Policy Framework

172. A variety of RE-specific investment incentives have been put in place in different jurisdictions, with mixed results. They can be grouped in three broad categories:

• Regulatory incentives: policies (general or sector-specific) intended to improve the business environment (general or sector-specific), market liberalisation, and regulatory exemptions ;

• Financial incentives: capital subsidies, soft loans, loan guarantees, premium and grants ; and,

• Tax incentives: tax exemptions on import levies, sales tax, value-added-tax, etc.

173. In the MENA region, target-setting and policy deployment is now a widespread phenomenon. As of May 2014, all MENA countries have renewable energy targets, and most have targets specified by technology that would result, if realised, in 107 GW of installed capacity throughout the region by 2030. More than half the policy targets are for shares of electricity production, typically 10-20%, ranging from 2% in 2020 in Qatar to 40% of electricity generation in Algeria by 203033.

Table 2. Renewable energy targets in selected MENA countries (as of 2014)

Source: MEED Insight (2014)

174. The majority of targets and policies place a focus on solar PV, CSP and solar water heating (SWH), reflecting the abundance of solar energy resources in the region and the decreasing technology costs. Wind is the second most popular technology choice.

175. Yet across the region, the state of preparedness of policy frameworks for renewable energy varies considerably: despite nascent policy developments, a majority of MENA governments lack the legislative infrastructure and promotion tools required to help achieve those targets. For instance, feed - in tariffs (also called premium payments), advanced renewable tariffs and minimum price standards, which offer long-term contracts to RE producers typically based on the cost of generation of each technology, are a common policy type in the electricity sector worldwide. They have been adopted in seven MENA countries and are under consideration or development in others. Seven countries have net metering in place (Egypt, Jordan, Tunisia), and 11 MENA countries have some form of RE fiscal incentive, including capital subsidies and tax or production credits or reductions.

Table 3. Incentives regimes for renewable energy in selected MENA countries (as of 2014)

Source: REN21 Secretariat (2013), MENA Renewables Status Report, Abu Dhabi International Renewable Energy Conference (ADIREC), Paris.

176. Yet the most common public policy tool used by national governments to promote renewable electricity remains public competitive bidding for fixed quantities of RE and public financing, including grants and subsidies. At least 15 MENA countries have direct or indirect public funding or public competitive bidding processes in place. From 2012 to early 2013, several countries started public competitive bidding processes34.

177. A number of countries have also established special renewable energy funds to finance investments directly, provide low-interest loans or facilitate markets in other ways (e.g. through research, education, standards). The Masdar Initiative (UAE), a privately-structured, government - backed entity that channels public funds into RE projects worldwide and within the country, began commercial operation of the 100 MW Shams 1 CSP plant in 2013, and is in the planning stages for both the 100 MW Noor 1 PV plant and the 30 MW Sir Bani Yas wind farm. The Abu Dhabi Fund for Development has also set aside (in addition to a range of grant-funded RE projects around the world) USD 350 million in soft loans for RE projects in developing countries that are members of IRENA.

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33. IRENA (2013), MENA Renewables Status Report.

34. See Annex 1 (Morocco: The Ouarzazate "Noor 1" CSP Project).