MENA Tipped for CSP Boom

The Middle East and North Africa region (MENA) could be ripe for developing its massive potential in concentrating solar power (CSP), finds a recent study for the World Bank by the Fraunhofer Institute for Systems and Innovation Research (ISI) and the Fraunhofer Institute for Solar Energy Systems (ISE).

Solar thermal electricity generation is on a clearly positive trend, with new CSP installations having doubled since 2007, finds 'MENA Assessment of Local Manufacturing Potential for Concentrated Solar Power (CSP) Projects,' a study conducted in co-operation with Ernst & Young.

By mid-2010, over 800 MW of CSP plants were in operation. Although the market is dominated by the US and Spain, a boom fuelled by national incentives is now seeing projects appear in Australia and in Asia and MENA.

The latter offers the greatest global application potential, found the study. In addition, European plant manufacturers and technology providers are keen and ready to get involved in the region. But the report found that success and acceptance of solar power plant construction in the five countries it examined — Egypt, Algeria, Jordan, Morocco and Tunisia — depend heavily on the integration and participation of local industry.

The background to the study is the World Bank's Clean Technology Fund (CTF), which is supporting the development of solar thermal power plants in MENA countries. An investment programme is intended to help finance new power plants in the region and develop a local CSP industry as well as attract additional investment.

The study results indicate that the local value added for CSP plants in the MENA region could average 60%. Christoph Kost, head of the study at Fraunhofer ISE, estimates that the effect from local value added in the region could total US$14.3 billion if sustainable, long-term demand is created, and that 60,000 to 80,000 jobs could be created in the MENA region by 2025.

CSP's Potential for The Region

Countries stand to profit from developing production and infrastructure if they exploit regional advantages and dismantle market barriers. But in the short and medium term CSP projects in MENA will require a portfolio of support schemes, including climate finance and concessional loans, revenues from solar electricity exports to Europe, and national incentives such as long-term power purchase agreements, feed-in tariffs, or tax rebates.

In the longer term, generation costs need to fall dramatically. Investment costs, and therefore manufacturing costs for main components and systems, need to be reduced through technical innovation, economies of scale, and the experience curve effect. But MENA has technical and industrial capabilities that are likely to form a good basis for CSP-related activities, found the study.

Local manufacturing of CSP in MENA countries could also benefit from a massive scale-up of concessional climate financing envisaged under the United Nations Framework Convention on Climate Change (UNFCCC). In addition, CSP is central to the high-level political agreement between MENA and the EU to make solar energy trade a fundamental pillar of economic integration between the regions. CSP located in the MENA region could be key to realising the EU's GHG emissions reduction and energy security objectives.

A Strategy for Growth

National strategies for industrial development and energy policy should involve: clear targets for the market diffusion of CSP; substantial RD efforts; the creation of strategy funds for industrial development of CSP industry sectors; and stronger regional integration of policies. More technology parks/clusters and regional innovation platforms are also needed, especially to help small and medium-sized firms overcome barriers and gain access to the latest technological advances, the report says.

Business models should build on the comparative advantages of some industrial sectors in MENA countries and also involve international co-operation agreements, such as joint ventures and licensing. A crucial first step will be investment in new highly automated production of mounting structures and white glass as well as in adapting techniques for coating and bending mirrors.

Market actors will need both access to information and certainty about the market's development. Feasibility studies on production line upgrades could be key to this. A regional trade association might be essential. Starting local manufacturing will also involve comprehensive education and training programmes. Finally, universities should be encouraged to teach CSP-technology courses, particularly for engineers and other technical graduates, the document concludes.

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