ethical benchmark for sustainability reporting and assurance in a bid to prevent greenwashing. The EU had delayed the ESG disclosure rules until 2026 after being asked to prioritize the broader ESG disclosures that all companies must include in their annual reports from 2024 onwards.

DANGER ZONE-

Most emerging markets and developing economies (EMDEs) face severe barriers to raising capital for climate and conservation goals due to an ongoing debt crisis, a new report (pdf) by the Boston University Global Development Policy Center warned. The report identifies 62 EMDEs currently in debt distress or at high risk of distress and another 33 face significant capital market restrictions all of which require a gradual increase of funding of over USD 2 tn yearly to achieve the UN Sustainable Development Goals 2030, and USD 1 tn international capital for climate action, the report adds.

What can be done? The report calls for urgent reforms of the global financial system, including debt restructuring, capital increases for multilateral development banks (MDBs), and new issuances of the IMF's Special Drawing Rights. It also highlights the roles and responsibilities of different creditor types, such as MDBs, bondholders, Paris Club creditors and China, in providing debt relief and lowering the cost of capital for sustainable development. It also urges multilateral action through initiatives such as IMF’s Global Sovereign Debt Roundtable, rather than ad hoc deals with specific debtors and groups of creditors.

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CIRCLE YOUR CALENDAR-

Egypt will host the Egypt Energy Show from Monday, 19 February to Wednesday, 21 February in Cairo. The event will gather 35k energy industry professionals and host over 80 conferences on energy transition and sustainable production.

The UAE will host the Management and Sustainability of Water Resources Conference from Monday, 26 February to Wednesday 28 February in Dubai. Water availability in arid and semiarid regions, global water issues, and future water and environmental challenges are all on the agenda.

Saudi Arabia will host the International Conference on Sand and Dust Storms in theArabian Peninsula from Monday, 4 March to Wednesday, 6 March in Riyadh. The conference will address regional challenges caused by sand and dust storms and discuss monitoring systems, mitigation strategies, economic and infrastructural impacts, and more.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

Egypt eligible to receive risk assurances for climate projects from UK’s newly launched GGC

GGC launches to unlock climate financing for EMs: The UK’s GreenGuarantee Company (GGC) — which officially launched last Friday — is leveraging USD 100 mn in seed investments to provide assurances that it hopes will eventually unlock up to USD 1 bn of climate financing for developing countries including Egypt, according to a statement.

What we know: The assurances — which will reduce risk for global investors looking to tap the clean energy sector in emerging markets — will be underpinned by an investment grade rating of BBB/Stable from Fitch Ratings, the statement notes, adding that they “will be provided for institutional investors buying green bonds issued and listed on the London Stock Exchange (LSE) and green loans issued in the private credit market.” The UN’s Green Climate Fund (GCF) was amongst the investors who put money into the fund.

Why does this matter: What GGC does enables emerging markets to access long-term, hard currency climate financing to combat climate change, the statement explains. By helping emerging markets improve the credit ratings of assets to above investment grade, guarantees enable borrowers in developing countries to access a far bigger pool of capital at a lower cost, the company added. In our neck of the woods, Lebanon and Egypt are grappling with an FX crisis, potentially threatening their pipeline of renewables projects. Last week, Egypt saw its currency slip back to record lows against the USD.

GGC’s investors: Alongside GCF, The UK’s Foreign Commonwealth & Development Office through its MOBILIST programme, the Nigeria Sovereign Investment Authority, USAID, Prosper Africa, and Norfund, have contributed to the initial USD 100 mn seed capital.

A step towards just climate financing: The assurances will be offered to companies whose countries’ sovereign ratings typically “trap them” in an-investor repellant bubble that sees them fail to secure long-term debt needed for development projects, GGC co-founder Lasitha Perera told Bloomberg. The GGC will initially prioritize private credit and ensure debt capital for green infrastructure, renewable resources, alternative energy, and clean transportation across countries eligible for official development assistance in Africa, Asia and Latin America, including Egypt, Vietnam, and Kenya, the statement notes.

There’s more: GGC will also support emerging markets in issuing green bonds in the global debt markets, working with borrowers on climate impact disclosures for targeted sustainability-linked listings and loans, the company says.

Eying global debt markets: The GGC will initially focus on private credit and guaranteeing debt capital on LSE’s green bond market, before seeking out private sector funding as a part of a target to shore up a USD 5 bn capacity by 2035 at least, the statement notes. The company is planning to expand beyond LSE to other international stock exchanges as part of its 2035 target.

Emirates NBD Egypt is offering loans that cover 100% of solar stations for individuals

Emirates NBD Egypt is offering a personal loan program that fully finances the purchase of solar panels in collaboration with two undisclosed solar companies, according to a statement. The loan period can extend up to 7 years, ranging from EGP 100k to EGP 1 mn, and allows customers to apply for a second loan after 12 months. NBD is among the first lenders in Egypt to extend individual loans for customers to install household solar panels.

Not Egypt’s first: The Commercial International Bank (CIB) also offers a 100% covered personal solar loan ranging from EGP 50k to EGP 1 mn. Qatar National Bank (QNB) Al Ahli also offers similar loans covering up to 80% of the product cost and reaching up to EGP 400k. Crédit Agricole Egypt also finalized developing a solar loan program last year.

REMEMBER- Green funding needs to be coupled with net-metering schemes to incentivize more residential solar uptake: Net metering and feed-in tariffs allow residential and commercial consumers to sell excess electricity generated back to the national grid, allowing them to offset the cost of electricity bills and shortening the time it takes to break even. However, under the FY 2021-2022 net metering tariff structure, households and businesses can make only EGP 1.0288 per kWh and EGP 1.0858 per kWh respectively selling power back to the grid. Prior to COP27, Egypt’s Electricity Regulation Authority amended some parameters to make net-metering more attractive.

MENA’s renewable energy performance will surge over the next five years, IEA says

The world is predicted to fall short of its goal to triple renewables by 2030: Despite a predicted surge in global renewable energy capacity to 7.3 TW by 2028 — up from the current 510 GW — the anticipated growth trajectory will still fall short of the goal to triple global capacity by 2030, reaching only 2.5 times the current level,according to the most recent report (pdf) by the International Energy Agency (IEA).

What's driving the higher renewables projections globally? The global 2023 forecast has increased by 33% — or 728 GW —from the IEA’s December 2022 publication primarily due to policy changes and improved economics for large-scale wind and solar PV projects, as well as faster consumer adoption of distributed PV systems in response to higher electricity prices, the report concluded.

How will our region fare in the next 5 years? The MENA region is predicted to see accelerated action in renewable energy sources in the next 5 years with a 62 GW increase from 2023 to 2028. The projected growth rate is three times higher than the previous 5 year period, andthe leading countries in this growth include Saudi Arabia, the UAE, Morocco, Oman, Egypt, Israel, and Jordan, collectively representing over 90% of the region's expansion. Solar PV is set to make up 85% of the expected 62 GW increase in the region’s renewable capacity by 2028. The Middle East is also anticipated to be one of the next biggest markets for solar thermal energy, which together with the EU will account for over 40% of the increase in solar thermal heat use.

Oman’s renewables forecast was revised downwards: Delays in large-scale renewable energy projects, including in the field of green hydrogen, have caused a decline in Oman’s projected growth.However, the process can often take several years as countries need to qualify bidders, select winners, and sign PPAs after opening an auction.

Hydrogen’s role in renewables growth is becoming prominent: Saudi Arabia was named among the world’s major contributors alongside China and the US, which together are projected to contribute over 75% of global renewable capacity for hydrogen production by 2028. Anticipated global growth will reach 45 GW within the same time frame, about 1% of total renewable energy deployment. Certain markets, particularly those focused on hydrogen exports, demonstrate a more significant investment in solar and wind energy, with percentages ranging from 4% in Australia to over 30% in Oman. Countries with potential for hydrogen exports like Saudi Arabia, Australia, Oman, and the UAE will contribute over one-fifth of renewable capacity deployment driven by hydrogen by 2028.

Our region’s competitive pricing is pushing expansion:Competitive pricing due to incentivized policies for solar PV and onshore wind projects is behind the accelerated growth in the MENA region, the report explains. The region mainly owes its renewable energy expansion to competitive auctions, which account for 35% of its growth. Nearly all countries in the region are looking to attract private investors through government tenders for utility-scale PV, onshore wind or concentrated solar power (CSP) projects. These tenders have resulted in some of the world's lowest bid prices for solar energy.

There’s still a few factors holding us back:The delayed procurement of utility-scale capacity through competitive auctions, lack of cost-reflective end-user tariffs for distributed solar PV installations, and the need for enhanced system flexibility through storage are noted as hindrances to optimal growth. Implementing these three improvements could drive growth 70%. As a result, expansion through mechanisms other than competitive auctions — such as unsolicited bilateral contracts with utilities and corporate PPAs — has been increasing, the report found.

Wind isn’t faring well: Aside from China, onshore wind expansion is facing hurdles in major markets like India and Australia. Forecasted growth took a hit in ASEAN, Africa, and the Middle East due to sluggish project advancement and unclear policies, according to the report.

Korea’s SK On sees fewer losses in 4Q, expects a net income this year

BATTERIES-

SK On narrows losses in 4Q, expects to break even in 2H: SK On, the SNB Capital-backed battery unit of SK Innovation, reported a smaller operating loss in 4Q 2023 of KRW 18.6 bn (USD 14 mn) from KRW 86.1 bn in 3Q, and said it expects to reach a break-even point in 2H 2024, Reuters reports. The company attributed the improvement to increased shipments of EV batteries to its major customers, such as Ford and Hyundai. SK On also expects slowed growth in the global EV market, echoing similar expectations by its rival LG Energy Solution. SK On also said it will continue to invest in its battery business, allocating more than 80% of its 2024 capital expenditure of about KRW 9 tn (USD 6.8 bn) to expand its production capacity abroad.

REMEMBER- SK On has regional support: Saudi Arabia’s SNB Capital acquired an undisclosed stake worth USD 100 mn in the Korean battery manufacturer in July. The funds were earmarked for the company’s expansion plans and boosting its production capacity.

SOLAR-

Tunisia opens first solar plant in Djerba island: Tunisia has inaugurated a 1 MW photovoltaic solar power plant in Djerba that will provide electricity to 500 homes, TAP reports. The TND 3 mn project spans 1.5 hectares with 2k solar panels. The project is in alignment with Tunisia’s goal to produce 35% of electricity through renewable energy by 2035 and lower the current 50% energy deficit, which will require 5 GW of energy.

More projects in the pipeline: Tunisia is issuing tenders for larger projects with a total capacity of 1.7 GW, including two in Metbasta at 500 MW and 100 MW each. Two projects at 50 MW each are also in the final stages in Tozeur and Sidi Bouzid.

China’s PV industry firms turn to share buybacks amid rising competition

Some of China's solar manufacturers are resorting to share buybacks to boost their low market valuations as rising competition drives down equipment prices, Bloomberg writes. Longi Green Energy, the world's largest solar equipment maker, has announced a 600 million yuan (USD 83 mn) repurchase plan of its Shanghai-listed shares, following similar moves by Tongwei and JinkoSolar. Analysts doubt the buybacks will be effective and expect the solar sector's profitability to drop further. The buybacks also come as Chinese regulators urge listed companies to increase repurchases to stabilize the stock market, which closed at a five-year low last week.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

Toyota + Chiyoda partner on a large-scale electrolysis system: Japan’s Toyota Motor Corporation and engineering firm Chiyoda Corporation are partnering to introduce a 5 MW electrolysis system for hydrogen production — which will later be expanded to 10 GW — at the automaker’s Honsha plant starting FY 2025. Construction of the electrolyzer factory is expected to begin in 2026 at the earliest. (Statement)

The world possibly passed 1.7°C warming already according to sea sponges

The sea sponges have spoken: A new study (pdf) by the University of Western Australia on sponges in the Caribbean Sea suggests that the world may have warmed by 1.7°C since the start of the industrial revolution, The Guardian writes. This is half a degree higher than the estimates used by the UN’s climate panel.

The methodology: The study used the sclerosponge, a long-lived species that records sea temperature changes in its calcium carbonate skeleton, to reconstruct 300 years of ocean history. The researchers found that human-induced warming began as early as the 1860s.

The findings are drawing criticism: The findings of the study faced skepticism from several scientists who argue tests were too localized and small in scale. The NASA Goddard Institute for Space Studies director Gavin Schmidt expressed doubt that a single record could reliably determine global warming since the pre-industrial era.

REMEMBER- The world already broke warming records: Global warming was set to reach 1.4°C warming above pre-industrial levels in 2023, making it the hottest year on record. Scientists also predict that 2024 will likely be the hottest year in recorded history, with temperatures predicted to rise to 1.6°C.

The climate crisis may have ushered in a new category of hurricane

Hurricanes have intensified due to climate change leading scientists to propose adding a new “category 6” classification on the Saffir-Simpson hurricane scale, according to a new study by the National Academy of Sciences. Storms with sustained winds exceeding 192 mph would fit this category including The Philippines’ Typhoon Haiyan, which killed over 6k people, and Hurricane Patricia, which reached a top speed of 215 mph and hit parts of Central America, Mexico, and the US.

Rising temperatures in the ocean and atmosphere are to blame: While the total number of hurricanes remains constant, their intensity has surged over the past four decades, fueled by a warmer, moisture-laden atmosphere and a superheated ocean, The Guardian writes. The heated oceans provide extra energy, increasing the size of hurricanes.

Breaking down the current scale: The Saffir-Simpson hurricane scale classifies a category 1 hurricane as between 74 mph to 95 mph with dangerous winds causing some damage. Category 2 hurricanes reach wind speeds of 96-110 mph, with extensive damage occurring. Category 3 to 5 are known as major hurricanes, causing extensive property damage at speeds from 111 mph to 157 or higher. In category 5, homes are destroyed, trees and utility poles fall, and power outages can occur for extended periods of time. 2005’s Hurricane Katrina was a category 5 hurricane that caused extensive destruction in New Orleans. It holds the record as the costliest hurricane in US history, with 1.8k fatalities and around USD 108 bn in damages.

CALENDAR

FEBRUARY 2024

19-21 February (Monday-Wednesday): Egypt Energy Show (EGYPES), Cairo, Egypt.

26-28 February (Monday-Wednesday): Management and Sustainability of Water Resources, Dubai, UAE.

(xxNA) 26-28 February (Monday-Wednesday): Oman Conference for Environmental Sustainability, Muscat, Oman.

MARCH 2024

4-6 March (Monday-Wednesday): International Conference on Sand and Dust Storms in the Arabian Peninsula, Riyadh, Saudi Arabia.

APRIL 2024

16-18 April (Tuesday-Thursday): World Future Energy Summit, Abu Dhabi, UAE.

16-18 April (Tuesday-Thursday): Middle East Energy, Dubai, UAE.

22-24 April (Monday-Wednesday): Oman Petroleum and Energy Show, Mustac, Oman.

23-25 April (Tuesday-Thursday): Connecting Green Hydrogen MENA, Dubai, UAE.

28-29 April (Sunday-Monday) Global Cooperation, Growth and Energy for Development,Riyadh, KSA.

28-2 May (Sunday-Thursday) Oman Sustainability Week, Oman International Exhibition Center, Muscat.

30 April-2 May (Tuesday-Thursday): Autonomous E-Mobility Forum, Doha, Qatar.

MAY 2024

7-9 May (Tuesday-Thursday): Global Waste Forum, Algiers, Algeria.

14 to 16 May (Tuesday-Thursday): Airport Show, Dubai, UAE.

19-21 May (Sunday-Tuesday): Saudi Energy Convention, Riyadh, KSA.

20-22 May (Monday-Wednesday): Electric Vehicle Innovation Summit, Abu Dhabi, UAE.

28-30 May (Tuesday-Thursday): Make it in the Emirates Forum, Abu Dhabi, UAE.

JUNE 2024

5 June (Wednesday): World Environment Day, Saudi Arabia.

OCTOBER 2024

15-17 October (Tuesday-Thursday): EV Auto Show, Riyadh, KSA.

NOVEMBER 2024

11-14 November (Monday-Thursday) Abu Dhabi International Petroleum Exhibition & Conference (ADIPEC), Abu Dhabi, UAE.

DECEMBER 2024

2-13 December (Monday-Friday): Conference of the Parties (COP16) to the United Nation Convention to Combat Desertification, Riyadh, KSA.

EVENTS WITH NO SET DATE

2024

Early 2024: The 2023 US Algeria Energy Forum, Washington DC, USA.

12-14 February (Monday-Wednesday): Sustainable Aviation Futures MENA Congress, Dubai, UAE.

End-2024: Emirati Masdar’s 500 MW wind farm in Uzbekistan to begin commercial operations.

QatarEnergy’s industrial cities solar power project will start electricity production.

2025

International Union for Conservation of Nature World Conservation Congress, Abu Dhabi, UAE.

UAE to have over 1k EV charging stations installed.

2026

26-29 October (Monday-Thursday): World Energy Congress, Riyadh, Saudi Arabia.

UITP Global Public Transport Summit, Dubai, UAE.

Annual Meetings of the World Bank and the International Monetary Fund, Bangkok, Thailand.

1Q 2026: QatarEnergy’s USD 1 bn blue ammonia plant to be completed.

End-2026: HSBC Bahrain to eliminate single-use PVC plastic cards.

2027

MENA’s district cooling market is expected to reach USD 15 bn.

2030

UAE’s Abu Dhabi Commercial Bank (ADCB) wants to provide AED 35 bn in green financing.

UAE targets 14 GW in clean energy capacity.

Tunisia targets 30% of renewables in its energy mix.

Qatar wants to generate USD 17 bn from its circular economy, creating 9k-19k jobs.

Morocco’s Xlinks solar and wind energy project to generate 10.5 GW of energy.

2035

Qatar to capture up to 11 mn tons of CO2 annually.

2045

Qatar’s Public Works Authority’s (Ashghal) USD 1.5 bn sewage treatment facility to reach 600k cm/d capacity.

2050

Tunisia’s carbon neutrality target.

2060

Nigeria aims to achieve its net-zero emissions target.

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MENA’s renewable energy performance will surge over the next five years, IEA says

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TODAY: Lots of green finance updates + MENA’s renewables performance in the spotlight

Related

This publication is proudly sponsored by

Egypt eligible to receive risk assurances for climate projects from UK’s newly launched GGC

Related

Emirates NBD Egypt is offering loans that cover 100% of solar stations for individuals

Related

Related

MENA’s renewable energy performance will surge over the next five years, IEA says

Related

Korea’s SK On sees fewer losses in 4Q, expects a net income this year

Related

China’s PV industry firms turn to share buybacks amid rising competition

Related

The world possibly passed 1.7°C warming already according to sea sponges

Related

The climate crisis may have ushered in a new category of hurricane

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