middle east solar demand outlook executive summary

Middle East PV Market Overview

Market Forecast 2013-2017 - Q2, 2013 -

Prepared by ClearSky Advisors Inc.

© ClearSky Advisors Inc. 22-Apr-2013

Table of Contents

About This Report ..................................................................................................................................................5

Middle East at a Glance ..........................................................................................................................................5

Summary .............................................................................................................................................................. 6

Market Attractiveness ........................................................................................................................................... 6

Fundamental Market Drivers .............................................................................................................................. 7

Political Market Drivers ...................................................................................................................................... 7

Market Forecast .................................................................................................................................................... 8

Market Forecast By Region ................................................................................................................................... 9

Forecast Methodology ......................................................................................................................................... 10

Saudi Arabia ......................................................................................................................... 11

At a Glance .......................................................................................................................................................... 11

Summary ............................................................................................................................................................. 11

Market Forecast ................................................................................................................................................... 12

Market Segmentation .......................................................................................................................................... 13

Market Attractiveness .......................................................................................................................................... 14

Solar PV Policy ..................................................................................................................................................... 14

Competitive Procurement Process ..................................................................................................................... 14

Electricity Market ................................................................................................................................................. 16

Supply and Demand ......................................................................................................................................... 16

Electricity Tariffs .............................................................................................................................................. 16

Electricity Production Costs .............................................................................................................................. 17

Market Dynamics ............................................................................................................................................. 17

Solar PV Market ................................................................................................................................................... 18

Historic Installations ......................................................................................................................................... 18

Installed Costs.................................................................................................................................................. 18

Solar Resource ................................................................................................................................................. 18

Economics of Solar PV ...................................................................................................................................... 19

Key Industry Players ......................................................................................................................................... 19

Job Creation and Economic Benefits ................................................................................................................... 20

Turkey ................................................................................................................................. 21

At a Glance .......................................................................................................................................................... 21

Summary ............................................................................................................................................................. 21

Market Forecast .................................................................................................................................................. 22


Market Attractiveness ......................................................................................................................................... 24

Solar PV Policy .................................................................................................................................................... 24

Licensed Production .........................................................................................................................................24

Unlicensed Production ...................................................................................................................................... 25

Electricity Market ................................................................................................................................................ 26

Supply and Demand .........................................................................................................................................26

Electricity Tariffs ..............................................................................................................................................26


Market Dynamics ............................................................................................................................................. 27

Solar PV Market .................................................................................................................................................. 28

Historic Installations .........................................................................................................................................28

Installed Costs..................................................................................................................................................28

Modules ...........................................................................................................................................................28

Solar Resource .................................................................................................................................................29



Israel ................................................................................................................................... 32

At a Glance .......................................................................................................................................................... 32

Summary ............................................................................................................................................................. 32

Market Forecast ................................................................................................................................................... 33


Market Attractiveness .......................................................................................................................................... 35

Solar PV Policy ..................................................................................................................................................... 35





Electricity Market Dynamics ............................................................................................................................. 38

Solar PV Market ................................................................................................................................................... 38

FiT Program/Government Tenders .................................................................................................................... 38

Installed Costs.................................................................................................................................................. 39

Solar Resource ................................................................................................................................................. 39

Economics of Solar PV ......................................................................................................................................40

United Arab Emirates ............................................................................................................ 41

At a Glance .......................................................................................................................................................... 41

Summary ............................................................................................................................................................. 41

Market Forecast .................................................................................................................................................. 42


Market Attractiveness ......................................................................................................................................... 44

Solar PV Policy .................................................................................................................................................... 44

Abu Dhabi ........................................................................................................................................................44

Dubai ...............................................................................................................................................................46

Benefits of Solar PV ..........................................................................................................................................46



Electricity Tariffs ..............................................................................................................................................48


Market Dynamics ............................................................................................................................................. 51

Solar PV Market ................................................................................................................................................... 52


Installed Costs.................................................................................................................................................. 52

Solar Resource ................................................................................................................................................. 53



Jordan ................................................................................................................................. 56

At a Glance ..........................................................................................................................................................56

Summary .............................................................................................................................................................56

Market Forecast ................................................................................................................................................... 57


Market Attractiveness ..........................................................................................................................................59

Solar PV Policy .....................................................................................................................................................59

Renewable Energy and Energy Efficiency Law (REEEL) ...................................................................................... 59

Direct Large Scale Proposals ............................................................................................................................. 59

MEMR Tenders .................................................................................................................................................60

Net Metering ....................................................................................................................................................60

Electricity Market ................................................................................................................................................ 60

Supply and Demand .........................................................................................................................................60



Market Dynamics .............................................................................................................................................62

Grid Infrastructure ............................................................................................................................................62

Solar PV Market ................................................................................................................................................... 63


Installed Costs.................................................................................................................................................. 63

Equipment Production ...................................................................................................................................... 63

Solar Resource ................................................................................................................................................. 63


Key Industry Players .........................................................................................................................................64

Other Regions ...................................................................................................................... 65

Iran ......................................................................................................................................................................65

Kuwait .................................................................................................................................................................65

Qatar .................................................................................................................................................................. 66

Bahrain ............................................................................................................................................................... 66

Appendix ............................................................................................................................. 67

Installation Forecasts by Market Segment and Scenario ...................................................................................... 67

Middle East ...................................................................................................................................................... 67

Saudi Arabia ....................................................................................................................................................68

Turkey ............................................................................................................................................................ 69

Israel ............................................................................................................................................................... 70

United Arab Emirates ....................................................................................................................................... 71

Jordan ............................................................................................................................................................. 72

Key Solar PV Market Data .................................................................................................................................... 73

About This Report

This report contains a summary of solar PV market fundamentals as well as an outline of policies, initiatives, and

general market dynamics that have informed a market forecast for the Middle East region through 2017. An initial

analysis was performed on all 16 nations within the Middle East region. Out of these 16 regions, the top 5 market

opportunities of Saudi Arabia, Turkey, United Arab Emirates, Israel, and Jordan have been identified and an in

depth analysis of these opportunities is presented. This document is part of a series of reports that focus on key

emerging PV markets from around the world. Together, these reports provide a comprehensive view of the

opportunities that exist for the solar PV industry within Asia, Africa, Europe, Latin America and the Middle East.

Middle East at a Glance

The Middle East region presents a significant

opportunity for solar PV industry participants

looking for growth opportunities within

emerging markets. The region’s increasing

electricity demand caused by rapidly growing

populations and developing economies has

placed a lot of stress on conventional electricity

supplies. Faced with few other alternatives,

rising oil prices and natural gas supply

disruptions have caused many nations to include

solar PV as part of their long term energy

strategies. As a result, many favourable solar PV

policies and procurement programs have

already been initiated. Furthermore, distributed

solar PV is very close to achieving, or already has

achieved, grid parity within some regions. This is

expected to drive significant distributed PV

market activity and allow some of the economic

and grid stability benefits of this technology to

be realized.

Although the long term prospects for solar PV development are good, the Middle East region does pose significant

risks. Since the markets are considerably under-developed, issues relating to permitting, grid connection, and

project financing are expected to pose significant threats and should be examined carefully. Political instability, as

highlighted by the recent turmoil known as the Arab Spring, is also a significant market risk.

Summary

Expected installations: It is expected that 11.6 GW of solar PV will be installed in the Middle East region from 2013-2017.

o 62% of installations will take place in the regions of Turkey and Saudi Arabia.

o The regions of Israel, United Arab Emirates, and Jordan will also see modest market growth.

Renewable energy targets included as a part of many nations’ long term energy strategies are driving utility-scale solar PV procurement programs throughout the Middle East region.

Abundant solar resources, recent decreases in installed costs, and rising unsubsidized electricity tariffs are driving significant commercial-scale market growth in some regions.

o Regions with highly subsidized electricity rates will have to rely on other incentives to drive distributed generation market growth; this will limit growth in these regions.

o Higher electricity subsidies provided to residential customers and higher installed costs for residential systems are limiting growth in the residential market segment.

Ever increasing electricity demand, abundant solar resources, rising oil prices, natural gas supply disruptions, decreasing solar PV costs, and rising electricity tariffs are all expected to sustain market growth in the long term.

Weak electricity infrastructure, permitting issues, concerns about sovereign bankability, political instability, and investments in competing technologies such as wind and nuclear, are all expected to restrain growth in the long term.

Market Attractiveness

ClearSky Advisors’ Middle East PV Market Overview is the aggregation of 9 independent studies of the most

promising solar PV markets within the Middle East region. These regions were selected from the 16 regions that

make up the Middle East based on expectations of solar PV market size. Each of the 9 regions was rated according

to a number of factors deemed to have the largest influence on future solar PV development. Based on these

ratings an Overall PV Market Attractiveness rating was given to each of the regions. These ratings can be seen

below.

Middle East Solar PV Market Attractiveness Matrix

Region Overall Market Attractiveness

Cost of Electricity

Effectiveness of Solar Policies

Size of Electricity

Market

Generation Capacity Needed

PV Market Maturity

Solar Resource Economic and

Investment Risk

Saudi Arabia 4.1 4.0 4.5 4.0 4.5 3.5 4.3 3.7

Turkey 3.8 4.0 4.0 4.0 4.0 3.5 3.6 3.1

Israel 3.6 3.5 4.5 1.0 3.5 4.5 4.1 3.7

UAE 3.4 3.0 3.0 2.0 4.0 4.0 4.6 3.9

Jordan 3.2 3.0 4.0 1.0 4.0 3.0 4.1 2.8

Iran 3.1 3.0 3.0 4.0 4.0 2.0 4.3 1.6

Qatar 2.9 2.0 3.0 1.0 4.0 2.0 4.0 3.7

Kuwait 2.9 3.5 2.5 1.0 3.5 3.0 4.1 3.0

Bahrain 2.9 2.5 2.0 1.0 4.0 2.5 4.6 3.8

Middle East Regions That Were Not Rated

Syria

Iraq

Oman

Lebanon

Yemen

Cyprus

Palestine

In general the factors affecting the attractiveness of a solar PV market can be divided into two main categories:

Fundamental Market Drivers and Political Market Drivers. Distinguishing between those markets that are driven

fundamentally and those that are driven politically can be a valuable initial step to gaining a solid understanding of

the various market opportunities and risks present within a given region.

Fundamental Market Drivers

These factors affect the economic returns of installing solar PV in a region, as well as describe the demand that is

present for additional sources of power. High solar resources, expensive electricity production costs and a growing

or developing economy are all considered fundamental market drivers.

Political Market Drivers

Many markets flourish even in the face of limited fundamental market drivers. These markets tend to be driven by

political reasons. Job creation, CO2 reductions and energy security can all drive significant levels of solar PV

adoption. Likewise increases in political uncertainty, like those seen recently during the Arab Spring conflicts, can

often reduce the attractiveness of a given market.

The chart below allows for an easy comparison of different markets and their respective drivers.

Saudi Arabia

TurkeyIsrael

UAE

Jordan

Iran

QatarKuwait

Bahrain

Po

licy

Dri

vers

Fundamental Market DriversUnattractive

Un

attr

acti

veA

ttra

ctiv

e

Attractive

Bubbles are sized by total electricity market size (TWh/year)

Market Forecast

Annual Solar PV Installations in the Middle East (MW)

2013 2014 2015 2016 2017 2013 – 2017

Total

High Case 759 1,744 3,197 4,260 6,718 16,679

Expected Case 530 1,203 2,063 3,108 4,659 11,563

Low Case 317 505 963 2,143 2,814 6,743

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2013 2014 2015 2016 2017

An

nu

al I

nst

all

ati

on

s (M

W)

Middle East Solar PV Market Forecast

Low Case Expected Case High Case

Expected Installations By Market Segment (2013-2017)

Residential 6%

Commercial 24%

Utility 70%

The majority of PV installations will be

large utility-scale projects driven by

government renewable energy

procurement targets. Highly subsidized

electricity rates for residential customers,

and a lack of distributed solar PV incentive

programs, severely limit growth in the

residential market segment. In many

regions commercial-scale net metered

projects are already economical or are

expected to become economical over the

next 5 years. This will drive significant near

term growth.

Forecast Methodology

Based on the study of market attractiveness the five most promising markets were selected and a 5-year forecast

of solar PV market development was completed for each of these five regions. In addition a preliminary analysis of

likely development in all the other regions was also completed. The formulation of these forecasts followed a

consistent and robust procedure.

The elements that inform each forecast fall into three broad categories.

Market fundamentals and economic factors

Renewable energy policy drivers

Pipelines of announced and planned projects

Market and economic factors influencing PV development include retail electricity prices and electricity demand in

the residential, commercial and industrial sectors, solar insolation and the resulting capacity factors, average PV

installation costs, time of use electricity pricing, and a number of other factors distinct to each region. This data is

collected through primary and secondary sources and used to inform ClearSky Advisors’ propriety Dynamic

Forecasting Tool (DFT) to determine the volume of projects expected to be installed in the absence of additional

policy incentives.

In addition to this fundamental demand, any policies in the region are analyzed to determine the volume of

installations each program will incent. This analysis is based on the detailed nature, budget, and mandated goals

of each policy in addition to the impact of similar programs in similar regions elsewhere in the world.

Finally, the forecast is informed by the pipeline of commercial and utility-scale projects that have been planned or

announced by developers and/or government agencies. Information is gathered from primary and secondary

sources to determine the likelihood that these projects will be completed and the anticipated commercial

operation date for each.

Combining the forecasts together provides a robust, bottom-up analysis for the entire Middle East region.

In addition to the forecasts, detailed information is provided describing the:

Electricity market structure,

o Electricity supply and demand growth and segmentation,

o Electricity tariffs and costs,

o Market structure and regulation,

Solar PV market factors,

o Historic installations,

o Installed costs,

o Costs of solar electricity,

Renewable energy and solar specific policy programs and incentives,

o Current policies and their effectiveness,

o The likely development of future policies, and

o Main policy drivers like job creation, economic development and energy security.

2013 Middle East PV Market Overview

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