IEA (2020), North Africa’s pathways to clean energy transitions, IEA, Paris https://www.iea.org/commentaries/north-africa-s-pathways-to-clean-energy-transitions
The five countries in the North Africa region1 have varying socio-economic and energy circumstances, but both energy importers and large net exporters of oil and gas are aligned on the imperative of transitions, and several countries are at the forefront of the continent’s energy transformation.
On September 21st, the International Energy Agency launched the Clean Energy Transitions in North Africa report. The release of this new publication provided an opportunity for stakeholders and experts from across the region to take stock of the situation today and share experiences on how to spur future development during a virtual dialogue convened by the IEA. Across the region, countries show examples of energy transitions initiatives and clear-sighted policies that have demonstrated tangible results, and reveal the potential ahead.
North Africa has shown important wins on renewables, and can accelerate further with right policy mix
Over the last decade North Africa has managed to increase its renewable energy production by 40%, by adding 4.5 GW of wind, solar PV and solar thermal capacity to its renewable energy power fleet. Renewables generation capacity grew by 80% over the past ten years, and almost by 560%, when excluding hydropower. This progress has come despite significant recent social and political change in four countries in the region. As technologies have matured and costs have dropped, countries have increasingly been designing distinctive policies to promote energy transitions.
Egypt’s experiences are worth noting. The country went from chronic power shortages to having a 25% surplus of electricity supply by adding 25.5 GW of new generating capacity between 2015 and 2019. This included 1 GW of solar PV and nearly 840 MW of new wind capacity. Such transformation highlights an important lesson: it is entirely possible to address immediate energy challenges while also planning for a more sustainable future.
How did Egypt manage to achieve what it has in such a short space of time? One key factor is that it identified early the laws and regulations that could enable private investment in the sector. In 2014, it introduced feed-in tariffs and followed this up in 2017 by allowing long-term power purchasing agreements to make investments by independent power producers more attractive. A tangible result of these two policies was the development of the 1.8 GW solar PV park at Benban – one of the largest solar plants in the world once completed. At the same time, it opened projects for tendering through auction mechanisms. This has already proved successful for solar and wind projects, including the development of the 200 MW Kom Ombo solar PV plant (part of 600 MW of solar capacity tendered in auctions in 2018). Egypt also improved its investment climate by allowing investment guarantees, liberalising its currency, and implementing an effective and methodical restructuring of power subsidies.
Important lessons can also be drawn from Morocco, which alone accounted for three-quarters of the region’s renewable electricity production growth. Here too, impressive achievements in the energy transitions process have been underpinned by concerted government policy. In 2009, Morocco announced a 42% renewables target of electricity supply by 2030. During COP21 in Paris in 2015, that target was increased to 52%, which it now expects to reach five years early. In fact, the country is now on track to increase the share of renewables in electricity to 60-65% by 2030.
In addition to setting long-term targets (and enshrining the right to sustainable development in the constitution), Morocco sought to provide the legal and regulatory framework to roll out its broader transitions strategy, aiming first and foremost at market creation. Since then, subsequent legislation was passed that allows tendering and auctions for large-scale solar and wind projects, encouraging private investments in the sector. Other enablers of success focused on fostering investor and lender confidence by creating competent “one-stop-shop” agencies including the Moroccan Agency for Sustainable Development (MASEN); ensuring strong institutional off-takers; and increasing institutional capacity.
Morocco’s persistence in its strategy has been durable, and the uncertain climate in 2020 has not derailed its initiatives, with Morocco successfully commissioning two wind projects this year. The country is not resting on its laurels, however. It now plans to increase its renewables penetration by including this in its broader outlook of regional integration and trade. As well as ensuring priority dispatch for renewables, Morocco has developed interconnections with Spain and Algeria, and is now looking to integrate further into other markets in North and sub-Saharan Africa, as well as Europe.
Long road for energy efficiency with vast potential, and a few best practices show the way
The move towards more sustainable energy use in North Africa is not limited to tapping the region’s significant renewable potential. Energy intensity has remained essentially stagnant over the last two decades, highlighting that there are major opportunities to promote the more efficient use of energy across all sectors. There have been a number of barriers to energy efficiency initiatives, ranging from limited institutional capacity to the inability to create the markets necessary to bring in the required investment.
Libya, for example, faces some unique challenges, but has nonetheless created its National Energy Efficiency Action Plan (NEEAP), introduced LED lighting replacement plans, and planned the roll-out of regulations against inefficient appliances. In doing so, it hopes to improve energy efficiency wherever possible across the residential sector and in government buildings. These are commendable measures in less than ideal circumstances and show a commitment to transitions even in a hydrocarbon-rich country where energy subsidies remain prominent.
Tunisia’s energy efficiency policies, meanwhile, are recognised as being some of the most effective in the world. In part as a response to the country’s status as a net importer of energy, Tunisia declared energy efficiency a national priority as early as 1985. Since then it has shown how the full breadth of an institutional and regulatory system, as well as financial incentives, can be used to enhance energy conservation objectives, setting a regional example. Part of this success is related to the institutional strength of the National Agency for Energy Conservation (ANME), which is responsible for setting the country’s policies. ANME introduced an integrated approach based on six measures, including technical, regulatory and fiscal instruments to boost efficiency uptake and effective communication campaigns, as well as obligatory energy audits and building regulations.
One notable aspect of Tunisia’s strategy was the creation of a national Energy Transition Fund, which provides subsidies and loans to finance investment actions aimed at energy efficiency. The Fund is financed by development cooperation and taxes on high-energy consuming products. It has a discernible return: every dinar invested by the Fund results in a reduction of 8 dinars on electricity bills following the investments made. As a result, and in a departure from the wider regional trend, Tunisia has since 2001 witnessed a decoupling of economic growth and energy demand.
But more is still possible. IEA analysis shows vast potential for further improvements in the industry, transport and buildings sector. Under the Africa Case, where enhanced energy efficiency measures are deployed, electricity demand growth in North Africa is limited to 35% by 2030, 11 percentage points lower than if these enhanced measures are not taken. Efficiency will be key to alleviating peak demand, grid stress and to limiting production capacity needs.
The region could benefit from making transport more efficient through mandatory fuel standards, fuel efficiency incentives, and regulation on the age of car fleets. Continued urbanisation and increased vehicle ownership make transport the fastest-growing energy sector, thus such measures can make a significant difference.
More efficient buildings could likewise shift the needle on energy demand growth. Low-hanging fruits include enhancing building energy performance codes, with a focus towards the insulation of buildings. Appliances can be made more efficient too. Cooling demand is expected to increase by nearly 55% by 2030, explained by the combined result of climate change raising the number of hot days, and because rising incomes and living standards raise the number of air conditioners in use. The proliferation of more efficient cooling, through increased minimum energy performance standards and labelling could reduce energy demand growth in cooling by 14%.
A changing role for the region’s oil and gas sector
North Africa can translate resource endowments into sustainable economic growth by diversifying their economies and by reducing its emissions intensity. Energy transitions are being internalised even in countries in which oil and gas resources have long been the cornerstone of the economy, like Algeria and Libya. As clean energy transitions accelerate, the region’s large fossil fuel exporters face serious questions about their development models, which rely heavily on fossil fuels.
Yet it can be in countries’ interest to bring the hydrocarbon sector into compliance with energy transitions through potentials for emissions intensity reduction and macro-economic diversification. Combined methane emissions for the region’s producers in 2019 was 10 million tonnes – or around 12% of global oil and gas methane emissions – despite the region only accounting for less than 4% of the world’s oil and gas production. North Africa also accounts for 10% of flared gas volumes globally, reaching around 15 bcm, highlighting a major wasted economic and environmental opportunity. IEA estimates show 40-55% of methane emissions in the region could be avoided at no net cost, as there are ample cost-effective opportunities. Moreover, transitions opens up the possibility for transversal diversification strategies, where countries can leverage existing knowledge, technical and managerial expertise, industry and capacity assets to build new markets.
Clear-sighted policies have driven change in the past, and will continue to do so in the future
Through different circumstances and contexts, the countries across North Africa have shown numerous examples of energy transitions initiatives and policies that have garnered tangible results. From the increased deployment of renewables in Morocco and Egypt to the exemplary pursuit of energy efficiency in Tunisia, the achievements across countries in North Africa can act as a lesson to regional and continental peers. The imperative for energy transitions is growing for oil and gas producers like Algeria and Libya – but the opportunity to direct existing expertise in the energy sector to help drive economic diversification efforts could hold significant promise. The IEA stands ready to assist governments across the region as they seek to redouble their efforts and multiply their ambitions.
This analysis focuses on Algeria, Egypt, Libya, Morocco and Tunisia.
This analysis focuses on Algeria, Egypt, Libya, Morocco and Tunisia.