Interview: Regulatory reforms key to next phase of region’s renewables push

11 Feb 2020
Interview: Regulatory reforms key to next phase of region’s renewables push



In conversation with: Suresh Bhaskar, Executive Vice President & Head of Business Development for Engie in the Middle East, South and Central Asia, Turkey

At the recent World Future Energy Summit (WFES), leading policy makers and private sector firms gathered in the UAE capital of Abu Dhabi to discuss the key opportunities and challenges facing the global power and wider energy sectors. Unsurprisingly, the transition towards clean energy was top of the agenda for much of the event.

In the second half of the last calendar decade, renewable energy finally started to make a breakthrough in the Middle East and North Africa (Mena). Following a number of record low tariffs for solar and wind projects across the region, utilities are embarking on some of the most ambitious clean energy projects in the world.

Energy & Utilities caught up with Suresh Bhaskar, regional Executive Vice President & Head of Business Development for France’s Engie, on the sidelines of the event to hear his thoughts on the shift towards alternative sources of energy sweeping across the region’s utilities sector.

“The shift towards renewable energy has become much more pronounced in last four or five years, in terms of the scale and size of projects we are seeing coming out especially in the UAE and Saudi Arabia for example,” says Bhaskar. “Each of these countries is pushing ahead with large projects in terms of solar, both PV and CSP, and wind.”

According to Bhaskar, the Middle East and North Africa region offers an optimum environment for deploying large-scale renewable energy technologies.

 

Economic value



"These countries have realised the economic value of natural energy sources, and with the cost advantages of proceeding with projects at scale coupled with high solar irradiation levels and abundance of land in the Middle East , there are enough economically compelling reasons for off takers to integrate renewables into the grid  – and this is the way it should be,” he explains.

Engie’s first major renewable energy project in the Mena region was the 262.5MW Ras Ghareb wind project in Egypt, which it developed in partnership with Japan’s Toyota Tsusho Corporation and Egypt’s Orascom Construction. The wind project was commissioned in October 2019. 

While the Ras Ghareb wind farm is being operated under a long-term PPA contract with a state utility, the standard model for PPP power projects in the Mena region, Engie has also signed a power purchase agreement (PPA) directly with a private company in Saudi Arabia, one of the contracts of its kind in the GCC.

Engie entered into a contract with Saudi-listed National Agricultural Development Co (Nadec) in July last year to develop a 30MW PV solar plant in Nadec City, Haradh. Engie will develop the solar plant to feed directly into Nadec’s own micro-grid.

 “Nadec was meeting its energy needs through liquid fuel using diesel engines – and given the rising price of liquid fuels in the last few years as subsidies are being phased out, any energy needs that can be met through  renewables is a positive impact to their bottom line ,” says Bhaskar.

 

Decentralised market

 

While the Nadec project offers an interesting insight into the future of possibilities for distributed solar in the Middle East, Bhaskar says that the renewables market in the region will continue to be dominated by utility-scale projects until sufficient progress has been made with establishing an adequate regulatory environment.

“The shift in the energy landscape is happening, but mostly in the utilities space,” says Bhaskar. “For it to happen in the distributed space – it will depend on a regulatory revolution.”

“Across the world, the growth of renewables is being driven by decentralisation – but here [Middle East] it is not the case, partly because the various government entities have control over power generation and the grid.”

 “For this revolution to happen, you need energy to be bought by the ultimate customer for the real cost – and the price will be determined on a real-time basis,” says Bhaskar.  “We are already seeing Oman trying to implement a spot market - but I think ultimately when others follow there will be the potential for a GCC energy market.”  

While much of the focus of the WFES has shifted towards solar and wind energy in recent years, gas power plants will play an important role in supporting the development of intermittent energy resources.

 “In the short-to-medium term, gas plants will be required,” says Bhaskar. “It is not just about intermittent resources, but also about grid stability and energy security – I don’t think an offtaker would want its grid dominated by one particular source of energy at any given point in time, it is always a balancing arrangement.”

 

Game-changer



Although gas will continue to play an important role in meeting the region’s power needs in the near future, the game-changer will be when battery storage for renewables become cost-efficient at scale. Bhaskar says that regulatory reforms will also be key to allow the region’s utilities and power providers to reap the benefits of battery storage.

“To use battery storage only for peak shifting or energy shifting is limiting, and you aren’t using the full potential of the battery. There are so many other ancillary services you can benefit from – but you need a regulatory framework with an acceptable compensatory mechanism for this,” he explains. “Today most of the grids are dominated by capacity compensation, when it moves to energy compensation you will see the full potential of batteries being unleashed.”



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