EBRD to provide up to $250 million in renewable energy financing in four MENA nations

The limited solar development which has occurred in the Middle East and North Africa (MENA) region to date has largely been through government solicitations and one-off projects, with little in the way of a sustained private market in most nations. However, globally falling costs for solar PV are creating opportunities for other business models.

Today EBRD made a bold move towards sparking direct sale of power from renewable energy in MENA, by announcing a framework for up to US$250 million in debt and equity funding for private companies in Egypt, Jordan, Morocco and Tunisia.

The bank cites reforms in the four nations which have begun to allow private power producers to sell electricity directly to consumers, mentioning cement plants and hotel chains as potential customers. Additionally, Jordan, Tunisia and Morocco import substantial amounts of fossil fuels, and EBRD cites “unreliability of energy supply” as a main obstacle to economic growth.

“For the first time in this region the private sector is now able to produce and sell clean renewable energy on a commercial basis competing head to head with gas and oil-fired generation,” notes EBRD Director for Power and Energy Nandita Parshad.

BNEF Head of Solar Insight Jenny Chase says that given a high cost of capital these nations, EBRD’s assistance could be significant for the development of solar markets. “Lower-cost financing can help a lot to help developers to offer power purchase agreements (PPAs) to these private sector consumers,” Chase told pv magazine.

“Of course there will be other barriers, like that you will need to get this cement company or this hotel group to sign a long-term PPA. It’s probably not a magic bullet.”

Chase says that the prices will have to be low enough to induce companies to make long term commitments. However, she notes that solar costs are falling in the region, with the most recent solicitation in Jordan producing prices under $70/MWh. Chase also says that hedging against fossil fuel price fluctuations may play a role.

In addition to contracts with private off-takers, sales of electricity from renewable energy sources to Tunisia’s public utility will also be supported under the program. Government solicitations remain a main driver of solar markets in the four nations.

BNEF’s Jenny Chase estimates that less than 100 MW of solar PV will be installed in Egypt, Jordan, Morocco and Tunisia in 2015. However, she expects at least 100 MW to be installed in Egypt in 2016, and at least 150 MW in Jordan. Tenders will play a role in both nations, however Jordan is also building a distributed solar market based on net metering.

And despite the promise of solar, the first project to be supported under ERBD’s program is a 120 MW wind project in Morocco.