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2012MENA Cleantech Survey Report

2 | 2012 MENA Cleantech Survey Report

Introduction

The objective of the MENA Cleantech Survey 2012 is to identify the main trends in the Middle East and North Africa (MENA) cleantech sector and highlight significant drivers for cleantech investment and policy frameworks.

We have broadened the selection of participants to avoid biasing the results. As an add-on to our previous year’s survey, we have included analysis of the differences between the various territories in MENA, i.e., Levant, Gulf Cooperation Council (GCC) and North Africa, and in some cases, we broke down the responses to the country level.

Nimer AbuAliMENA Cleantech Leader

Ernst & Young

Thomas ChristiansenEMEIA Cleantech Operations Manager

Ernst & Young

2012 MENA Cleantech Survey Report | 3

Executive summary

For the second year, Ernst & Young co-hosted the annual Project Village at the 2012 World Future Energy Summit (WFES) in Abu Dhabi. With projects representing more than 1 gigawatt of capacity and a cumulative investment of US$4 billion present in 2012, the Project Village is one of the foremost platforms for renewables investment in MENA. Ernst & Young took the opportunity to survey experts in the Project Village and at WFES and to leverage our strong regional network in the Middle East and North Africa to launch this year’s MENA Cleantech Survey.

In order to gauge sentiment regarding cleantech development in MENA, Ernst & Young surveyed 190 people from different sectors, such as banking, technology, public and private sectors, NGOs, and academic and civil society, from countries inside and outside the MENA region.

InvestmentThe respondents were more optimistic than last year, mainly due to the government support and initiatives in the different countries in MENA, such as Saudi Arabia, UAE, Egypt and Jordan. They mentioned that investors would be keen to invest inside MENA, particularly in solar energy.

Seventy-nine percent of the respondents are confident that cleantech investment will increase in MENA in the coming five years.

Thirty-four percent of the respondents expect that the investment in cleantech will be inside MENA, through projects, funds or investments driven mainly by government expenditure.

Fifty-five percent of the respondents still believe that the Desertec project will be realized because of the advantages for all the parties involved.

TechnologyIn general, the respondents were highly optimistic about the market prospects for a number of technologies in the MENA region. Respondents said that solar energy would continue to attract attention due to the abundant solar sources in MENA. They also felt that photovoltaics would dominate the solar market for at least the next five years, followed by Concentrated Solar Power (CSP).

Energy efficiency has also become a very hot topic across MENA, and especially in GCC countries, due mainly to increasingly high energy consumption per capita.

Respondents felt energy efficiency was the second most promising growth area in GCC countries.

The respondents in Levant and North Africa selected the water sector in general as the third potential area for cleantech investments.

Drivers and barriersIn general, the price competitiveness of renewable energy compared with the traditional sources and the support of governments are the main challenges to any cleantech investment in MENA in general and the GCC in particular.

The lack of financing experience in renewable energy is the main obstacle and challenge for cleantech investment in Levant.

However, governments’ policies, the decreasing cost of renewable energy and increasing business efficiency are the main drivers of cleantech growth across MENA.

The survey identified job creation as another driver for renewable energy investment, especially in the countries that are net importers of energy.

CountriesThe survey identified Saudi Arabia, UAE, Qatar and Jordan as the most attractive markets in MENA for different reasons. Whereas Saudi Arabia, UAE and Qatar were selected because of the availability of financial resources through big initiatives like KACARE Masdar or the ”green” FIFA World Cup 2022, Jordan and Egypt were cited by respondents due to the increase in population and need to secure more jobs through the local economic activity created by clean technologies.



UAE39%

China9%

Asia19%

North Africa3%

Germany6%

Americas9%

Europe15%

Country

Manufacturing34%

Power orwater utility2%

Investors3%

Oil and gas1%

Other18%

Project developer16%

Research7%

Government4%

Service provider15%

Sector

Figure 1>>

Water16%

Waste management12%

Green building12%

Wind9%

Solar31%

Carbon captureand storage3%

Energy efficiency17%

MENA potential technologies

What is the technology with the highest potential for growth in each region within MENA over the next five years?

Solar energy is the number one option across MENA

Almost one-third of the respondents in MENA favor solar energy as the number one potential source of renewable energy irrespective of their territories.

In a dramatic change from last year’s results, respondents selected energy efficiency as the second potential growth area across the region, with slight changes from one territory to another, followed by water and green building.

Profile of the respondents>>


Water16%

Waste management12%

Solar32%

Wind3%


Green building16%

Carbon captureand storage

4%

GCC potential technologiesGCC has to focus on the energy efficiency and green building areas

Energy efficiency and green buildings have become very hot topics and high-potential areas in the GCC due to climatic

conditions and high electricity consumption. Water is also an important sector recognized by the respondents.

Water16%

Solar31%

Carbon capture and storage1%

Wind10%


Waste management13% Green building

11%

Levant potential technologiesWater has been selected as a priority area in Levant and North Africa

Water is a common area for potential in North Africa and Levant because of the lack of natural resources and the high growth

rate of their populations. The respondents expect that wind will attract a great deal of attention in North Africa, especially with

the possibility of exporting the energy to Europe.

Carbon captureand storage3%

Water16%

Solar32%

Wastemanagement

12%


Wind16%

Green building6%

North Africa potential technologies

31%of respondents in MENA favor solar energy as the number one potential source of renewable energy.


Figure 2>>

Others5%

CSP19%

Photovoltaics76%

Potential solar technology

From your experience, what is the most appropriate solar technology for MENA?

The majority (75%) of respondents selected photovoltaic (PV) as the main solar technology in MENA followed by just 19% naming CSP. Respondents justified their selection mainly by the price per watt compared with the other technologies.

Figure 3>>

Other7%

Insufficientgovernment

support31%

Insufficient private financing

16%

Price competitiveness compared to traditional

energy sources25%

Lack of global carbon reduction mechanism

5%

Lack ofR&Defforts inMENA7%Limited experience

in banks of financing renewableenergy

projects9%

Challenges to renewable energy

Within MENA, what is the single most important barrier or challenge to the development of renewable energy?

Although respondents have different views based on their territories, insufficient government support remained the most significant barrier to new investment

For this question, the respondents in GCC had different views on the challenges facing the development of renewable energy. The price competitiveness compared with traditional energy sources is the main obstacle, especially for the GCC countries when they compare their low production cost per barrel to the investment cost of renewable energy. This price comparison is not a factor for the Levant and some of the North African countries that are net importers of energy.

Answers varied slightly among the main regions within MENA. While insufficient government support was the main challenge or barrier to the development of renewable energy across all the regions, the other challenges were slightly different. For GCC, the respondents mentioned price competitiveness compared to traditional energy sources, as well as insufficient government support, as the main challenges to the development of renewable energy.

Instead, in Levant, the lack of experience and funding to finance renewable energy is the main challenge since most Levant countries are energy importers and have limited financial resources.

The case in North Africa is close to that of the Levant countries; however, price competitiveness is also a major challenge since most of the North African countries are energy exporters as well.


>>

0

20

40

60

80

100

120

Job creation

Water scarcity

Population growth

Solar irradiation

Climate change

response

Desire to increase business efficiency

and reduce cost

Desire to reduceuse of

fossil fuel

Reduced cost of

renewable energy

Government policy

Figure 4In your opinion, what will be the main drivers of cleantech growth in each

geographical area within MENA?

Government policy, cost of renewable energy, desire to reduce use of fossil fuels and increased

business efficiency are the main drivers of cleantech growth across MENA

Tracking the results of last year’s survey, the respondents still cite government policy as the main driver of cleantech growth

regardless of country. The absence of clear regulations and policy frameworks continues to discourage investors and the

private sector from investing in cleantech.

The respondents mentioned job creation as one of the important drivers for cleantech investment in the Levant countries as a

result of population growth and elevated rates of unemployment.

76%of respondents selected photovoltaic as the main solar technology.

GCC Levant North Africa


Figure 5>>

Qatar

94%91%

73%59%

51%51%54%

47%33%

24%18%22%

16%13%

5%4%

6%8%

18%34%

30%40%36%

40%52%

31%43%

42%40%

38%13%

24%

1%1%

9%

7%20%

10%10%

13%16%

45%38%36%

45%49%

82%73%

0% 20% 40% 60% 80% 100%

Saudi ArabiaUAE

JordanEgypt

KuwaitMorocco

OmanAlgeria

LibyaBahrainTunisia

IraqLebanon

YemenSyria

In five years, what will be the most attractive markets within MENA for renewable energy investments?

Saudi Arabia, UAE, Jordan and Qatar will become the most attractive markets in MENA

Saudi Arabia, UAE and Qatar are at the top of the attractive markets list, according to the respondents, due to their government plans, budgets and long-term strategies.

Jordan has limited financial resources; nonetheless, there are government initiatives to draft a law for renewable energy, in addition to the urgent need to create new jobs by increasing local content requirements for investments in renewable energy.

Figure 6>>Stay the same

16%

Increase80%

Decrease1%

Don’t know3%

MENA cleantech investment in five years

How will the level of investment in MENA cleantech change over the next five years?

Eighty percent of the respondents are confident that cleantech investment will increase in MENA; they are more optimistic regarding the GCC compared with Levant and North Africa

In general, 94% of the respondents were more optimistic about the investment in GCC compared with 73% in North Africa and 67% in Levant.

The respondents also were expecting considerable increases in cleantech investments in the GCC, reflecting the impressions of investors after recent announcements in the GCC, with especially ambitious plans in Saudi Arabia and the UAE.

High potential Good potential Low potential

Note: percentages may not total 100 due to rounding.


>>Figure 7Will the cleantech investments of MENA investors be focused on companies and

projects outside or inside MENA?

Thirty-seven percent of the respondents stated that cleantech investment is more likely to occur inside

MENA while 14% expect funds from MENA to be invested primarily outside MENA

Invest insideMENA

37%

Don’t know36%

Invest equally13%

Invest outside MENA14%

MENA cleantech investment

Most attractive markets in 5 years

Saudi ArabiaUAEJordan and Qatar


Figure 8>>

Project will berealized54%

Projectwill not be

realized at all4%

Don’t know6%

Project will not be realized on

this scale36%

EU, ME, NA electric grid project

Currently, European Union, Middle East and North African governments and companies are planning to connect the regions via an electrical energy grid capable of providing MENA countries with considerable electricity and Europe with 15% of its electricity needs by 2050. The electricity will be generated mostly by renewables.

Fifty-four percent of the respondents still believe that the Desertec project will be realized

Compared with last year, when 62% of the respondents stated that this project would be realized, only 54% of the current respondents think that will occur, and the other 36% believe that the project could be realized but on a smaller scale and at a reduced size.

Figure 9>>

Conventional energywill prove cheaper for Europe than renewable electricity from MENA9%

Local renewables will prove cheaper

for Europe than renewable

electricity from MENA

16%

The project will not receive support

in MENA11%

The project will notbe funded at thenecessary level

23%

The project will not receive

support in EU8%

Other6%

Technical problems cannot be resolved

9%

Country risk premiums will make debt funding

too expensive18%

EU, ME, NA electric grid project challenges

If you answered “this project will not be realized” or “will not be realized on this scale,” please give us your reason.

Forty-one percent of the respondents said that financing would be the main issue for this project, while 25% believed that the cost of renewable energy would be one of the challenges for the project, and 19% cited MENA and EU governments’ lack of support as the main challenge for the project.


The MENA practice of Ernst & Young has been operating in the region since 1923. For over 85 years,

we have evolved to meet the legal and commercial developments of the region. Across MENA, we have

more than 4,200 people united across 20 offices and 15 Arab countries, sharing the same values and an

unwavering commitment to quality.

For more information, please visit www.ey.com/mena.

ContactNimer AbuAli MENA Cleantech Leader

Direct contact: +971 2 417 4566Office number: +971 2 417 4400Mobile number:+971 50 722 4315Email: [email protected]

4,200 people united

across

20 offices

and

15 Arab countries worldwide

Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & YoungErnst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.

© 2012 EYGM Limited. All Rights Reserved.

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EYG no. FW0013 1204-1352625 BOS

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

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