195. Investments in renewable energy infrastructure will need to be scaled up significantly in the MENA region to support the broader development, economic and climate agenda. Given strains on public finances, engaging the private sector is essential.
196. The task of encouraging private investment in such a frontier sector, faced with unfavourable regional risk perceptions, is daunting. As seen previously, investment in renewable energy is further hampered by market and government failures, including fossil-fuel subsidies, the lack of supportive policies and outstanding barriers to international trade and investment (OECD, 2014).
197. As detailed in the OECD Policy Guidance for Investment in Clean Energy Infrastructure, governments have a key role in strengthening the enabling environment for infrastructure investment by designing and implementing clear and predictable domestic policy frameworks. Based on the extensive consultations and findings derived from the ISMED Support Programme, key policy recommendations applicable to the renewable energy sector in the MENA region are set forth below.
Box 6. The OECD Policy Guidance for Investment in Clean Energy Infrastructure The OECD Policy Guidance for Investment in Clean Energy Infrastructure (OECD, 2014) is a non-prescriptive tool to help policy makers identify ways to mobilise private investment in clean energy infrastructure. It raises key issues for policy makers to consider, including in the areas of: • Investment policy: applying investment policy principles such as non-discrimination of international versus domestic investment, investor protection and intellectual property protection, contract enforcement and transparency; • Investment promotion and facilitation: improving coherence of the broad system of investment incentives and disincentives, e.g. by setting long-term goals, setting well-targeted and time limited incentives (e.g. feed- in tariffs), and facilitating the licensing of renewable energy projects; • Energy market design and competition policy: levelling the playing field between independent power producers (IPPs) and state-owned enterprises (SOEs) and between national and foreign actors to tackle market rigidities that favour fossil fuel incumbency in the electricity sector; • Financial market policy: strengthening domestic financial markets and providing specific financial tools and instruments to facilitate access to long-term finance; • Governance of energy market institutions: enhancing co-ordination between different levels of governance (e.g. to align national and sub-national policies), ensuring the independence of the electricity market regulator, and co-ordinating the planning and deployment of the electricity grid with that of clean energy generation; and • Other policies and cross-cutting issues: regional co-operation; making and implementing the choice between public and private provision of clean energy infrastructure; and ensuring that clean energy policies are compatible with World Trade Organization (WTO) rules. The Policy Guidance benefited from substantial contributions by the World Bank and the United Nations Development Programme (UNDP) and was annexed to the Communiqué of G20 Finance Ministers and Central Bank Governors at their meeting in October 2013. The OECD is to apply the Policy Guidance to specific country contexts, in partnership with interested countries and international organisations, to help governments assess and reform their domestic policy framework for clean energy investment. One of the main outcomes of this project will be publication of Clean Energy Investment Policy Reviews, including a road map of actionable reforms for participating countries. Source : OECD (2014), Policy Guidance for Investment in Clean Energy Infrastructure : Expanding Access to Clean Energy for Growth and Development, Report submitted to the G20 with inputs from the World Bank and UNDP, OECD Publishing, Paris |