Deloitte Solar Energy Report

Sustainable finance
Can Sukuk become a driver of

solar and green energy growth?
Deloitte Islamic finance Insights Series In the Middle East
Leading by engaging since 1926
Sustainable finance | Can Sukuk become a driver of solar and green energy growth?
Contents
04 05 06 07
Foreword from Deloitte Foreword from ISRA Acknowledgments Executive summary
08 09 11 17
Research methodology Introduction Market development Industry and business
and investment trends leaders’ outlook
21 28 29 31
Islamic financing strategy Business practice and Conclusion Appendix A: Growth drivers
support initiatives and market dynamics
56 57
Appendix B: Abbreviations Appendix C: Thought
leadership reports
03
Foreword from Deloitte
This is the second Deloitte renewable Resource thought leadership, senior

energy report that examines the industry managers that serve clients in the solar
investment trends, regulatory policy, sector space in our region, Deloitte
industry stakeholders, financing strategies Middle East (ME) Islamic finance
and success stories that help drive the Knowledge Center (IFKC) survey
value proposition for Islamic financing conducted in 2017, interviews and
options. industry group discussions as well as
country cases built by associate research
While the demand for sustainable energy- institutions.
efficient sources continue to increase in
many countries around the world, I am most grateful to my fellow colleagues
security of sustainable finance and at Deloitte ME and Malaysia, and all
responsible investment in the sector associate research institutes
represents a main challenge. Solar energy acknowledged in this report.
continues to enter mainstream utilization
Dr. Hatim El Tahir, FCISI
in several Organization of Islamic As economic growth and population
Director, Islamic finance Group
Cooperation (OIC) countries in the regions increase in the 10 countries and regions
Leader, Deloitte ME IFKC
analyzed in this report (MENA, Asia and reviewed, solar and green energy will likely
Deloitte & Touche (M.E.)
Europe). grow in scale and scope and will certainly
require huge capital to fund. The issues
Energy efficiency and green energy and industry growth trends in this report
concepts have been embraced and may stimulate debate as to how Islamic
deployed in the national visionary finance can become central to these
strategies. A clear trend is the growing growing investment opportunities and
importance of Islamic finance as an help identify some of the key financing
alternative funding choice for many strategies/structures which can be further
countries and governments, supported by improved to respond to increasing needs
Multinational Development Banks (MDBs) for capital.
and local industry supporting initiatives
(technical and financial). I hope you enjoy reading this report.
The methodology for developing this set

of issues and trends emerged from data
analytics from Deloitte’s Energy and
04
Foreword from ISRA
The Paris Agreement on Climate Change projects. In the field of Islamic finance,
marks a key turning point in the global green Sukuk has emerged as a Shariah-
energy transition. More than 178 nations compliant instrument for the same
have ratified the United Nations purpose.
Framework Convention on Climate
Change (UNFCCC), which mainly aims to Malaysia and Indonesia are among the
consolidate efforts to address the threat first countries to issue this type of Sukuk.
of climate change. In Malaysia, the first corporate green
Sukuk worth RM 250 million, was issued
One of the most important provisions of by Tadau Energy Sdn Bhd to partly finance
the Paris Convention is to promote large-scale solar construction. Meanwhile,
renewable and sustainable energy. This Indonesia issued US$ 1.25 billion of
not only has a direct impact on economic sovereign green Sukuk, whose revenues
and social development, it is also will be partly used to finance renewable
environmentally friendly. More energy projects. The increase in the
Professor Mohamad Akram Laldin
importantly, the use of “green” energy has adoption of green Sukuk to finance
Executive Director
become an integral part of the UN’s renewable energy projects is attributable
International Shariah Research
Sustainable Development Goals (SDGs), to the following factors: the increase in
Academy for Islamic finance
which have been incorporated into the renewable energy projects, particularly
economic growth plans of many nations. solar energy projects, the low capital
It also contributes to several policy costs, and the fact that it is a Shariah-
objectives, such as developing new compliant instrument.
industries and products, creating new
jobs, reducing emissions of polluting This report, which is jointly produced by
gases and providing affordable and ISRA and Deloitte Middle East, highlights
reliable clean energy. the importance of renewable and
alternative energy by presenting the
According to the Bloomberg NEF report, experiences of selected countries in this
global investment is focusing strongly on field. The report also emphasizes the role
investing in renewable and clean energy. of Sukuk in sustainable development and
For example, investments into global renewable energy projects, particularly
clean energy recorded an increase from solar projects. The report is expected to
US$ 200 billion in 2008 to US$ 332 billion raise stakeholders’ awareness on
in 2018. This is due to lower investment investment in renewable energy projects
costs in green energy, especially solar. through Shariah-compliant financing
instruments particularly green Sukuk.
Several countries have also recently
witnessed a remarkable development in I would like to take this opportunity to
renewable energy investments. In the express my gratitude to Deloitte Middle
countries of the Gulf Cooperation Council East for collaborating with us in producing
(GCC), for example, the renewable energy this report. My profound thanks also go
target has become an integral part of to all the contributors to this report.
national determined contributions and Congratulations to the production team
falls within the objectives of UNFCC. from ISRA and Deloitte Middle East for
this great achievement. This report would
It is worth noting that issuances of green not have been possible without your
bonds have become part of the current earnest support.
forms of financing for renewable energy
05
Acknowledgments
We extend our gratitude and appreciation

to the respondents of our online survey
Solar energy continues to enter
questionnaire and Deloitte professionals
who contributed to this report. We are
mainstream utilization in several
also grateful to fellow colleagues and
practitioners who contributed in
Organization of Islamic Cooperation
developing the country cases and
stimulated our discussion themes which
(OIC) countries in the regions analyzed
helped improve the depth of the research
scope and industry analysis.
in this report (MENA, Asia and Europe).
Project contributors
Deloitte team Industry contributors & associate
• Dr. Hatim El Tahir, Director researchers
• Sakinah Jamil, Senior Manager • Professor Yelena Kalyuzhnova, Vice Dean
• Sajida Ali, Consultant (International), Henley Business School,
• Faisal Hamid, Consultant Director, the Center for Euro-Asian
Studies, the University of Reading.
ISRA team • Dr. Irum Saba, Assistant Professor,
• Associate Prof. Dr. Said Bouheraoua, Center of Excellence in Islamic finance
Director of Research Development and (CEIF), Institute of Business
Innovation Department Administration, Pakistan
• Dr. Salma Sairally, Research Consultant • Dr. Nihat Gumus, Ibn Haldun University -
• Dr. Marjan Muhammad, Head of Department of Management, Istanbul,
Research, Quality Assurance Office Turkey
Supported by
06
Executive summary
The drive to promote green energy in Over the years, and in particular in the Over the years, and in
many countries, together with reducing markets we considered, Islamic finance
solar technology costs and maturing has emerged as a key player to fund particular in the markets
practices, have attracted strategic social and infrastructure projects and we considered, Islamic
investors into the sector primarily driven offers various innovative Shariah-
by return and sustainable investment compliant structures to both large and
finance has emerged as a
principles. Owing to such factors, almost small-scale enterprises in different key player to fund social
all countries analyzed are either sectors of the economies. Evidently,
and infrastructure
increasing their current solar capacities or these structures are also used in
installing new plants to achieve its clearly financing several major solar projects in projects and offers
set energy efficiency strategies. the Middle East and North Africa (MENA), various innovative
Asia and Europe.
Countries such as Malaysia and Indonesia
Shariah-compliant
which are considered highly coal This report provides an in depth analysis structures to both large
dependent economies have started to
drastically decrease their government
of the key driving factors of going green
in these selected groups of counties and
and small-scale
sponsored subsidies towards discusses the value proposition of Islamic enterprises in different
conventional energy sources to drive their financing strategy, as well as present sectors of the economies.
focus towards non-conventional sources, anchor transactions and structures used
with solar the being prime focus. in these countries.
With such focused approach by various The analysis also covers the global
governments, the majority of the group energy landscape, and concludes with
countries researched have seen a rising discussions on regulatory and investment
trend in investments through both policy support in these group countries.
conventional and Islamic finance methods A summary of the industry outlook is
primarily driven by international presented addressing the various
developers and strategic national challenges and opportunities faced by
investors. This has also encouraged many solar developers and investors which
other investors to engage in scale solar could help improve business practices
and green energy projects, thereby and investment strategies.
enjoying benefits offered by their
respective governments.
07
Research methodology
The report includes 10 The ‘Solar report’ is a follow up issue of Present Islamic finance instruments such
our ‘renewable industry study’ in which as ‘Solar Sukuk’ serve as a catalyst for
country cases in Asia we examined the prospects of Islamic funding solar projects in the OIC
(Malaysia, Indonesia, finance as a source of financing solar marketplace.
projects in several OIC markets based on
Pakistan), Middle East three geographical regions: Asia, Middle Figure 1: Percentage of participating
(Kingdom of Saudi Arabia, East and Europe. respondents based on different
geographical regions
United Arab Emirates, We have unearthed vital and interesting
Bahrain, Jordan and findings and provided industry analysis
2.50%
5.76%
Morocco), and Europe through our ‘triangular study approach’:
5.04%
regulatory environment, markets and
(Turkey and Kazakhstan). practices, and business supporting
We examined the size of institutions. This allowed us to form
practical policy and practice
global solar projects and recommendations as how to Islamic
26.26%
finance gap, along with finance can lead by assuming a natural 60.44%
regulatory and policy role in financing the ‘real economy sector

of energy.
development in the
selected countries. We looked at the challenges and needs of
Asia Middle East &
key solar stakeholders, articulating a
North Africa (MENA)
possible ‘way forward plan’ for connecting
Sub-Saharan Africa Europe
Islamic finance investors, solar energy
Others
operators, energy distributors and other
stakeholders.
Almost
The report includes 10 country cases in
Asia (Malaysia, Indonesia, Pakistan),
Middle East (Kingdom of Saudi Arabia,
United Arab Emirates, Bahrain, Jordan and
60.44%
of respondents were from Asia
Morocco), and Europe (Turkey and
Kazakhstan). We examined the size of
global solar projects and finance gap, Followed by the MENA region with
along with regulatory and policy
development in the selected countries.
The report also features highlights on the
26.62%
of total respondents
role of the International Renewable
Energy Agency (IRENA) and the Islamic
5.76%
Development Bank (IsDB) in the MENA
region and other industry and multilateral
organizations.
of respondents were from Europe
08
Introduction
In the past decade, the world has

witnessed a pressing need for a major Looking at the Gulf Cooperation
transformation from conventional energy
sources to renewables starting with Council (GCC) region, the renewable
planned efforts in limiting the global
temperature rise to below 20ºC for the energy market has seen an upward
present century. According to the
International Energy Agency (IEA) World trend in recent years with all countries
Energy Outlook 2018, rising disposable
incomes and an additional 1.7 billion incorporating renewable energy
people – mostly added to urban areas in
developing economies have pushed up targets in their National Determined
global energy demand by more than a
quarter to 2040. Contributions (NDCs) under the United
While the prevalent approach followed by Nations Framework Convention on
many countries is to decrease their
energy-related carbon emissions, a key Climate Change (UNFCC).
driver for climate change is arriving at a
universal agreement on improving energy
billion in 2008 to US$ 332 billion in 2018, market is seen as one of the innovative
efficiency along with faster adoption levels
with a maximum investment per MW in financing methods with the National bank
for renewable energy as their primary
solar sector compared to the rest of of Abu Dhabi issuing the first green bond
source.
renewable energy sources. This is largely in the Middle East valued at US$ 587
due to a drastic decrease in required million in 2017.3
IRENA reported that the global
capital cost thereby reducing the total
renewable energy capacity more than
investment in solar to US$ 130 billion in Islamic finance is considered one of the
doubled in the last decade from 1,060
2018, as reported by Bloomberg NEF. new options for solar financing apart from
MW in 2008 to 2,179 MW in 20171. This
conventional loans, bonds and equity
provides an additional thrust to the overall
Looking at the Gulf Cooperation Council schemes. One of the popular finance
appeal of renewable energy as one of the
(GCC) region, the renewable energy techniques, Green Sukuk, which are
preferred areas for investing in the future.
market has seen an upward trend in Shariah-compliant green bonds, have
recent years with all countries recently been used in five renewable
Increasing renewable energy deployment
incorporating renewable energy targets in energy projects in Malaysia (as at
by various countries contributes to
their National Determined Contributions December 2018). Indonesia has also
numerous policy objectives, including
(NDCs) under the United Nations launched the world’s first sovereign Green
boosting national energy security and
Framework Convention on Climate Sukuk bonds (for US$ 1.25 billion) in
economic growth, creating jobs,
Change (UNFCC). February 2018, whose proceeds will
developing new industries, reducing
partially finance renewable energy
emissions and local pollution, and
Renewable energy financing in the GCC projects.
providing affordable and reliable energy.2
region generally has long tenures with
high debt-equity-ratios (more than 70%).
Global new investment in clean energy
However the rise of the green bond
almost increased by 66% from US$ 200
09
Overall, the adoption of Green Sukuk as Cost declines for key technologies have Global investment in solar projects has
one of alternatives to several traditional influenced finance flows in the renewable increased dramatically to reach US$ 161
financing techniques will rise due to energy space. Lower solar and wind billion in 2017 as shown in Figures 2
factors such as increasing number of power costs were key contributors which and 3.
solar projects, lower capital cost, faster, reduced the total value of renewable
favorable green energy policies, along with energy investment in 2015 and 2016, as
preference towards Shariah-compliant each dollar of investment financed more
instruments. capacity than in previous years.4
Global clean
Global solar energy landscape However, global clean energy investment
Renewable energy is gaining impetus reached US$ 332.1 billion in 2018,
energy investment
these days as part of focused approach in according to Bloomberg NEF. in 2018
every country’s economic growth policy. It
is considered one of the many ways to Global new solar energy investment US$ 332.1
achieve a country’s development ambition Investments in renewables have billion
and to meet the increased demand for continued to increase each year and
power with emphasis on developing the continue to make remarkable progress.
infrastructure needed to meet the According to the Frankfurt School-UNEP
demands of the future. Centre Annual Global Trends in
Renewable Energy Investment 2018
Increasing global prosperity drives growth report, global investment in renewable
in energy demand. According to IRENA’s energy went up by 2% in 2017 to
report on global landscape of renewable US$ 279.8 billion, taking cumulative
energy finance 2018, global annual investment since 2010 to US$ 2.2 trillion.
Global new
investment in renewable energy rose This rise in capital expenditure took place investment in
steadily in 2013-2015, peaking at US$ 330 in a context of further decrease in the cost
billion in 2015 before falling to US$ 263 of wind and solar that made it possible to solar in 2018
billion in 2016. While annual investment buy megawatts of equipment more US$ 131
declined in 2016, capacity additions in the cheaply than ever before.
same year were up from 2015. This was billion
partially due to declining costs, time lag Solar power gained prominence in 2017
between financial closure (i.e. the time of as total installed capacity from new solar
investment) and the completion of power projects stood at 98 gigawatts,
construction, after which an installation which was more than total of new coal,
becomes operational. gas, and nuclear plants put together.5
Figure 2: Global new investment in solar photovoltaic (PV) (US$ billion), 2017 Figure 3: Global investment of renewable
energy by sector by 2017 (US$ billion)
200
180 179 Solar 161
158 161
160
Wind 107
145
140 140 137
Biomass &
120 Waste-to- 5
US$ billion
120
energy
103
100
Small hydro 3
80
62 64
60 Biofuels 2
38
40
Geothermal 2
22
20
0 Marine 0.2
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0 40 80 120 160
Source: BloombergNEF
10
Market development and investment

trends
Majority of the financial support has come Developed countries have benefitted In 2017, emerging
through government-backed programs from market and product designs that
boosted by the willingness of initially took off in emerging countries. For markets accounted for
development financial institutions (DFI’s) example, renewable energy auctions are a 63% of global new
to advise and fund these projects. As an trend that emerging markets embraced
example, the World Bank Group’s lending first and that have brought steep price
investment in renewable
arm the International Finance declines in renewable prices across the energy, widening the
Corporation (IFC) has provided nearly
US$ 6 billion in capital for 250 renewable
globe.
investment gap with
energy projects in emerging markets A combination of enabling trends and developed countries to
(5 GW solar and 4 GW wind)6. demand trends are helping solar and a record high.
wind compete on par with conventional
Technology trends sources and win (Deloitte analysis).
Technology is accelerating the
deployment of renewables: Automation Solar energy growth
and advanced manufacturing are
improving the production and operation Enabling trends Demand trends
of renewables by reducing the costs and
time of deploying renewable energy Lower solar cost Focused approach by government to support growth
systems. Artificial Intelligence (AI) can of non-conventional energy sources
improve weather forecasting, optimizing Expanding investor Population growth, increasing economy and climate
the use of renewable resources whereas interest changes are fueling demand for power
Blockchain can enable energy attribute
certificate (EAC) markets to help resolve Technology innovation Persistent energy deficit
trust and bureaucratic hurdles. Advanced
materials have potential to transform the
materials in solar panels and wind Investment trends by regions
turbines (Deloitte analysis). A report published by IRENA: Unlocking
Renewable Energy Investment: The Role
Emerging markets of Risk Mitigation and Structured Finance
In 2017, emerging markets accounted (2016), identifies the main risks and
for 63% of global new investment in barriers to renewable energy investment
renewable energy, widening the and provides policy makers and public
investment gap with developed countries finance institutions with a strong portfolio
to a record high. of measures, instruments and tools (see
Figure 4) that can be used in combination
China recorded the highest growth for to mobilize private investment at scale.
solar and wind segments along with
capacities marking above 100 GW for Investment in renewable energy
both in 2017. China accounted for over projects – GCC
half of new solar additions and two thirds The renewable energy projects in GCC are
of global PV production in 2017. concentrated in the UAE. According to
11
IRENA’s renewable energy market analysis

GCC 2019 report, investment trends in After a lean year in 2016, renewable
renewable energy projects in the GCC
spiked in 2011 with US$ 765 million energy investments again picked up
invested in the UAE’s 100 MW Shams 1
CSP plant, which became operational in in 2017, mainly in three large-scale
2013. Investment activity dropped in
2012. Because of increasing government solar projects in the UAE. In Dubai’s
interest and falling technology costs,
investment in new projects rose in 2015, Mohammed Bin Rashid Al Maktoum
and included US$ 326 million in the UAE’s
200 MW Mohammed bin Rashid Al Solar Park, the 950 MW solar PV Phase
Maktoum Solar Park Phase II, US$ 400
million in the Shagaya project in Kuwait III and the 700 MW CSP Phase IV
and US$ 600 million in Oman’s 1 GWth
Miraah Solar EOR project. received investments of US$ 940
After a lean year in 2016, renewable million and US$ 3,870 million
energy investments again picked up in
2017, mainly in three large-scale solar respectively as reported by IRENA.
projects in the UAE. In Dubai’s
Mohammed Bin Rashid Al Maktoum
Solar Park, the 950 MW solar PV Phase III
and the 700 MW CSP Phase IV received
investments of US$ 940 million and
US$ 3,870 million respectively as reported
by IRENA.
In Abu Dhabi, about US$ 870 million was

invested in the 1,177 MW Noor Abu Dhabi
solar PV plant in Sweihan.
Figure 4: Policies, tools and instruments that reduce renewable energy barriers and mitigate risks
Structured finance mechanisms and tools
• Standardization
Financial risk mitigation instruments • Aggregation
• Securitization
• Green bonds
• Guarantees
• Yieldcos
Enabling possibilities and tools • Currency hedging instruments
• Liquidity facilities
• Resource risk mitigation
• Financial policies and regulations
• Project preparation facilities
• Project facilitation tools Scalability
• On-lending facilities
Low High
• Hybrid structures
Source: IRENA, 2018
12
I. MENA
The Middle East will require additional power capacity of 267 GW by 2030, an increase of 66%, as reported by Siemens. The following
tables highlight the market growth trends and list some of the key solar projects and capacity.
Morocco, Jordan and Egypt are Industry investment trends PV West of Nile tender.
including large scale CSPs in • Investment in renewable energy • The biggest solar projects to be
their energy mix projects within the MENA region financed included the 800MW Noor
has seen an upward trend due to Midelt PV and solar thermal portfolio
rise in clean energy-based electricity in Morocco, at an estimated US$ 2.4
demand coupled with factors such billion and, Dubai Electricity and
Morocco planned to construct as growing population, economic Water Authority (Dewa) in UAE Phase
800 MW project valued at US$ growth, decreased cost of solar IV is 950MW and has a total project
2.4 billion energy, and increased industrial cost of US$ 4.36 billion.
activity. • Morocco’s 580 MW Noor II and III
• Solar energy has continued to gain projects at the Ouarzazate solar
momentum both globally and in the complex, one of the largest in the
MENA region. As of the first half of world to consist of PV and CSP.
2018, over 470 GW of solar • Concentrated solar power in MENA:
photovoltaic (PV) was installed Despite MENA region’s contribution
worldwide of which 100 GW was standing at a mere 7% of the global
added in 2017. Concentrated Solar Power CSP’s
• The 200 MW Kom Ombo solar PV generation of 5 GW, countries such
project in Egypt and Jordan’s Round 3 as Morocco, Oman and the UAE are
PV auction received bids below 3 early adopters of the large scale CSP,
US$ cent/kWh. In addition, the while other countries like Egypt,
Egyptian government has requested Jordan and Kuwait have or are
bids no higher than 2.5 US$ cent/ looking to implement utility scale
kWh for the ongoing 600 MW solar projects (Source: MESIA).
MENA solar projects
Project Country Capacity (MW) Status

CREG PV IPP Algeria 150 –
Solar PV EPC Algeria 50 –
Algeria PV Algeria 4000 Announced
West Nile PV IPP Egypt 600 –
West Nile PV IPP 2 Egypt 200 –
Round 3 Solar PV Jordan 150 –
RAI Solar PV Jordan 50 Awarded
Noor Midelt PV Morocco 800 –
ANME Solar Park Tunisia 1700 Announced
Tunisia Authorization Scheme Tunisia 64 Awarded
Tunisia PV - Round 1 Auction Tunisia 500 –
Tunisia PV - Round 2 Auction Tunisia 70 –
Solar IPP project GCC country 900 –
Solar IPP GCC country 2 GW –
12 Solar PV projects GCC country – –
Source: MESIA, Solar Outlook Report 2019 and other

13
GCC focus
GCC region is expected to add Industry investment trends • GCC countries are investing in the
7 GW of new renewable energy • The GCC region is expected to renewable energy value chain
witness drastic rise in renewable including project developers,
energy deployment. Led by the UAE, manufacturing companies, and
Oman and KSA, nearly 7 GW of new research and development initiatives.
KSA’s 300 MW project began renewable power generation capacity Although the bulk of investments to
construction in November 2018 is expected to become operational date are concentrated in the UAE, as
by the early 2020s. deployment picks up, investment
• According to IRENA, the Solar PV flows will likely be distributed more
remains the dominant technology in evenly among the countries in the
the GCC’s project pipeline, with a region.
share of over 75%, followed by CSP at • Saudi Arabia’s 300 MW solar PV
10% (all of which accounted by a Sakaka project, the first utility scale
single project in the UAE) and 9% project in the country, was awarded
share for wind projects, primarily in at 2.34 US$ cent/kWh and began
Saudi Arabia and Oman. Solar- construction in November 2018,
assisted enhanced oil recovery in (Source: MESIA, Solar Outlook Report
Oman is also expected to contribute 2019).
about 1 gigawatt-thermal (GWth) in
2019.
GCC: Installed renewable energy capacity at end of 2018
Country Photovoltaic (PV) Concentrated Total renewable Share of RE in total

Solar Power (CSP) energy electricity capacity
Saudi Arabia 89 50 142 0.2%
United Arab Emirates 487 100 589 2.0%
Bahrain 5 0 6 0.1%
Kuwait 19 50 79 0.4%
Oman 8 0 8 0.1%
Qatar 5 0 43 0.4%
Source: IRENA, Renewable Energy Market Analysis: GCC 2019
14
Utility-scale renewable energy projects in the GCC as of January 2019
Country Project/site Technology Size (MW) Details

Mohammed bin CSP 700 • The project has been considered as the world’s largest CSP
Rashid Al Maktoum plant, expected to cost US$ 3.87 billion (AED 14.2 billion) to
Solar Park, Phase IV build in stages starting in 2020
Solar PV 250 • Assumed to start in 2020 with additional scope of CSP plant
in November 2018
Mohammed bin Solar PV 600 • Construction begun in 2017
United Arab Rashid Al Maktoum (of 800) • Shuaa Energy 2 developed the project which is a joint venture
Emirates Solar Park, Phase III between DEWA (60% stake) and a Masdar-led consortium
200 which also includes Electricité de France’s subsidiary, EDF
(Dubai)
(of 800) Energies Nouvelles
Mohammed bin Solar PV 200 • The project has been developed by ACWA Power and TSK and
Rashid Al Maktoum operational since March 2017
Solar Park, Phase II
Mohammed bin Solar PV 13 • The first phase of the Solar Park was a 13 MW PV plant
Rashid Al Maktoum completed by First Solar in late 2013
Solar Park, Phase I
United Arab Noor Abu Dhabi, Solar PV 1,177 • Under construction in 2019 at an average price of 2.94 US$
Emirates Sweihan cents/kWh
(Abu Dhabi) Shams 1 CSP 100 • Completed in 2013
Miraah Solar Solar 1000 • Miraah is a 1 GW solar thermal plant that creates steam for
Thermal thermal (GWth) enhanced oil recovery. The first four blocks (100 MW) were
completed in February 2018.
• Under construction: 100 MW complete, delivering 660 tonnes
of steam/day as of February 2018
Oman
Ibri PV Plant Solar PV 500 • The Oman Power and Water Procurement company (OPWP)
has shortlisted the three bidders in November 2018 for the
US$ 500 million project
PDO Amin PV Plant Solar PV 100 • A joint Japanese-Omani consortium has been announced in
Nov 2018 to build a landmark 100 megawatt solar photovoltaic
Independent Power Producer (IPP)
Sakaka Solar PV 300 • The US$ 302 million facility will begin commercial operations
Saudi
in August 2019 which is backed by is a 25-year PPA with the
Arabia
Saudi power procurement company
Al-Kharsaag Solar PV 900 • To be completed by 2020 (first 350 MW)
Qatar • The project is structured as a 25-year build, own, operate, and
transfer (BOOT) public-private partnership with Kahramaa
Shagaya CSP 50 • Completed
Solar PV 10 • Completed
Kuwait
Al Dibdibah/ Solar PV 1,200 - • The US$ 1.2 billion project is owned by Kuwait National
Shagaya Phase II 1,500 Petroleum Company (KNPC). Bidders expected to construct
the project and perform O&M for 25 years
Askar Landfill Solar PV 100 • Askar PV on a landfill: three bids were submitted in December
2018. EWA will be the sole offtaker of the project for a period
of 20 years. The lowest tariff was submitted by ACWA Power:
Bahrain US$ 4.92 US$ cents/kWh with an alternative bid of US$ 3.89
US$ cents/kWh
Al Dur Solar-wind 5 –
hybrid
Source: IRENA, Renewable Energy Market Analysis: GCC 2019 15
II. Asia
China leads with US$ 126 billion Industry investment trends installed (more than the whole world
investment • The East Asia-Pacific region was the market as recently as 2014), and
dominant destination for renewable solar investment of US$ 86.5 billion,
energy investment which witnessed up 58%.
rapid growth from US$ 64 billion in • Indonesia was the prominent
Indonesia witnessed US$ 1 2013 to US$ 114 billion in 2015, country in Asia within the geothermal
billion worth of investment for before a dip to US$ 88 billion in energy space with total of US$ 1
RE projects 2016. billion worth of investment. Almost
• According to Frankfurt School-UNEP 60% is contributed by Supreme
Centre Global Trends in Renewable Energy Muara Laboh geothermal
Energy Investment 2018 report, project of 80MW.
China was the leading country for • Pakistan continued to attract
renewable energy investment in investment in non-hydro renewables,
2017 which accounted for US$ 126.6 particularly large-scale and small-
billion, contributing to 45% of the scale solar, but its total of $695
global total. There was an million, while up 42% on 2016, was
extraordinary solar boom in that far below the average of $1.7 billion
country in 2017, with some 53GW achieved in 2014 and 2015.7
III. Europe
Renewable energy sector Industry investment trends • The European Union (EU) will require
employs about 1.2 million people • Europe shows that renewable energy investment of around US$ 76.5
can reach very high penetration at billion annually to achieve 34 per
low cost. By 2050, renewables will cent renewables in its power mix
make up 87% of the electricity mix, by 2030, according to IRENA.
The European Investment with wind and solar playing dominant • Turkey’s renewable energy sector
Bank has supported solar role, according to Bloomberg Nuclear will attract nearly US$ 28 billion
photovoltaic projects Energy Finance. investments by 2020, according to a
• By 2050, Germany will be running on new report by the World Bank’s IFC
wind and solar, and 84% renewables, arm.
but it has the highest emissions in • Some US$ 16.4 billion of these
Europe. investments will be made in wind
• By 2025, UK will have added 158 GW power, US$ 7.4 billion in solar energy,
of wind and solar and US$3.4 billion in geothermal
• According to IRENA, the renewable energy and US$ 560 million in hydro
energy sector employs about 1.2 power, according to data compiled
million people in Europe. This figure by state-run Anadolu Agency.
would increase substantially with a
doubling of the renewable share by
2030.
16
Industry and business leaders’ outlook

This section summarizes the feedback Figure 6: Aside from solar energy, what other
renewable energy projects exist in your
Apart from solar,
from our online survey questionnaire
which aims at understanding how Islamic
country/region? geothermal is the
finance as an option could be considered primary renewable
to fund solar energy projects. The target
audience consisted of executives from
35%
36%
energy source followed
organizations whose primary industry was by Windmill and Biofuel
oil and gas production, solar generation,
banking, asset management or
which substantiates
professional services. strategies to invest and
undertake renewable
I. Industry information and factors
involved energy projects in future.
12% 17%
Figure 5: What is the estimate of solar
energy contribution to energy generation
in your country? Geothermal Windmill
Biofuel Other (please specify)
4.32%
• Apart from solar, geothermal is the
primary renewable energy source
23.74%
71.94% followed by Windmill and Biofuel which
substantiates strategies to invest and
undertake renewable energy projects
in future.
• As reported by IRENA, there is ample
evidence that the Solar PV and wind
power dominate global spending on new
renewables projects, moving from 83%
of total finance in 2013, to 93% of total
Less than 5% More than 5% renewable energy investment in 2016.
• Therefore, solar projects can be seen as
Non-existent
an important asset, underpinning
economic growth of the countries.
• Majority of respondents believe that
share of solar energy in their country’s
total energy generation has been low
despite having considerable amount
of support from their governments.
• This is evident from the fact that non-
hydro renewables comprise only 11%
of the gross energy consumption
compared to 29.7% for petroleum
products.8
17
Figure 7: Which factors have most influenced the growth of solar energy projects in your • Awareness of the benefits of renewable
country? energy and investment incentives are
considered two key factors influencing
Regulatory and policy support 23% solar energy growth with more than 50%
of respondents indicating the same.
Awareness of the benefits
26%
of renewable energy • The economic viability is the major
influencer to the growth of solar energy.
Economic/investment incentives
26% While 60% attribute to the technological
suitability, financing structures and
Renewable energy and low cost public awareness and community
21%%
support.
Other 4%
II. Policy development and regulation
0% 5% 10% 15% 20% 25% 30%

Figure 9: Is there a defined solar energy
strategy/initiative in your market/
jurisdiction?
Figure 8: Which factors do you think will influence the growth of solar energy projects in
your country?
10.07%
The economic viability 28%

38.85%
30.94%
The profiles of participants 9%

and developers
The financing structures 21%
Technology suitability 19%
Public awareness and community 20% 20.14%

support and acceptability
Yes No
Other 3%
Some progress in place Not sure
0% 5% 10% 15% 20% 25% 30% • Majority (~70%) of industry experts

comprehend about presence of solar
energy strategy in their market.
Awareness of the benefits of renewable • This indicates that the countries’
governments are starting to make room
energy and investment incentives are for more solar projects in the coming
future. This hopefully will result in
considered two key factors influencing significant change in the solar energy
market.
solar energy growth with more than
50% of respondents indicating the
same.
18
Figure 10: What is the level of regulation and

government support/guidance relating to
III. Islamic finance as an alternative Less than 20 % of
option to Solar projects
solar energy in your country/region? respondents were
6.47% 7.91%
Figure 12: Which of the following is more engaged in Islamic
suitable to solar financing projects?
9.35%
financing of a solar
45% 43% project. Factors such
40%
35%
as technological
30% improvements, demand
25% 23%
20% 17%
for innovative ways of
35.97%
15% financing will see an
upward trend in the
10% 10%
40.29% 7%
5%
0% future.
Traditional Public Climate Public Other
Non-existent At an early stage
bank funding funds private Figure 13: Have you or a member of your
Developing stage Maturing level syndicates partnerships team, or any affiliate organization,
Not sure (PPPs) engaged in Islamic financing of a solar
project?
• Large number of respondents have • Most of the respondents (43%) believe 0.72%
witnessed government support on Public Private Partnerships (PPPs) are 5.04%
regulation and guidance, with many suitable for financing projects followed
other leaders considering it to be at the by traditional bank syndicates and public 16.55%
nascent stage with very little progress. 20.14%
funding.
• Results indicate that governments are • Few respondents (7%) suggested
active in shaping solar energy strategies that Islamic finance instruments like
in several countries around the world. Mudarabah and Sukuk would be the
ideal way to invest in solar projects.
Figure 11: What types of support and policy would you be interested in seeing to consider solar
energy in your business? 57.55%
Yes No
Regulatory improvement 24%
Planning to in the near future
Public awareness and Not considering Islamic finance as a source

education of all stakeholders 28% of finance
Other
Economic incentives, government
31%
subsidies including tax incentives
• Less than 20% of respondents were
Enabling of the foreign engaged in Islamic financing of a solar
investment environment 14%
project. Factors such as technological
improvements, demand for innovative
Other 3%
ways of financing will see an upward
trend in the future.
0% 5% 10% 15% 20% 25% 30% 35%
• Majority (83%) of respondents expect to

see improvement in regulatory,
economic incentives, government
subsidies and awareness and education
which will help them consider solar in
their business.
19
Many government Figure 14: If you are considering Islamic

Finance for solar projects, which of these Opportunities
agencies offer financial options suit you more?
• Government policies
support in terms of tax 8.63%
Many countries have formulated explicit
solar focused regulatory policies along
exemptions, incentivizing with ambitious RE targets
SMEs engaged in RE 28.78% • Declining capital cost
project development, Large number of investors have shown

interest to invest in solar sector owing
providing incentives for to decline in cost of capital required
citizens to adopt RE with support from industry and
government
based electrification • Use of unproductive land areas
programs in their 62.59% Many countries have started to utilize
available unproductive lands in the
localities and buildings. Equity-based financing, where the financier countries to set up solar plants
takes an equity stake in the project • Financial support
Debt-based financing, where investors take a Many government agencies offer
dividend/return on their investment financial support in terms of tax
Other exemptions, incentivizing SMEs
engaged in RE project development,
• Investment in equity-based and debt- providing incentives for citizens to
based investments (collectively ~90%) adopt RE based electrification programs
are considered best options for in their localities and buildings
investing in solar.
• A small amount of respondents Challenges
suggested that diversified option • Lack of available government
between debt and equity could be a resources
good method rather than investing State owned utilities in some countries
solely in one type of financial want to keep a firm grasp over the
instrument. power sector and are hesitant to
liberalize their energy sectors
• Unrealistic expectations
Countries need to set expectations for
tender prices based on their own risk
profiles, not on tender results achieved
in other countries
• Subsidy reform
In the long run, energy subsidies are
unsustainable, hence, long term reform
is a necessary measure that will help
countries become energy independent.
However, reform, if not implemented
with an adequate safety net to protect
the poorest segments, may cause
public unrest
20
Islamic financing strategy

Solar and green energy financing UiTM Solar Power Sdn Bhd
decisions have been affected by the In April 2018, UiTM Solar Power Sdn Bhd, an indirect subsidiary of Universiti Teknologi
continuing global credit crush impact such Mara, issued Green SRI Sukuk of up to RM240 million to finance the development and
as banking regulatory capital operation of the 50MW utility solar power plant in Gambang, Pahang. It is the first
requirements, which triggered corporates institute of higher learning in the world to issue a Green SRI Sukuk.
to actively seek alternative financing
sources such as green bonds and green Transaction details Murabahah
Sukuk private equity investments and
other methods. Issuer UiTM Solar Power Sdn Bhd
Country Malaysia
This section discusses key Islamic finance
structures, supported by regional and The green SRI Sukuk will finance a 50MW utility solar power
Use of proceeds
Multilateral Development Banks (MDBs) in plant in Gambang, Pahang, Malaysia.
the regions studied. It also proposes Rating AA- by Malaysian Rating Corporation Berhad (“MARC”)
Sukuk as a practical asset class for funding Facility Green SRI Sukuk
solar projects and analyzes its merits and
Issue size MYR 222.3 million (US$ 56.8 million)
factors rendering it a driver of boosting
green economy in MENA and Asia. Tenor 18 years
Issue date 27 April 2018
Going Green: Anchor solar projects
Islamic structure Murabahah (via Tawarruq arrangement)
Republic of Indonesia
Green In March 2018, the Republic of Indonesia issued a 5-year green Wakalah Sukuk which
financing also marked as the Republic’s first issuance under its recently established Green Bond
and Green Sukuk framework.
Transaction details Wakalah
Issuer Perusahaan Penerbit SBSN Indonesia III (“PPSI-III”)

Sustainable
projects Country Indonesia
To finance or re-finance expenditure directly related to
eligible green projects, including renewable energy,
Use of proceeds
sustainable transport, waste management, climate-related
projects and green buildings
Social cohesion Rating Baa3 by Moody’s, BBB- by S&P and BBB by Fitch
and inclusion
Facility Green Sukuk
US$ 3.0 billion Wakalah Sukuk
Issue size Tranche 1: US$ 1,250 million
Tranche 2: US$ 1,750 million
Tranche 1: 5 years
Environmental Tenor
Tranche 2: 10 years
Tranche 1: 3.75% per annum
Profit rate
Tranche 2: 4.40% per annum
Issue date 1 March 2018
Islamic structure Wakalah
21
In October 2017, Mudajaya Group Berhad (Sinar Kamiri Sdn Bhd)

In January 2018, Sinar Kamiri Sdn Bhd, an indirect subsidiary of Mudajaya Group
Quantum Solar Park Berhad, issued a Green SRI Sukuk of up to RM245 million for purposes of financing the
(Semenanjung) Sdn Bhd construction/development of a 49MW solar photovoltaic facility in Sungai Siput, Perak.
issued one of the world’s

largest Green SRI Sukuk Transaction details Wakalah
of up to RM1 billion for Issuer Mudajaya Group Berhad (Sinar Kamiri Sdn Bhd)
purposes of financing the Country Malaysia
construction of three Use of proceeds

To finance a largescale 49MW solar PV plant in Sungai
Siput, Perak (Malaysia).
large-scale solar Tier-1 (RAM Holdings, AA-IS (Malaysian Rating
Rating
photovoltaic plants in Corporation Bhd)
Kedah, Melaka and Facility Green SRI Sukuk
Terengganu. Issue size MYR 245 million (US$ 62.8 million)

Tenor 18 years
Issue date 30 January 2018
Islamic structure Wakalah Bi Al-Istithmar
Quantum Solar Park (Semenanjung) Sdn Bhd

In October 2017, Quantum Solar Park (Semenanjung) Sdn Bhd issued one of the world’s
largest Green SRI Sukuk of up to RM1 billion for purposes of financing the construction
of three large-scale solar photovoltaic plants in Kedah, Melaka and Terengganu. This is
the largest solar power project of its kind in South-East Asia and will generate about
282,000MWh of electricity to Tenaga Nasional Bhd yearly for a period of 21 years.
Transaction details Murabahah
Issuer Quantum Solar Park (Semenanjung) Sdn Bhd (“QSP

Semenanjung”)
Country Malaysia
To finance the construction of three large-scale solar
Use of proceeds
photovoltaic plants in Kedah, Melaka and Terengganu.
Rating AA- by Malaysian Rating Corporation Berhad (“MARC”)
Facility Green SRI Sukuk
Issue size RM1.0 billion (US$ 236.5 million)
Tenor 1.5 years – 17.5 years
Issue date 6 October 2017
Islamic structure Murabahah
22
PNB Merdeka Ventures Sdn Bhd Jordan Islamic Bank invests in solar
In December 2017, the Malaysian government linked investment institution Permodalan power as part of social responsibility
Nasional Berhad (PNB) launched its MYR 2 billion green Sukuk programme to fund its Jordan Islamic Bank (JIB) has inaugurated
83-storey office space which forms part of the Merdeka PNB118 tower project within the largest rooftop PV project in Jordan a
the Warisan Merdeka. 2.7MW rooftop solar project in Sahab, King
Abdullah II Industrial City.
Transaction details Murabahah & Wakalah The project took nine months to complete.
The cost of constructing the plant was
Issuer PNB Merdeka Ventures Sdn Bhd
approximately JOD 1.4 million (US$ 1.97
Country Malaysia million) and the cost recovery period of
To fund the construction of 83-storey green building, the plant is estimated to be approximately
Use of proceeds
Merdeka PNB118 Tower. one and a half years.
Rating –
Solar energy project financed by IFC
Issue size RM2 billion (US$ 480 million)
Tenor 15 year
Issue date 29 December 2017
Islamic structure Murabahah (via Tawarruq arrangement) and Wakalah The IFC committed a record of
US$ 2 billion to support the Middle
East and North Africa private
sector, boost innovation, drive
Tadau Energy Sdn Bhd economic growth, and create jobs.
In July 2017, Tadau Energy Sdn Bhd, a Malaysian-based renewable energy and
sustainable technology investment firm, issued the world’s first Green SRI Sukuk of up to It focused on supporting power
RM250 million to finance the construction of large scale solar (“LSS”) photovoltaic power and renewable energy projects,
plants in Kudat, Sabah. and helping entrepreneurs. Among
key projects in FY18 were a US$
653 million financing package for a
Transaction details Istisna’ and Ijarah landmark solar array in Egypt, the
first green-bonds program in
Issuer Tadau Energy Sdn Bhd
Lebanon and the Levant, and a
Country Malaysia solar project in Gaza, the first
To finance the construction of a 50MW Solar Photovoltaic privately financed energy project in
Use of proceeds
power plant in Sabah, Malaysia. more than a decade, as reported
Rating AA3 by RAM Rating Services Berhad by IFC.

The IFC has also invested more
Issue size RM250 million (US$ 59.2 million) than US$ 300 million to support
Tenor 2 to 16 years clean energy options in Jordan,
enabling well over US$ 1 billion in
Profit rate 5.20-6.55% per annum
private sector investments in
Issue date July 2017 Jordan’s power distribution and
Islamic structure Istisna’ (manufacturing sale) and Ijarah (leasing) generation sectors, including solar
power.
23
Between 2012 and 2015, Islamic Development Bank (IsDB) solar energy initiatives
The IsDB provided

financing for the energy
sector, supporting four
renewable energy
development projects The IsDB is an ardent supporter of Restrictive Mudarabah financing.
green energy projects, having invested Under this mode of financing, the IsDB
and six energy-efficiency billions into the sector as a group. It provides capital to Mudarib (in this
projects. has approved financing of various case, TSKB) to invest in business
development projects in different enterprises, as per the agreed criteria.
countries. Among the projects This approach eliminated the need for
approved for financing, are several IsDB to enter into individual financing
solar energy projects (see table on agreements for each sub-project
page 25).9 being financed and gave a lot of
freedom to TSKB as the local
Between 2012 and 2015, the IsDB executing agency.
provided financing for the energy
sector, supporting four renewable- Solar panel projects
energy development projects and six The facility has also supported smaller
energy-efficiency projects. The IsDB projects that allow companies to
extended a Financing Facility approach generate their own electricity. One
which worked through an beneficiary was Prokon, an
implementing partner: The Turkiye engineering manufacturing company
Sinai Kalkinma (TSKB, known in English located just outside Ankara. In March
as the Industrial Development Bank 2013, Prokon installed 2,040 solar
of Turkey). panels on the roof of its workshop.
Solar power has huge potential in
The combined costs of the projects Turkey especially as the panels
amounted to US$ 641.2 million of generate around 75-95 MW during
which IsDB provided US$ 100 million. the peak months of July and August.
All ten projects are already proving to Between April 2013 and February
be successful with the energy efficient 2016, Prokon generated around 1,835
projects having already decreased MWh from the panels in total. The
greenhouse emissions by 1,006,000 process has been so successful that
tonnes, surpassing their target of Prokon now sells energy back to the
decreasing emissions by 300,000 National Grid. Prokon have also
tonnes. pursued development of other solar
powered equipment such as solar-
A new approach in Islamic tracking systems that enable panels
Financing to rotate and ‘follow’ the sun thereby
This was the first time IsDB used generating more power.
24
Several solar energy projects approved for financing by IsDB
Project Country Size of support Year Details
Solar Energy for Mali US$ 4 January The objective of the project is to enhance the capacity
rural development million 2018 of Mali in rural electrification by establishing a
project under sustainable model for rural electrification, which
reverse linkage provides affordable and reliable electricity to rural
communities in the country. The project will Increase
the installed capacity of solar energy by 14%; from 15
MW in 2015 to 17.42 MW in 2021.
Mohammed bin Dubai US$ 170 June Non-sovereign project financing participation in the
Rashid Al Maktoum million 2017 Dewa 800 MW Photo-voltaic Solar Power Plant –
Solar Park Phase III”
Scatec solar Egypt US$ 24 June Scatec Solar is developing six projects in the Egyptian
projects million 2017 FiT program, in partnership with prominent
international investors including Norfund and Africa 50.
The projects will have a total installed generation
capacity 300MW and will all be based in Benban Solar
Park. The total cost of the projects will be funded by
sponsor equity and senior financing provided by the
EBRD, IsDB, FMO and the ICD.
Alfanar project Egypt US$ 28.5 June To build a 50MW solar PV power plant in the Benban
million 2017 Solar Park in southern Egypt. The total project will be
funded with equity and debt. Equity funding will be
provided by Alfanar Company, while the senior
financing will be provided by the EBRD and the ICD.
Solar Power Plant – Jordan US$ 5 December Support for construction of a solar power plant which
King Hussein Cancer million 2016 is expected to contribute to the sustainability and
Center Expansion financial resource optimization of the “King Hussein
Project Cancer Center (KHCC) Expansion Project” in Jordan.
Source: Islamic Development Bank (IsDB)
25
European Investment Bank (EIB) Asian Development Bank (ADB) African Development Bank (AFDB)
Mediterranean Solar Plan – The Asia Solar Energy Initiative The Sustainable Energy Fund
Project Preparation Initiative (ASEI) for Africa (SEFA)
(MSP-PPI) This initiative of the Asian Multi-donor trust fund
Initiative of the European Development Bank helps enable administered by the African
Investment Bank (EIB), together solar-generated electricity to Development Bank to support
with the European Commission, compete with the retail rate from small- and medium-scale
KfW, and the Union for the mainstream networks currently Renewable Energy (RE) and Energy
Mediterranean. dominated by fossil fuel sources. Efficiency (EE) projects in Africa.
Consequently, developing
The Mediterranean Solar Plan countries benefit economically A pan-African Private Equity
Project Preparation Initiative (MSP- from local solar manufacturing and Fund (PEF) solely focused on
PPI) aims to accelerate the associated industries while small/medium (5-50 MW)
implementation of renewable strengthening their energy independent power projects from
energy and energy efficiency security. solar, wind, biomass, hydro as well
projects in several Mediterranean as some geothermal and stranded
partner countries (Algeria, Egypt, Innovative Finance: Asia gas technologies.
Palestine, Jordan, Lebanon, Accelerated Solar Energy
Morocco and Tunisia). Development Fund (AASEDF) The AFDB has supported the
The AASEDF boosts solar energy development of two solar power
Supported Ouarzazate solar growth in the region through plants Ouarzazate solar complex
complex in Morocco private sector participation by (Noor I and Noor II) by US$ 265
The EIB has supported solar keeping transaction and million at a total cost of € 2.048
photovoltaic projects. The bank is opportunity costs low while solar billion with a cumulative capacity of
behind development of first large technology remains at the pre- 800 MW, under a public-private
solar project in North Africa, the commercial stage. Ultimately, such partnership (PPP). The investment
massive concentrated solar power support helps unburden end- is part of the Bank’s continued
project at Ouarzazate, Morocco. A consumers of the initial high cost support to Morocco’s US$ 3 billion
financial commitment of € 300 of solar power. Noor solar energy program.
million was signed by the
European Investment Bank (EIB),
the Development Agency for
France (AFD), KfW
Entwicklungsbank (KfW) and
MASEN, promoter of the
Ouarzazate solar complex in
Morocco.
26
Considering solar Sukuk asset Improving Grid Network through solar Sukuk structure10
The increasing use of Independent Power
Producer (IPP) and Power Purchase
Project overview Transaction highlights
Agreements (PPAs) in many countries
including those analyzed is welcome news 1. Gulf Municipality (GM) - project Construction phase
for the Islamic financing strategy as this originator is seeking finance to build a • A special purpose vehicle (SPV) will be
helps identify and quantity both business 100 MW solar plant (Gulf Solar Farm). set up to act as trustee of Sukuk holders
and financial risks to design structures 2. GM aims to procure an Independent (also known as investors).
that balance with risk sharing and, asset- Power Project (IPP) to build the project • Gulf Solar Sukuk (SPV) signs an Istisna’
backed and ownership transfer elements asset in one of its suitable sites. contract with the project originator (GM),
designed in the structure. This is 3. GM will purchase the Renewable to construct the project asset (Gulf Solar
important to ensure that all stakeholders’ Energy Certificates (RECs), through Farm).
interests are safeguarded. its affiliate; Gulf Electricity & Water • A tech know-how developer (First Gulf
Authority (GEWA). Solar LTD) will deliver the project asset.
Sale-based, lease-based, and equity- 4. GEWA will enter with Gulf Solar (service • Upon completion (two years), title and
based Shariah-compliant financing manager) into a Power Purchase asset ownership pass to the Gulf Solar
structures such as Murabaha, Ijarah, Agreement (PPA). Sukuk (SPV).
Mudarabah respectively can be designed Operation phase
to reflect the solar project risks and • GM (the project originator) will also sign a
timeline requirements, in the different Forward Ijarah with Gulf Solar Sukuk to
phases of the project life-time. lease the Solar Farm.
• The completion of the solar plant, Gulf
Evidently, solar asset Sukuk financing Solar Sukuk (SPV) leases the solar farm to
brings benefits and skills along the entire project originator (GM).
value chain. Its transactional structure, as • Both parties are subject to a purchase
seen in the below proposed structure, is undertaking where the project originator
divided in different phases to reflect the (GM) will repurchase the solar farm from
level of the project implementation and the Gulf Solar Sukuk (SPV).
capital expenditure.
Figure 15: A proposed project structure of Gulf Solar Sukuk of US$ 100 million
The proposed solar Sukuk structure in
Phase 1: Construction Phase 2: Operation
Figure 15 illustrates the suitability of
Sukuk in addressing developers and
investors’ interest alike. Issuers Investors
1 7
Gulf Municipality (GM) 5
22 years site release
Rating
Sukuk holders
Credit enhancement
4
GEWA 6
Power Purchase Gulf Solar
Agreement (PPA)
Sukuk Ltd
for 20 years
(SPV)
2
8
Gulf stock exchange
Gulf Solar Farm Gulf

Site
(GSF) Solar
Forward Ijarah contract

3
FirstGulf Solar Limited
(FGS) – Developer Istisna’ contract
Istisna’ contract Forward Ijarah
0 2 years 2 20 years 20
1. Asset originator (GM) 5. Financers (Sukuk holders)

2. The project asset (GSF) 6. Special Purpose Vehicle (SPV)
3. Developer (FGS LTD) 7. Credit enhancement institution
4. Electricity distributor–off taker (GEWA) 8. Service manager (Gulf Solar)
27
Business practice and support initiatives

The following table highlights key government and financial institutions providing business, technical and financial support to MENA,
Asia and Europe:
MENA Asia Europe

Business practice
Saudi Arabia Malaysia Europe
• King Abdullah Center for Atomic and Renewable Energy • Malaysian Photovoltaic Industry • ESTELA: European Solar
(KACARE) Association (MPIA) Thermal Electricity Association
• Renewable Energy Project Development Office (REPDO) • Centre for Education and • European Renewable Energy
• Saudi Arabia Solar Industry Association (SASIA) Training in Renewable Energy Council
• Saudi Standards, Quality and Metrology Organization (SASO) and Energy Efficiency (CETREE), • IEA - International Energy
UAE University Science Malaysia, Agency
• International Renewable Energy Agency (IRENA) Penang. • European Photovoltaic Industry
• Abu Dhabi Future Energy Company (Masdar) Indonesia Association
• Dubai Supreme Council of Energy • USAID’s Indonesia Clean Energy • European Solar Thermal
• Middle East Solar Industry Association (MESIA) Development (ICED) Industry Federation
• Clean Energy Business Council MENA (CEBC) • Indonesia Renewable Energy • International Solar Energy
• Ras Al Khaimah Research and Innovation Centre (RAK-RIC) Society (METI) Society (ISES)
Bahrain • Energizing Development (EnDev) • European PPP Expertise Centre
• Sustainable Energy Unit (SEU) Pakistan (EPEC)
• National action plans for renewable energy (NREAP) • Pakistan Solar Association (PSA). Turkey
Jordan • Econoler, IRG & USAID – • Renewable Energy Development
• Jordan Enterprise Development Corporation (JEDCO) Pakistan and Information Centre (YEGEM)
Morocco • Alternative Energy Development • Turkish Energy Foundation
• Moroccan Agency of Sustainable Energy (MASEN). Board (AEDB) • Ege University- Solar Energy
• National Agency for the Development of Renewable Energy • Renewable & Alternative Energy Institute
and Energy Efficiency (AMEE) Association of Pakistan (REAP) • Istanbul Technical University –
• Moroccan Association of Solar Industries and Windmills Energy Institute – Solar Car
(Amisola). Team
• Research Agency for Solar Energy and Renewable Energies • Scientific and Technological
(IRESEN) Research Council of Turkey –
Energy Institute
Financial initiatives and policies

Saudi Arabia Malaysia Europe
• Taqnia Energy- KSA • Green Technology Financing • European Investment Bank
• Saudi Arabia’s Public Investment Fund (PIF) Scheme (GTFS) Turkey
UAE • GreenTech Catalyst Sdn Bhd • The European Bank for
• Abu Dhabi Fund for Development (ADFD) Indonesia Reconstruction and
• Dubai Green Fund (DGF) • Indonesian Infrastructure Development (EBRD)
• Mubadala Investment Company Guarantee Fund Kazakhstan
Bahrain • PT Indonesia Infrastructure • Kazakhstan Renewable Energy
• First Energy Bank – Bahrain Finance Financing Facility (KazREFF)
Jordan • Indonesian Independent Power
• Jordan Renewable Energy and Energy Efficiency Fund (JREEEF) Producers Association
• Higher Council for Science and Technology Industrial • Indonesia Solar Energy Lending
Research and Development Fund Program (ISL)
• Asia Development Bank (ADB)
Pakistan
• Meezan Bank
28
Conclusion
Key messages
Balanced commercial and New innovative project Disruptive innovation

social financing strategy financing strategies and sustainable finance
Financing solar and renewable energy Governments and private sector Energy and solar companies need to be
projects in countries studied are enterprises are under increasing pressure mindful of the disruptive technological
challenged with environmental and to provide sustainable and competitive and regulatory and policy reforms which
climate set of rules such as responsible energy prices to meet growing economies are shaping the industry investment
investment guidelines, green energy and energy demands. This will require new space, and hence develop commercially
principles, sustainable finance, social innovative project financing strategies to viable and sustainable financing
impact attributes and investment access a diversity of international investors structures.
governance, more than ever. Success in and perhaps tap into Islamic financial
achieving a balanced commercial and Institutional investors.
social financing strategy will require
inclusive industry stakeholders
partnerships that embrace sustainable
finance and responsible investment.
As this report illustrates, solar energy The increasing acceptance and the Hence, in the coming few years, Islamic
developers and investors alike now have adoption of Islamic finance across the finance will be considered as one of the
enviable structures of Islamic finance to countries studied, indicated that both primary financing strategies and in
boost growth of green energy in the energy operators and investors are taking particular, in the GCC, Jordan, Egypt,
countries we studied. The drive for advantage of the equity-based financing Malaysia, Indonesia and Pakistan. Other
more Sukuk and other Islamic financing model. Different Shariah-compliant countries will follow suit as the market
structures such as Murabah, Ijarah and financing structures have been used for matures and become a driver of green
Mudaraba in greenfield projects will different phases of solar projects. In economy in these regions.
continue to play a key role in the solar particular, Sukuk stands out as a popular
industry investment landscape. asset class amongst international
investors.
In the coming few years,
UAE and KSA collectively will be leading Islamic finance will be
the GCC region with maximum number of Due to such available offerings, both
considered as one of
solar projects currently active or developers and investors have
announced by their key industry players, implemented Islamic financing strategies the primary financing
followed by Bahrain and other nations. in their project financing and plant strategies.
investments, thereby boosting their
Jordan and Morocco have started acceptance levels across the world. Many
reversing their energy mix toward international agencies have started to
Renewable Energy (RE) after realizing its reap the benefits offered by Shariah
potential in coming years. A similar compliant financing options which lowers
approach is observed by Indonesia and their debt to equity ratios for capital
Malaysia as well to continue with their intensive projects.
sustainable energy development plan.
29
Appendix A: Growth drivers and market

dynamics
To increase traction for sustainable investment in renewables, IRENA, being a global renewable agency, anticipated strong foreseeable
growth for RE projects in the Middle East and as a result, collaborated with the Abu Dhabi Fund for Development (ADFD) to support
replicable, scalable and transformative projects in developing countries. ADFD committed US$ 350 million in concessional loans, over
seven annual funding cycle, to renewable energy projects recommended by IRENA.
Some of the projects supported by IRENA are listed below:
Country Name of project Capacity Loan Value Project description

(MW) (US$ million)
Guyana Hinterland 5.2 MW US$ 8 million Project by Ministry of Public infrastructure to install grid-
Electrification connected solar PV systems; Benefit targeted at 34,700
Programme people
Togo Dapaong 30 MW 30 MW US$ 15 million Project by Togolese Rural Electrification and Renewable
Solar Project Energies Agency to construct 30 MW project; benefit
targeted at 700,00 people
Mauritius Solar power kit 10 MW US$ 10 million Project by Central Electricity Board to install grid-tied
solar PV systems on rooftops of low-income households;
Benefit targeted at 30,000 people
Rwanda Ignite Rwanda 7.5 MW US$ 15 million Project by joint venture between Ignite Power and
Government of Rwanda to distribute and install 500,000
solar home systems through an affordable payment
scheme; Benefit targeted at 2.5 million people
Niger Rural electrification 2.1 MW US$ 10 million Project by Government of Niger to install solar PV mini-
of 100 villages grids and individual solar home systems in 100 isolated
villages
Republic of the Renewable/Hybrid 4.6 MW US$ 11 million Project by Government to install Solar PV mini-grids on
Marshall Islands Microgrid Portfolio four islands; Benefit targeted at 15,000 people
Seychelles Ile de Romainville 5 MW US$ 8.5 million Project by Government of Seychelles to install solar PV
Solar Park plant integrated with an existing wind farm
Antigua and Transformation and 4 MW US$ 15 million Project by Government to install hybrid solar PV and
Barbuda Resilience Building of wind project
the Water Sector
Burkina Faso Rural Electrification 3.6 MW US$ 10 million Project by Government to install solar plant; Benefit
Project targeted at 12,400 households
Cabo Verde, 100% Renewable 2 MW US$ 8 million Project by Government to install hybrid wind and solar
Island of Brava Energy Island Solution PV project
Senegal Renewable Energy for 2 MW US$ 13 million Project by Government to install solar mini-grid project;
Rural Electrification Benefit targeted at 100 remote villages
Cuba Grid connected 10 MW US$ 15 million Project by Government to install solar PV mini-plants;
Solar PV Project Benefit targeted at 5,300 people
Mali Hybrid Renewable 4 MW US$ 9 million Project by Government to install solar power mini grids;
Energy Systems for Benefit targeted at 120,000 people
Rural Electrification
Sierra Leone Freetown Solar Park 6 MW US$ 9 million Project by Government to install solar power plant;
Benefit targeted at 15,000 people
Source: IRENA 31
Country case 1: United Arab Emirates
UAE Solar energy sector in UAE

Overview
utility companies tend to be significant
equity-holders in these IPPs.
The key drivers for the growth of the UAE
solar sector are large scale government The UAE’s solar-power plants are mostly
sponsored solar energy projects and a built on an IPP model, typically having 25-
strong sovereign credit rating offering low year power purchase agreements.
risk for Independent Power Producers
(IPPs) with Power Purchase Agreements The UAE has incorporated Shariah-
(PPA). compliant finance as co-investment to
large projects mostly financed through
IPPs generate significant majority of Abu conventional project finance.
Dhabi’s electricity wherein government
Economic indicators
Industry highlights
US$ 382.575 9,400,145

Country GDP
Population
• The UAE solar sector is expected to enjoy

billion million rapid growth, strengthened by ambitious
government targets and a regulatory
GDP (World Bank, 2017) Total population
environment attractive to project
(World Bank, 2017)
financiers.
• The UAE’s solar production has tripled
• Installed renewables-based • Dubai Electricity & Water since 2015, and now approaches 1 GW.
capacity (IRENA, 2018): 589 Authority (DEWA) • Emirates Water and Electricity Company
Key industry players
MW • Emirates Water and (EWEC) has replaced Abu Dhabi Water

• Share of renewables in total Electricity Company (EWEC) and Electricity Company (ADWEC) and
will be under the umbrella of Abu Dhabi
Industry statistics
installed power generation • Abu Dhabi Future Energy

capacity (IRENA, 2018): 2% Company (Masdar) Power Corporation.
• Project pipeline as of • Dubai Supreme Council of • Each of EWEC, DEWA and Sharjah
November 2018: 3.14 GW Energy Electricity and Water Authority (SEWA)
solar power (PV and CSP) by are mostly free to adopt their own
2020 policies for solar power, Abu Dhabi and
• Renewable energy Dubai, have become regional leaders for
investment in 2017: US$ 2.2 the solar energy sector.
• Large scale government
billion • Abu Dhabi and Dubai have attracted the
sponsored solar energy
world’s lowest bids for solar energy
Key industry growth drivers
projects
generation. Private players are eager to
• Favorable government
Dubai take advantage of the huge size of the
policies
• Mohammed Bin Rashid Al country’s planned solar farms, and the
• Introduction of the new
Maktoum Solar Park country’s reliable IPP model.
Key solar projects
concepts of PPAs and IPPs

Abu Dhabi and international solar
• Noor Abu Dhabi, Sweihan operating firms
(solar PV). • Growing industrial base in
• Shams (CSP) the country
• Favorable and conducive
investment guidelines
32
Regulatory development and Financiers and investors

policies
Name of Investment Capacity Project Project description
• Dubai has established one of the world’s project value period
most effective regulatory environments Mohammed – Total capacity 2012-2030 Project was awarded to a
to cultivate the growth of the solar- bin Rashid 5GW, Phase consortium between Masdar,
energy sector. Al Maktoum 3 of 800 MW and EDF partnering with
• All the solar IPPs in the UAE are backed Solar Park DEWA with bid value at
by a government guarantee from the US$ 0.0299/kWh
relevant Department of Finance (DOF).
Without this guarantee, the projects will Noor Abu US$ 3.2 1,117 MW Up to 2019 Project was awarded to
be a lot less bankable. Dhabi billion DEWA and a consortium of
• Dubai has issued regulation targeted to plant Japan’s Marubeni Corp and
achieve this goal including a mandate China’s JinkoSolar Holding
that all new buildings must heat 75% of
water by solar energy. The Emirate’s
Shams Dubai initiative is promoting
Industry initiatives Opportunities
small-scale urban solar generation and
has already developed 18.7 MW of
rooftop solar generation. Through the • In January 2019, the Khalifa University of • The country’s clean-energy targets rank
Shams Dubai initiative, the city is hoping Science and Technology, the Abu Dhabi among the world’s most ambitious,
to increase rooftop and small-scale solar Transmission and Dispatch company aiming to achieve 24% clean-energy
generation. (TRANSCO) and the Manitoba Hydro generation by 2021, with solar-power as
International (MHI) of Canada, signed a the second-largest source of clean-
collaboration agreement for building an energy power after nuclear.
industrial-level software to monitor, • The UAE has already made significant
predict, and interact with network progress towards these goals, tripling
operators in real time and enable solar-energy generation since 2015.
renewable energy integration with the
UAE power system.
Islamic finance potential in the solar energy sector
Type of Name of Size of Islamic Acceptance Investment Description

Islamic project investment lenders level of Islamic type
Finance finance
Istisna 800 MW - A US$ 242 Apicorp and High Co-investment • The US$ 940 million financing will
Ijarah Mohammed million Islamic IsDB were the be used for the development of
bin Rashid Al loan sole lenders in the third phase of the Mohammed
Maktoum A US$ 2.84 the Islamic bin Rashid Al Maktoum solar
project million Islamic tranche photovoltaic power plant in Seih
standby facility Al-Dilal, around 50 km south of
Dubai.
• The deal includes :
- A US$ 242 million Islamic loan
- A US$ 2.84 million Islamic
standby facility
Main hurdle is lack of liquidity among Islamic banks, However, UAE government’s support for Shariah-compliant project
finance will increase its investment appeal among investors
Source: IJ Global, Mohammed bin Rashid Al Maktoum Solar PV Phase III (800MW), February 2019
33
Country case 2: Kingdom of Saudi Arabia (KSA)
KSA Solar energy sector in KSA

Overview
market in Saudi Arabia is in the growth
stage driven by rapid growth in electricity
The Kingdom of Saudi Arabia (KSA) demand.
represents an attractive market for
renewables due to its market size, The development of Saudi Arabia’s solar
resource potential, land availability and energy sector is one of the primary
high-energy demand. objectives of Vision 2030. In February
2017, the Kingdom launched the National
Power demand in the Kingdom is growing Renewable Energy Programme (NREP),
8% annually, forcing state-run Saudi administered by the newly created
Electricity, the Gulf’s largest utility Renewable Energy Project Development
company, to spend billions of dollars on Office (REPDO).
projects to add capacity. The solar power
Economic indicators
US$ 683.738 32,938,213 Industry highlights

Country GDP
Population
billion million • The solar power market in Saudi Arabia is

in the growth stage driven by rapid
(World Bank, 2017)
growth in electricity demand.
• KSA has a pipeline of 12 projects for
2019 with the biggest one having a
• Installed renewables-based • Saudi Electricity Company
600MW capacity. (Announced by REPDO

capacity (IRENA, 2018): 142 (SEC)
in Jan 19).
MW • King Abdullah City for Atomic
Industry statistics
• The NREP will target 700 MW, 1.02GW

• Share of renewables in total and Renewable Energy
and 1.73GW respectively across the
installed power generation • Renewable Energy Project
three rounds starting 2017. The NREP
capacity (IRENA, 2018): 0.2% Development Office (REPDO)
will target a further 6.05GW by 2023.
• Project pipeline as of • ACWA Power
• It has targeted to develop 3.45 GW of
November 2018: 700 MW
renewable energy by 2020 under its
wind and solar PV power by
National Transformation Program as well
2019/2020 • Rising domestic oil
as developing 9.5 GW which is ~10% of
consumption
total capacity of renewable energy
• Young citizens’ entry into
capacity by 2023. This will be done
• Sakaka (Solar PV) job market
through 60 projects, investing between

• Waad Al-Shamal (CSP) • Reduced solar panel
US$ 30 billion and US$ 50 billion, with
• Solar energy plan - 3 GW production costs
solar power as primary segment.
consisting of 30 solar and • Increasing demand for energy
Key solar projects
wind projects sources to deliver strategic

• New Taif energy project infrastructure projects
• NREP Round 2 projects (12 • Government and policy
projects over 7 sites) support
• Strong industrial base such as
oil and gas and
petrochemicals
• Access to governments
specialized funds
34

In January 2019, Saudi
policies Arabia announced plans
Saudi Arabia’s Vision 2030 and the
• A memorandum of understanding (MOU) to develop a US$ 2 billion
has been signed between the Crown
National Transformation Program (NTP) Prince of Saudi Arabia and Japan-based
solar and carbon black
clearly outline ambitious renewable SoftBank founder Masayoshi Son to integrated complex in the
energy goals under the King Salman
Renewable Energy Initiative.
establish the world’s largest solar PV
heart of the Kingdom.
energy project by 2030.
• The Renewable Energy Project

Development Office (REPDO):
established to oversee the country's Industry support
renewables program, chose the bids
submitted by the local developer and • In January 2019, King Abdullah City for
Japanese engineering firm over the Atomic and Renewable Energy (KACARE)
world's cheapest bids for a solar project signed a MoU and partnership with the
submitted by a consortium led by Abu Saudi Technical Institute for Electricity
Dhabi clean energy firm Masdar and its Services in Riyadh. The agreement entails
French partner EDF. cooperation for training and
• The Electricity and Cogeneration development in the field of renewable
Regulatory Authority in Saudi Arabia energy and benefiting from the existing
(ECRA) has prepared a Small Photovoltaic capabilities and expertise of both parties.
Solar System Regulation, setting out the • In January 2019, Saudi Arabia announced
framework for the connection of Small plans to develop a US$ 2 billion solar and
Scale Solar PV Systems to the carbon black integrated complex in the
Distribution System. heart of the Kingdom. The deal was
• SASO adopts new IEC standards: Saudi struck between Saudi Arabia’s National
Standards, Quality and Metrology Industrial Clusters Development Program
Organization (SASO) signed technical (NICDP) and the Kingdom’s diversified
cooperation agreements with Saudi manufacturing company SABIC, in
Aramco and SEC in 2016 to collaborate partnership with China’s Longi and South
on energy efficiency and consumption Korea’s OCI.
rationalization programs, and to
exchange experiences in the
development and management of
engineering standards. Challenges and opportunities
• Saudi Arabia issues rules for small-scale
solar energy generation: In 2017, Saudi Opportunities Challenges
Arabia has issued a regulatory
1. Easy availability of finance 1. Uncertainty of large projects
framework for electricity consumers to
operate their own, small-scale solar 2. Significant investment in value chain 2. Solar prices competiveness
power generating systems and export
unused power to the national grid. The 3. Presence of key players 3. High capital expenditure
rules will cover small photovoltaic
4. Feed-in-tariff 4. Large installation area
facilities with generating capacity of no
more than 2 MW. Consumers will have
their excess electricity offset against their
future consumption and after a year,
they will receive cash payments at a tariff
approved by the authority.
35
Country case 3: Kingdom of Bahrain
Kingdom of Solar energy sector in Bahrain

Overview
nearly 4 GW, of which just 6 MW stems
from renewable sources (5 MW of solar
Bahrain
The Kingdom of Bahrain is a small-scale PV and 1 MW of wind).
producer of crude oil, refined oil products
and natural gas with its energy sector Rapid population growth and industrial
largely dependent on fossil fuels. development are the main drivers of the
increase in power demand, which is
However, the government foresees the addressed by expanding existing
need to diversify its energy supply in the conventional power plants to supply
near future. As a result, Bahrain has an residential and industrial end users, such
installed electricity generating capacity of as Aluminum Bahrain (Alba).
Economic indicators
Industry highlights
Country GDP
US$ 35.307 1,503,091

Population
billion million • The Kingdom’s economic growth has

GDP (World Bank, 2017) Total population (CBB, 2018) been reinforced by a secure energy
system, which has seen a corresponding
growth in energy demand.
• As per the National energy efficiency
• Installed renewables-based • Bahrain petroleum company plan, over the past twenty years,
capacity (IRENA, 2017): 6 MW (Bapco) Bahrain’s total primary energy supply
• Share of renewables in total • Electricity and water authority grew by 4.2%, total final energy
installed power generation (EWA) consumption grew by 5.3%, and non-
Industry statistics
capacity (IRENA, 2017): 0.1%. • Tatweer petroleum industrial electricity consumption grew
• Project pipeline as of • National oil & Gas authority by 6.6% per year. The difference in
November 2018: 100 MW • KP smart solar energy demand and supply growth has placed
solar PV power by 2019 Bahrain increasing strain on the energy system.
• Solar energy target 2025 • Solar One Bahrain Currently the country’s power generation
(MESIA): 255 MW (PV) and system relies explicitly on natural gas,
700 MW (2030) (Renewables) which is a scarce and diminishing
resource.
• Integrating renewable energy in the
• Population growth and rapid
energy mix can help Bahrain optimize

industrial development
the use of indigenous gas resources,
• Bahrain PV Park • Focused government
reduce greenhouse gas emissions, make
approach for solar projects
Key solar projects
• Al Dur PV Plant and Al Dur

the economy more competitive,
Wind Farm • Conducive regulatory and
decrease electricity peak demand, and
• Askar solar PV on a landfill investment environment
improve energy security in the long-term.
• Increasing demand for
energy and power supply
projects
36

policies
• Oil and gas accounts for majority of project value period
country’s current consumption and US$ 360 100 MW 2019 Project is developed Bahrain
exports, but several initiatives are million Petroleum Company (BAPCO)
Bahrain
undertaken to reach 255 MW of PV by
PV Park US$ 720 200 MW Not Not disclosed
2025, as per National Renewable Energy
million disclosed
Action Plan (NREAP), namely Net
Metering – enacted in January 2018. Al Dur PV US$ 17.18 Total 5 MW Not Not disclosed
• The country has provided renewable Plant and million (Solar 3 MW) disclosed
energy-based mandates for buildings Al Dur
through tender based FiT schemes which Wind Farm
will have rooftops of government
BAPCO US$ 25 5 MW Not BAPCO plan to fund
buildings tendered in batches to harness
township million disclosed distributed power plant
solar energy.
of Awali
• The government is working with local
banks to encourage them to provide
financial support to individuals willing to
install solar plants and trying to increase
Key initiatives Challenges and opportunities
public awareness about solar energy.
• To diversify the Kingdom’s energy supply,
the cabinet adopted the National • Bahrain has identified seven key • Bahrain faces several challenges in
Renewable Energy Action Plan (NREAP) initiatives that can be implemented along ensuring sustainability and security of its
and the National Energy Efficiency Action with setting a target of 5% renewables in energy needs. These include its limited
Plan (NEEAP) in early 2017. The NREAP the energy mix by 2025 and to 10% by resources of fossil fuel compared with its
highlights feasible renewable energy 2035 neighbors; a very high per capita
options for the country, and proposes • In January 2017, the Bahrain cabinet consumption of electricity & water and
targets, policies and initiatives for approved the development of a 100 MW its international, regional and local
implementation. It sets a national solar plant project in Bahrain commitments towards clean
renewable energy target of 5% by 2025 • A consortium comprising Saudi-based environment, energy efficiency and
and 10% by 2035. The envisioned ACWA, Japanese contractor Mitsui & renewable energy.
renewable energy mix comprises of Company and Bahrain industrial In addition, the size of the country
solar, wind and waste-to-energy conglomerate AlMoayyed has won the represents a challenge as solar energy
technologies. The NEEAP sets a national contract for the construction and projects are space consuming.
energy efficiency target of 6% by 2025. It operation of a 100 MW independent • Therefore, there is a need to diversify its
aims for efficiency improvements in both solar power plant in the Kingdom energy mix by resorting to renewable
energy supply and demand through 22 energy and energy conservation by
initiatives across all economic sectors improving efficiency measures.
(SEU, 2017). • Abu Dhabi Future Energy emerged as
• Bahrain economic vision 2030: one of the potential bidders for Bahrain’s
Protecting our natural environment will 100 MW solar project thereby,
include implementing energy-efficiency progressing on its efforts to reach the
regulations (e.g., for buildings and target of 5% renewables in the energy
electrical appliances); and directing mix by 2025.
investments to technologies that reduce
carbon emissions, minimize pollution
and promote the sourcing of more
sustainable energy”.
37
Country case 4: Jordan
Jordan Solar energy sector in Jordan

Overview
and 7 kWh per square metre (m2), which
potentially equates to at least 1,000 GWh
Jordan relies heavily on imports for its per year.
energy resources to meet its domestic
demand for fossil fuels. These imports The country has developed a master
account for more than 40% of the strategy of energy sector for the period
country’s budget. 2007-2020 in which the country targets
10% electricity generation from
Jordan is one of many countries located in renewables by 2020, amounting to 1,850
the Solar Belt region, creating great MW, of which 800 MW is wind, 1,000 MW
potential for harnessing solar energy. The PV and 50 MW is waste-to-energy.
average solar radiation ranges between 5
Economic indicators
US$ 40.068 9,702,353

Country GDP
Population
billion million
(World Bank, 2017)
• The total capacity of installed • Jordanian Renewable Energy

renewable power generation and Energy Efficiency Fund
in Jordan, excluding (JREEEF)

Industry statistics
hydropower, is approximately • Ministry of Energy and

550 MW divided between Mineral Resources
solar PV (347 MW), wind (197 • The Jordan Chamber of
MW) and biogas (3.5 Industry’s Factories Support
MW).(IRENA) Program
• Clean energy target
(2020):10% of total energy
mix, MESIA
• Key country in solar-belt

region
• 200 MW by direct proposal • Government subsidies
Key solar projects
submission-stage I (12 • Tax exemption

projects, nine of which are at • Conducive regulatory and
Ma’an, first quarter (Q1) 2016 investment environment
- 100 MW at Qweira/GCC
Grant (2017)
- 100 MW small-scale PV
rooftops in pipeline
38
Industry highlights
• As Jordan is highly dependent on fossil fuels, its government plans to boost electricity
generation capacity from renewable sources up from the current 18 MW to 1.8GW by
2020, setting a target of 10% of primary energy demand from renewable energy by
2020. Jordan is in the process of adopting NEEAP and plans to achieve a 20% reduction
of primary energy consumption by 2020.
• Status of renewable energy in Jordan

National renewable Market potential Industrial assets
energy plans
• 10% renewables in • Implemented renewable energy • Well established
power generation by projects (1,132 MW) by 2018 leading industrial sector
2020 (1,850 MW) to O&M value creation • Expertise in
• Renewable Energy • Net-metering numerous basic
and Energy Efficiency • Feed-in tariff components
Law passed in 2012 • Wheeling application and direct
proposal submission
Source: IRENA, 2018
• In the short-to-medium term, the Government expects to construct the first

concentrated solar power (CSP) demonstration project and is considering Aqaba and
the south east of Jordan for this purpose.
Regulatory development and policies
Government support mechanisms

• The Government of Jordan (GoJ) is continuously improving the policy framework and has
introduced different instruments to attract and increase private investments in the
energy sector to operate various utility scale projects (AFEX, 2016). To meet its
respective targets, the following instruments and mechanisms were implemented:
Mechanism Description
Feed-in tariff FiT especially for solar PV and CSP projects not exceeding 500 MW.
The prices were described as a “ceiling tariff” without indicating any
tranches in size.
Independent Fully unbundled power sector with separate ownership of

regulator generation, transmission, and distribution. In addition, private
investors can partially own and operate utility scale RE power plants.
Subsidies Jordan decreased subsidy reforms in electricity sector. Most effected

reform businesses were Jordanian banks and hotels which an annual
increase of 15% every year. Due to this dramatic tariff increase,
many RE projects are expected to be deployed in these two sectors
soon (AFEX, 2016).
Other Jordan has established rules specifying RE and EE systems will be

supporting able to qualify for full exemption from sales tax. Jordan also
measures introduced scheme for submission of direct proposals for the
development of utility scale RE projects to the GoJ, which provides
guidance to identify appropriate sites for implementation (AFEX,
2016).
39
Financiers and investors Challenges and opportunities
Previous and ongoing solar energy projects in Jordan • Concentrated solar power (CSP):
Potential investments in the installation
Technology Previous and ongoing projects of a CSP project, which would generate
Solar PV • 35 MW of small-scale systems (2015) more than 250 MW of electric power in
• 20 MW at Al Mafraq (2015) the Ma’an development zone.
• 10 MW at Aqaba (2015) • Solar PV - Opportunities for local
• 10 MW at Al Mafraq (2015) manufacturing: Grid capacity and land
• 5 MW at Azraq (2015) access are two major challenges
• 200 MW by direct proposal submission-stage I (12 projects, hindering the renewable energy
nine of which are at Ma’an, first quarter (Q1) 2016, PPA deployment sector in Jordan. However,
signed between NEPCO and Masdar) the National Electric Power Company
- 200 MW by direct proposal submission-stage II north and (NEPCO) is planning to add a further 1
east Jordan (2016-2017) GW through the US$ 160 million Green
- 100 MW at Qweira/GCC Grant (2017) Corridor project by the end 2019. The
• 100 MW small-scale PV rooftops in pipeline Ministry of Energy and Mineral Resources
decided to delay the announcement of
the successful bidder in Jordan’s Round 3
Financial support PV and wind auction.
Name of institution Description
JREEEF • Designed to boost RE efficiency initiatives

• Targets SMEs RE enterprises
• Source fund from general budget, foreign investment and
grants from GCC & EU
• Covers interest rates and guarantees to loans for enterprises
in partnership with the Jordan Guarantee Loans company
Jordan Enterprise • Support start-up and SMEs companies by allowing up to
Development 80% of equity in their RE projects with a focus on industrial,
Corporation (JEDCO) service and agribusiness sectors
• Require 10% return on profits
Jordan Chamber of • Non-refundable capital subsidy for SMEs to install either

Industry Factories solar PV or solar water heaters
Support Program • Subsidy covers up to 35% of the product costs, if imported,
and up to 50% if the product is Jordanian made
Higher Council for • Provide grants up to EUR 32,792 for solar PV project
Science and
Technology Industrial
Research and
Development Fund
(IRDF)
40
Country case 5: Morocco
Morocco Solar energy sector in Morocco

Overview
Morocco has an abundant source of solar
energy, with an average solar potential of
Morocco imports around 91% of its 5.5KWh/m2/day. To tap into this potential,
energy demand which includes the country launched the Moroccan Solar
conventional resources such as crude oil Plan in 2009, which foresees an increase
and oil products, coal, natural gas and in installed capacity of both concentrated
electricity. solar power (CSP) and photovoltaics (PV)
to 14% of total installed capacity,
The country has pledged to increase its RE representing at least 2,000 MW by 2020.
capacity to 42% of total installed capacity
by 2020 for a total of 6,000 MW and to
52% by 2030.
Economic indicators
US$ 109,709 35,739,580 Industry highlights

Country GDP
Population
billion million • As of 2015, renewable energy in Morocco

represented 32% of its capacity mix
(World Bank, 2017)
driven mainly by hydroelectricity and
solar power. The country has pledged to
increase its RE capacity to 42% of total
• Solar energy targets • ONEE (Office National de
installed capacity by 2020 for a total of
Industry statistics
(2020): 2 GW (Solar), MESIA l'Electricité et de l'Eau

6,000 MW and to 52% by 2030.
Potable)
(2030): 5 GW (Solar), MESIA • It has formulated a facilitative RE legal

• Moroccan Agency for Solar
framework, through the declaration of
Energy (MASEN)
RE law 13-09, which has opened the
• L'Association Marocaine
market for the production and
des Industries Solaires et
commercialization of RE sources by
Eoliennes (AMISOLE)
public and private entities.
• Ministry of Energy, Mining,
Water and Environment
(MEMEE)
• Quarazate - 580 MW
• MIDELT – 600 MW
• TATA – 600 MW • Favorable and conducive
• AIN BENI MAHTAR – 420 MW

Key solar projects
investment guidelines.
• SEBKHATE TAH – 500 MW • Focused approach by
• FOUM AL QUAD – 500 MW government
• Boujdour – 100 MW • Attractive investment
destination
41
Noor Ouarzazate Solar Regulatory development and Financiers and investors

Power Plant Project policies
with power generating • The Moroccan Government has been

• To achieve its target, an investment of
approximately US$ 9 billion was planned,
capacity of 580 MW praised for the substantial efforts it has involving several projects totaling to
uses both CSP and PV made to strengthen the legal and more than 3,00 MW.
regulatory framework for developing
technologies wherein two renewables.
• Noor Ouarzazate Solar Power Plant
Project with power generating capacity of
of the power plants use • Law No. 13-09 on Renewable Energy was 580 MW uses both CSP and PV
promulgated in 2010, the aim of which is
parabolic trough power to deregulate the renewable energy
technologies wherein two of the power
plants use parabolic trough power
plants; one is a solar sector in Morocco by providing a plants; one is a solar tower power plant
tower power plant and framework for private producers to and the other is a photovoltaic power
produce and export green electricity.
the other is a Depending on the capacity of IPPs, this
plant.
• The Noor project was budgeted at a total
photovoltaic power plant. law sets the subjugation of IPPs to a prior cost of US$ 2.2 billion. The country’s
notification for generating capacity drive to develop a renewable energy
ranging between 20 kW and 2 MW, and a industry and its stable government and
prior authorization for a capacity equal economy helped in securing the
to or higher than 2 MW. necessary funding for the project.
• The Moroccan Agency for Solar Energy • Key financiers included MASEN which
MASEN (established in 2010) is issued green bonds for an amount of
responsible to ensure the 1.15 billion dirhams (US$ 114.4 million),
implementation of the Moroccan Solar the German government-owned
Plan which includes, managing the solar development bank Kreditanstalt für
projects of the country, building a Wiederaufbau (KfW), World Bank, Clean
national expertise in the field of solar Technology Fund, African Development
energy and playing a major role in Bank (AfDB), European Union, European
developing energy policies on an Investment Bank (EIB), and Agence
international scale. Française de Développement (AFD).
• The National Agency for the
Development of Renewable Energy and
Energy Efficiency aims to contribute to
the implementation of government
policy on renewable energy and energy
efficiency.
• The Moroccan Association of Solar
Industries and Windmills (Amisola) was
created to promote the interests of
industrialists and Moroccan
professionals working in the renewable
energy sector.
• A Research Agency for Solar Energy and
Renewable Energies (IRESEN) was
established in 2011 for carrying out R&D
in the area of solar energy and
renewables. The missions of IRESEN
include:
- Supporting R&D in renewable energy
- Developing pilot installations and
demonstration platforms
- Transforming research activities into
industrial outcomes
42
Country case 6: Malaysia
Malaysia Solar energy sector in Malaysia

Overview
project or an investment tax allowance
on qualified capital expenditure incurred
• Malaysia’s location within the Sunbelt is to be set against 100% of statutory
one of the driving factors responsible for income for five years.
intensified awareness with average solar In 2016, 111 projects in renewable
energy received is between 1400 to 1900 energy with total investments of RM 1.9
kWh/m2 annually with the highest solar billion were approved. Out of the total,
radiation estimated at 6.8 kWh/m2. RM 1.7 billion (88%) were from domestic
sources and RM 233.8 million (12%) were
As a result, Government of Malaysia from foreign sources. These projects
provides immense boost for projects were expected to create 615
with either tax exemption of 100% on employment opportunities in this sub-
statutory income for ten years for a sector.
Economic indicators
US$ 314,710 31,624,264 Industry highlights

Country GDP
Population
billion million • Malaysian government introduced the

National Green Technology Policy in April
(World Bank, 2017)
2009 which provides guidance and
create new opportunities for businesses
and industries to bring a positive impact
• Malaysia has installed • 81 projects - RM 588 million
Key solar projects
Industry statistics
to the economic growth.

capacity of solar power at
• Malaysian government has enacted the
15 MW in 2017
Renewable Energy Act in 2011 to
implement the Feed-in-Tariff (FiT) system
which enables individuals and companies
to apply and become eligible producers
and those who qualify are granted feed-
in approvals by SEDA. The feed-in
• Ministry of Energy, Science, • Favorable Islamic finance approval holder enters into a renewable
Technology, Environment & structure energy power purchase agreement with
Climate Change (MESTECC) • Tax exemption offered by the utility and all electricity produced
• Energy Commission (EC) government for solar projects thereafter enjoys guaranteed offtake by
• Sustainable Energy • Great demand for solar the utility.
Development Authority of power cells due to local

Malaysia (SEDA) economical production cost
• Tenaga Nasional Berhad
(TNB)
• SIRIM Berhad
• Yayasan Hijau Malaysia
(YaHijau)
• Malaysian Green Technology
Corporation (GreenTech
Malaysia)
43

policies
• The approved renewable energy investments include 81 projects (RM 588.8 million) that
The fundamental guide in the Energy will generate energy from solar power, 12 projects (RM 145.7 million) from biogas, 10
Sector’s development is based on the projects (RM 806.6 million) from mini-hydro and six projects (RM 343.6 million) from
three principal energy objectives of the biomass as the sources of energy generation.
National Energy Policy of 1979, namely: • As of December 2017, 15.13 MW of Solar PV capacity has been installed in Malaysia,
• The supply objective: to ensure and there is a total of 354.21 MW installed capacity of Solar PV in Malaysia from 2012
adequate, secure and cost-effective to 2017, as shown in the below table.
energy supply through developing and
utilizing alternative sources of energy Investment installed capacity Installed capacity (MW) of plants
(both non-renewable and renewable) (MW) of commissioned in progress
from within and outside the country. The installation value
focus of policy initiatives, particularly with Other RE Solar PV Other RE Solar PV
respect to crude oil and gas, were aimed
at both extending the life of domestic 2012 62.66 31.54 0 0
depletable energy resources, as well as 2013 6.58 106.99 0 0.01
diversifying away from oil dependence to
2014 13.6 64.87 0 0.04
include other forms of fuel resources.
• The utilization objective: to promote 2015 31 60.28 0 0.58
efficient utilization of energy and
2016 46.96 75.4 2.4 3.57
discourage uneconomical and non-
productive patterns of energy 2017 22.54 15.13 59.9 36.22
consumption.
2018 0 0 180.36 2.23
• The environmental objective: to
minimize the negative environmental 2019 0 0 131.9 0
impacts on the energy supply chain i.e. 2020 0 0 183.69 0
energy production, conservation,
transportation and utilization. Total 183.34 354.21 558.24 42.65
Challenges Key solar projects
Name of Capacity Project period Project description

The use of renewable energy
project/Company
resources faces numerous challenges.
• Generation of energy from renewable UMILE Ltd Liability 49 MW Not disclosed Planned to setup solar plant in
resources is economically unattractive Partnership Pasir Mas, Kelantan
due to the availability of cheaper Company
alternative energy and high cost of Scatec Solar, 3 PV solar Not disclosed Along with Tenaga Nasional
energy generation. ItraMAS, Maltech parks – Berhad (TNB), planned to
• Lack of reliable information on potential and Cam Lite 200 MW construct 3 PV plants in north,
supply of renewable energy at the east and south region of Malaysia
national level.
• Little traction for energy from the Northwest Electric 61 MW 2018 Signed EPC agreement with
renewable resources due to weak public Power Design Malaysian PV developer UiTM
awareness on the positive attributes of Institute (NWEPDI) Solar Power to construct Solar
renewable energy. project in Rembau, Negeri
Sembilan
Hanwha Energy 48 MW Not disclosed Secured contract to build solar
Corp park in Perlis, Malaysia
BGMC 30 MW Not disclosed Secured contract to build solar
International Ltd and PV in Kedah and Sabah region
and Bina Puri 5 MW
Holdings Bhd
44
Country case 7: Indonesia
Indonesia Solar energy sector in Indonesia

Overview
uncertainties, and the abundant supply of
cheap coal & other natural resources.
The overall use of renewable energy
constitutes about 12% of Indonesia’s The ambitious undertaking by the
current energy mix with solar energy government to raise renewable energy
potential largely untapped contributing at sources to at least 23% of Indonesia’s
less than 1% of the total energy mix. energy needs by 2025 (7% geothermal,
10% bioenergy, 3% water, and 3% other
Potential investors were deterred from NREs) and 31% by 2050 certainly calls for
entering the market in the past due to fuel significant investments from different
subsidies, low electricity tariffs, logistical stakeholders.
challenges, complex regulations, legal
Economic indicators
Industry highlights
• Indonesia is the largest energy user in

US$ 1.016 263,991,379
Country GDP
Population
the ASEAN, accounting for nearly 40% of

trillion million the market’s total energy consumption.
GDP (World Bank, 2017) Total population In a business-as-usual outlook, the
(World Bank, 2017) country’s energy consumption is
expected to grow by another 80% by
2030.
US$ 1 billion • Perusahaan Listrik Negara • Indonesia’s renewable energy sources
Industry statistics
projects
solar players
(PLN) are also considerable. The country is

Total renewable energy
• The Ministry of Energy and endowed with significant potential for
investment
Mineral Resources of the hydropower (75,000 MW) while only
industry
Republic of Indonesia 0.07% is being currently utilized;

(MOEMR) geothermal energy (29,544 MW) with
Key Key
• House of Representatives only 5% being currently utilized; solar

(Dewan Perwakilan Rakyat – (207.8 GWp) with only a small amount of
DPR) 16 MW being utilized; bioenergy (32,654
• Plan to develop 5,000 MW MW) with only 86.23 MW being utilized;
of solar plants wind (60.6 GW) and ocean (17.9 GW).
• Favorable Islamic finance • In PLN’s Electricity Business Plan 2017–
Key solar projects
structure 2026 (known as the RUPTL), Indonesia

• Abundant renewable plans to implement a program of “solar
resources power plants for 1,000 islands/
• Depletion of fossil energy locations”. This program aims to develop
resources solar photovoltaic (PV) power plants in
• High cost of oil-based energy remote islands and other locations
generation facing transmission line expansion or
• National emission targets transportation access issues. Under the
RUPTL, the plan is to develop up to
5,000MW of solar power plants by 2025.
45
The ambitious Regulatory development and Challenges and opportunities

undertaking by the policies
government to raise • Several regulations have been issued on

The renewable energy sector still
faces several challenges, including:
renewable energy renewable energy for power plants, • Complex pricing mechanism
sources to at least 23% of including solar energy, to help accelerate
• Lack of research funding
private sector development of solar
Indonesia’s energy needs power plants.
• Insufficient finance especially lack of
longer term lending from the banking
by 2025 (7% geothermal, • One of these regulations includes
sector
Minister of Energy and Mineral
10% bioenergy, 3% water, Resources (MEMR) , who improved the
• Land procurement difficulties for
developing large-scale power plant
and 3% other NREs) and incentives introduced in the 2013 policy,
facilities
including the quota capacities and
31% by 2050 certainly purchase tariffs, and revises the required • Uncoordinated planning between
calls for significant level of local content in the development ministries/agencies involved that
impinges on the viability of specific
of solar photovoltaic plants.
investments from • The MoEMR issued three new projects
different stakeholders. regulations in 2017 related to investment • Procedural delays in land acquisition
in the Indonesian power and New and licensing that impede project
Renewable Energy (NRE) sector to implementation and raise the perception
further improve and accelerate of risk for potential investors
investment flow in the industry. The
regulations specifically tackle certain key In the recent years, there have been
areas of regulatory uncertainty relevant several incentives which aim at
to the power sector. attracting more investment into the
- Improves the risk allocation between NRE sector such as:
PLN and independent power producers • Feed-in tariffs that require PLN to
(IPPs) in power purchase agreements purchase electricity from renewable
(PPAs) energy producers at predictable prices
- Amends the maximum price payable by
(which vary from one area to the other).
IPPs for natural gas
• Government guarantees by the
- Utilization of New and RE for Electricity
Indonesia Infrastructure Guarantee Fund
Supply relating to the purchase of
(IIGF) that provide guarantees for the
electricity from renewable sources.
construction and operation of power
plants in public-private partnerships
Financiers and investors (PPPs).
• Tax holidays and income tax reductions
made available for renewable energy
• The ambitious undertaking by the
projects.
government to raise renewable energy
sources to at least 23% of Indonesia’s
energy needs by 2025 (7% geothermal,
10% bioenergy, 3% water, and 3% other
NREs) and 31% by 2050 certainly calls for
significant investments from different
stakeholders.
• The MoEMR in its Roadmap for
Accelerated Development of New and
Renewable Energy 2015-2025 expects
that investment in the order of 1,600
trillion rupiah will be required by 2025
(475 trillion rupiah for geothermal, 645
trillion-rupiah bioenergy, 320 trillion
rupiah for hydro, and 160 trillion rupiah
for new energy).
46
Type of Islamic Name of project Investment Description

finance value
Sukuk One Solar Watt Per Person – In 2012, two Brisbane-based solar companies, i.e. the Solar Guys
Program International and Mitabu Australia proposed to fund its 250 MW of
clean and renewable solar power project in Indonesia called ‘One
Solar Watt Per Person program’ using Sukuk after securing a
Memorandum of Understanding (MoU) with Indonesia’s Ministry
of Energy and Mineral Resources. The program was planned to
deliver one watt of solar power for every man, woman and child in
Indonesia.
Green Sukuk Green projects ranging from US$ In February 2018, the Government of Indonesia, through its SPV
renewable energy to waste 1.25 billion Perusahaan Penerbit Surat Berharga Syariah Negara Indonesia,
management issued a 5-year Sukuk based on Wakalah Bil-Istithmar structure,
the first global sovereign green Sukuk issuance.
Green Sukuk More than half of the Sukuk’s US$ In February 2019, Indonesia issues US$ 2.27 billion global green
value was backed with state 2.27 billion Sukuk. It marked the second time that the government banked on
assets in the form of land and the global Sukuk market after it became the first sovereign green
buildings as underlying assets, Sukuk issuer last year, which raised US$ 1.25 billion.
while 49% of the Sukuk’s value
was backed with ongoing or
future infrastructure projects.
In the recent years, there have

been several incentives which
aim at attracting more
investment into the NRE sector.
47
Country case 8: Pakistan
Pakistan Solar energy sector in Pakistan

Overview
In Pakistan, there have been Islamic
project financing structures for long term
Pakistan’s geography and location financing for the Energy Sector since 2011
promises a huge natural potential for (though mostly not for Renewable Energy).
power production through Solar Energy
generation. For example, in 2015, Meezan Bank
provided a rated listed Retail Sukuk for
NEPRA (National Electric Power Regulatory long term financing of PKR 22 billion
Authority) is the main federal regulator (US$ 210 million) to Karachi Electric Ltd.
established in 1992 that issues licenses
for every power project.
Economic indicators
Industry highlights
• Pakistan’s tremendous natural solar

US$ 304.952 197,015,955
Country GDP
Population
potential is best described by the high

billion million Global Horizontal Irradiation (GHI) figures
GDP (World Bank, 2017) Total population observed in its different provinces, with
(World Bank, 2017) the highest being in Sindh, Balochistan
and Punjab.
• Pakistan is a developing Muslim country
US$ 695
Industry statistics
• 24 solar projects – 556 MW with a growing Islamic finance industry,

projects
and has tremendous resource potential

solarprojects
million for solar, wind, hydro and biogas

Total renewable projects. Frequent power shortages (of
investment up to 6000 MW) are listed as one of the
Keysolar
primary hindrances for its industrial

productivity, and yet less than 1% of its
Key
electrical power is generated by

renewable means (other than hydro).
• The Alternative Energy
The government of Pakistan has
Development Board (AEDB) announced Islamic financing as their
• National Electric Power • High mean sunshine per day priority for financing infrastructure
Regulatory Authority • Large number of favorable projects and has set a target of
(NEPRA) government policies for producing 5% of the country’s energy
• Private Power energy sector needs using renewables by 2030.
Infrastructure Board (PPIB) • Growing Islamic finance
• National Transportation sector
and Dispatch Company
(NTDC)
• Central Power Purchasing
Agency (CCPA)
48
Regulatory development and policies Financiers and investors
Name of Functions
• It is proposed that Sukuk structures for
authority
Renewable Energy (including solar
NEPRA (National • Main federal regulator energy) financing need to be developed.
Electric Power • Issues licenses for power project • Note that, in Pakistan, there have been
Regulatory • Regulatory framework for competitive environment Islamic project financing structures for
Authority) • Formulate tariff for electric power long term financing for the Energy Sector
since 2011 (though mostly not for
PPIB (Private • Window Facilitator to promote private sector participation Renewable Energy).
Power • Facilitates investors in launching power sector projects • With the efforts of Econoler and its
Infrastructure • Executes Implementation Agreements (IAs) with project Client, IRG (International Resource
Board) sponsors and issues sovereign guarantees on behalf of the Group), and funding from USAID, the 3-
Government of Pakistan year Energy Efficiency and Capacity (EEC)
project was launched in Pakistan.
Alternative Energy • Representing agency of the Pakistan Federal government, offers • The EEC project will identify potential
Development Federal Government guarantees to projects initiated under firms, which can become ESCOs (Energy
Board (AEDB) provincial Letter of Intent (LOI) sector contracting services for RE/energy
efficiency) in Pakistan. Post that, the
Energy • Generate, supply and distribute renewable, hydro and thermal
objective is to competitively select best
Department of energy. GOSED is also responsible for prospective planning,
suited entities to provide energy
the Government policy formulation and conservation strategies
efficiency to private and state-owned
of Sindh (referred
industries and aid them with managerial
to as GOSED)
and technical staff trainings.
Central Power • Responsible for implementing and administering the ‘Single

Purchasing Agency Buyer Plus’ market mechanism in Power agreements, to lead to
(CCPA) competitive market operations
NTDC (National • Main Grid Supplier in Pakistan

Transportation
and Dispatch
Company)
Pakistan is a developing Muslim country

with a growing Islamic finance industry,
and has tremendous resource potential
for solar, wind, hydro and biogas
projects.
49
Challenges Islamic finance potential
• Some of the key challenges to Solar • In April 2016, Pakistani banks arranged a
financing via Islamic finance structures, in ten-year Islamic Sukuk worth US$ 955
Pakistan, are explained below: million for a hydropower plant, the
The relative cost of Solar energy largest-ever energy deal using Islamic
production in Pakistan: financing in the country so far.
• Although Pakistan’s Alternative Energy • This landmark energy Sukuk could be a
Development Board (AEDB) does offer door opener for more to come and
facilitation to IPPs to obtain NEPRA Sukuk will be seen as a catalyst project
licenses for solar and wind power financing method for green economy in
projects, and offers several incentives to the country and elsewhere in the World.
private producers (such as tax cuts, duty
waver on imported machinery,
guaranteed government purchase etc.), a
key challenge in Pakistan is that without
This landmark energy Sukuk could be
government subsidies, the cost of Solar
or Wind generated electricity is
a door opener for more to come and
significantly higher than that of other
sources.
Sukuk will be seen as a catalyst project
• The fact is that investors in Renewable
Energy demand high ROI to compensate
financing method for green economy
for high risk of solar projects. RE solar
projects typically have huge Capex costs
in the country and elsewhere in the
(are capital intensive), and much of the
parts and infrastructure need to be
World.
imported.
Type of Islamic Name of project Investment value Description

finance
Retail Sukuk Not disclosed PKR 22 billion Meezan bank provided fund to Karachi Electric Ltd in 2015
Sukuk Not disclosed • PKR 5.5 billion MBP provided series of funds to
• PKR 6 billion • Lalpir Power Ltd (2013 & 2014)
• PKR 13.73 billion • KAPCO Ltd (2011, 2012 & 2013)
• Hub Power Co Ltd (2011, 2012 & 2013)
Not disclosed Not disclosed PKR 9.83 billion Meezan bank provide syndicated finance to Hartfod Alternative
Energy Ltd for Wind power-based production
Sukuk Not disclosed PKR 2 billion MBL offered sukuk based finance to Lalpir Pvt Ltd
Not disclosed Not disclosed • PKR 39.8 billion MBL offered syndicated project finance to below companies
• PKR 54.67 billion • Sui Southern Gas Company
• Sui Northern Gas Pipeline
50
Country case 9: Turkey
Turkey Solar energy sector in Turkey

Overview
Turkey already has an Islamic banking
sector, which provides financing solar
According to the Solar Energy Potential energy projects through Islamic finance.
Map for Turkey published in 2008, the For instance, Turkiye Finance Participation
total potential is above 500 GWh. Banks provides funds for the procurement
of the equipment to be used in
The total number of solar energy plants as construction of solar plants with
of July 2017 was 1773. As of September concessional terms as well as with
2017, the total installed capacity was 2,246 maturities up to five years.
MW. The biggest plant is the one that is
operated by Kayseri Organized Industrial
Center with an installed capacity of 50
MW.
Economic indicators

Country GDP
Population
billion million • Demand for energy and natural

resources increases due to a growing
(Turkstat, 2017)
economy and the population growth in
Turkey. Over recent years, Turkey has
seen the fastest growth in energy
US$ 2.2 billion • Established Islamic finance
Industry statistics
demand in the OECD, and according to

structure
Renewable energy IEA forecasts, is set to double its energy
• Enabling regulatory
investment 2017 use over the next decade.
environment
• Turkey is a net energy importer country,
• Growing industry
depending on such imports for 73% of
infrastructure and
its energy needs. This high rate of energy
institutions
dependence has been the main driving
• Government and policy
force behind the formulation and

support
implementation of new policies to
• Ministry of Energy • Strong manufacturing

• EMRA (EPDK) commission local and renewable energy
industries
• EUAS (Electricity Generation resources.
• Increasing demand for
Company – EGC) • Most of the plants are unlicensed ones
alternative energy supplies
with capacity equal and below one MW.
• Access to MDB's capital such
Recently, the Minister of Energy has
as European Bank for
announced that the 10-year target is to
Reconstruction and
install 10 GW solar energy capacity.
Development (EBRD)
• More than 1,773 solar

Key solar projects
plants
51

policies
• The regulatory infrastructure for energy project/ value period
as well as solar energy market in Turkey Company
consists of legal arrangements with Solar plant in US$ 1.3 1,000 Not In 2017, Kalyon-Hanwha Group
institutions. There are laws on electricity
Konya – billion MWh disclosed consortium won tender to
natural gas, petroleum, LPG, renewable
Kayapınar build solar project in Konya
energy, nuclear power plants and
Kanyapnar
geothermal energy markets which are
applied via the support of few bylaws Four solar Not 950 KWh Not Metropolitan Municipality of
and communiques that are guided by plants disclosed disclosed Antalya launched SP plant to
the decisions of the Council of Ministers be used for irrigation
and/or High Planning Council and Six solar Not 1.44 Not Metropolitan Municipality of
Ministry of Energy. In addition, the Energy
plants disclosed MWh disclosed Izmir announced to install sic
Market Regulatory Authority (EMRA) has
SP plants
the mandate to make secondary
regulations for and to supervise energy Buyukcekmece Not 250 KWh Not Metropolitan Municipality of
markets. plant disclosed disclosed Istanbul will install SP plant
Challenges
• Macro-risks
• High installation and operation costs
• Technological over-dependence on
foreign resources
• Limited knowhow
• Need for increased government support
Islamic finance potentials
Proposed Islamic finance transactional features

• Islamic finance with its asset-based
structure, which promotes risk sharing, Issuance Issue price US$ 1 billion
might be a viable alternative for financing Tenor Proposed a 10-year tenor
Solar energy projects.
• The Mudharabah and Musharakah Proposed periodic payment: Change in Energy
financing structures seem to be an Coupon rate Price Index + 4%
appropriate for solar energy projects. Payable semiannually
Transaction
• In addition, Istisna’ as well as Ijarah Payments Settlement options
structures may also be used for solar terms
Currency US$
energy production purposes.
• For instance, Turkiye Finance Solar Energy Plants with capacity of 1GW to be
Participation Banks provides funds for Underlying asset produced in Konya, Karman and Antalya
the procurement of the equipment to be Regions of Turkey
used in construction of solar plants with Governing law British Law and Turkish Law
concessional terms as well as with
maturities up to five years. Listing Borsa Istanbul
• Solar energy projects can be regarded as Regulatory Listing Requirements as suggested by Capital
and legal Regulatory approval
infrastructure projects for the financing Markets Board of Turkey, Borsa Istanbul
of which Sukuk may be an appropriate Subject to the regulations of the locations
tool. Regulations
where the Sukuk is listed
52
Country case 10: Kazakhstan
Kazakhstan Solar energy sector in Kazakhstan

Overview
including thermal power plants,
hydroelectric power, wind power, and
The current total cumulative installed solar power plants at 0.5 MW.
capacity of solar energy in country is
approximately 0.5 MW with 28 solar power There is clear evidence of government’s
stations with total capacity of 713.5 MW awareness and explicit strong
planned by 2020. commitment to support renewable
energy. Favorable policies and regulation
The country's electric power potential is for renewable energy generation, including
represented by 76 power plants with an feed-in tariffs and tax reductions present
installed capacity of 20.5 GW as of 2013, favorable conditions for external investors.
Economic indicators

Country GDP
Population
billion million • Renewable sources such as wind, solar,

small hydro and bioenergy currently
(World Bank, 2017)
contribute less than 1% of Kazakhstan’s
energy mix.
• There is considerable potential in
• Total solar energy– • The Ministry of Industry and renewable power generation and the
Industry statistics
0.5 MW power plant New Technology government expects the total share of
• Kazatomprom JSC renewable power generation to rise to
11% by 2030 with 1,040 MW of
renewable energy capacity by 2020.
• The recent economic growth increased
demand for additional energy in order to
ensure economic growth. In this context,
the use of renewable resources to cover
the gap between supply and demand
• 0.5 MW power plant • Established Islamic finance becomes attractive.
• 28 solar power plants • High solar radiance range • Kazakhstan has areas with high
insolation that could be suitable for solar
Key solar projects
planned by 2020 with total

capacity of 713 MW power, particularly in the south of the
country, receiving between 2200 and
3000 hours of sunlight per year, which
equals 1300-1800 kW/m² annually.
• Both concentrated solar thermal and
solar photovoltaic (PV) have potential.
There is a 2 MW solar PV plant near.
53

policies
• Even though being an attractive potential • The EBRD is financing the 50 MW
• The Law “On Support of Usage of for solar, volume of proprietary funds in Burnoye Solar-2 project in Kazakhstan in
Renewable Energy Resources”, July 2009, investments has decreased by KZT 34 partnership with the multilateral Clean
provides state support for green energy billion in 2017. Technology Fund (CTF), coming as part of
producers. It provides state incentives for • However, despite unfavorable conditions, a comprehensive US$ 200 million EBRD
producers of renewable energy. Solar DAO is planning to expand in both renewable energy-financing framework
Europe and Asia, with Kazakhstan being for Kazakhstan.
envisioned as one of the largest potential • To date, the EBRD has invested € 1.7
target markets. Solar DAO founders, billion in sustainable energy and
Islamic finance potentials
UNISOLEX LLC, are already participating resources.
in construction of two PV solar plants, • Solar energy’s share in the emerging
• There is clear evidence of government’s 1.06 MW in Kyzylorda and 10 MW in field of renewable energy has been just
awareness and explicit strong Almaty. slightly above 57 MW (as of September
commitment to support renewable • The EBRD has been active in financing 2016). In 2017, there were six operating
energy. Favorable policies and regulation the construction of solar parks in and 15 projected solar power stations
for renewable energy generation, Kazakhstan by having established across the country.
including feed-in tariffs and tax Burnoye Solar 1 in Zhambyl region • The Kazakh investment company KB
reductions present favorable conditions in April 2014; it is planning to start Enterprises (an investment firm
for external investors. construction of Burnoye Solar 2, to be in specializing in the development of solar,
• The involvement of Islamic investment in the same region, both with a capacity of wind, hydro and biomass projects) is
the solar projects financing is largely 50 MW. The bank will grant a US$ 44.5 planning the construction of a 100 MW
focused on developing natural million loan in partnership with the CTF. solar power plant near Kabanbay,
ecosystem related to Shariah compliant Tselinograd District, at a cost of
investment strategy in clean energy. US$ 165 million.
The involvement of Islamic investment

in the solar projects financing is largely
focused on developing natural
ecosystem related to Shariah compliant
investment strategy in clean energy.
54
Challenges
The EBRD has been
active in financing the
Main barriers to renewable energy penetration are: construction of solar
Factors Description parks in Kazakhstan by
Market • Highly controlled energy • Missing market infrastructure having established
failure sector
• Restricted access to
• High investment requirements
• Fossil fuel subsidies
Burnoye Solar 1 in
technology • Trade barriers Zhambyl region
• Lack of competition in April 2014.
• High transaction costs
Economic • High payback period • High up-front capital costs for

and Financial • Lack of access to capital investors
• Small market size • Lack of investor interest from
• Lack of access to credit to the private sector
consumers • Lack of investor interest from
• Low electricity tariffs the public sector
• High discount rates • Lack of financial resources
• Lack of instruments
Institutional • Lack of involvement of • Long and complicated

stakeholders in decision bureaucratic procedures
making regarding the issuance of
• Lack of private sector building permits
participation • Lack of expertise and
• Lack of a legal and regulatory awareness within authorities,
framework especially at the local level
• Problems in realizing financial • Lack of a stable institutional
incentives framework
Technical • Lack of infrastructure • Lack of skilled

• Lack of specialized technology personnel/training facilities
for the needs of Kazakhstani • Lack of entrepreneurs
market • Lack of R&D culture
• Lack of domestic • Product not reliable
manufacturing industry • Inefficient technologies
PVs/Wind turbines • Lack of experience
Social • Lack of consumer acceptance • Lack of social acceptance for

of the product some Renewable Energy
Technologies (RETs)
• Low consumer awareness
55
Appendix B: Abbreviations
Abbreviations Expansion Abbreviations Expansion
AED United Arab Emirates Dirham KZT Kazakhstani Tenge
AUD Australian Dollar MASEN Moroccan Agency for Solar Energy
CSP Concentrated Solar Power MENA Middle East and North Africa
ESCA Electric System Cascade Analysis MESIA Middle East Solar Industry Association
EWEC Emirates Water and Electricity Company MW Mega Watt
EU European Union NEF New Energy Finance Limited
GCC Gulf Cooperation Council OIC The Organization of the Islamic Cooperation
GDP Gross Domestic Product PPA Power Purchase Agreements
GW Giga Watt PKR Pakistani Rupee
GWh Gigawatt hour PLN Perusahaan Listrik Negara
ICMA International Capital Market Association PV Photovoltaic
IEA International Energy Agency UAE United Arab Emirates
IPP Independent Power Producers UK United Kingdom
IRENA International Renewable Energy Agency UNEP United Nations Environment Program
IsDB Islamic Development Bank US United States
KSA Kingdom of Saudi Arabia USAID U.S. Agency for International Development
KWh Kilowatt hour
Endnotes
1. IRENA (2018), Renewable Energy Statistics 6. MESIA, Solar Energy Outlook 2019
2018, Abu Dhabi. 7. Frankfurt School-UNEP Centre Global Trends
2. REN21, Renewable 2018 Global Status Report in Renewable Energy Investment 2018
3. IRENA (2019), ‘Renewable Energy Market 8. Economist Intelligence Unit (EIU)
Analysis: GCC 2019’. IRENA, Abu Dhabi 9. Islamic Development Bank (IsDB)
4. IRENA and CPI (2018), Global Landscape of 10. Developed by Deloitte IFKC and published in
Renewable Energy Finance, 2018, Abu Dhabi the IIFM’s Annual Sukuk Report, 7th edition,
5. Frankfurt School-UNEP Centre, Global trends in 2018
renewable energy investment 2018
56
Appendix C: Thought leadership reports

Sukuk in focus: the Islamic finance: Scalable
necessity for global and sustainable funding
common practices”. source for social
The report discusses the drive infrastructure
to promote efforts to enhance The whitepaper examines the
the functionality of Islamic key enablers of building an
capital markets amidst the effective Islamic finance
increasingly fragmented investment structure as a
Islamic financial marketplace source of social infrastructure
financing.
Responsible Investment: Corporate Sukuk: Building

New thinking for financing the ecosystem to finance
renewable energy sustainable infrastructure
The Renewable Energy report The whitepaper attempts to
presents an analysis of the address some of the key
main drivers and factors for regulatory and practice issues
building the business case of a that Corporate Sukuk the new
new thinking to finance asset class may encounter.
sustainable development in
the energy and renewable
energy sectors.
About the Deloitte Middle East Islamic Finance Knowledge Center (IFKC):
Deloitte ME Islamic Finance Knowledge Center (IFKC) is a global knowledge management center of
excellence and Islamic finance thought leadership think tank that provide market knowledge and
practice insights to the Islamic financial service industry.
Leveraging on Deloitte Analytics, its market intelligence and applied research, the Center imparts
knowledge, skills, and innovation in products and services with a prime objective to promoting and
implementing change in Islamic finance practices around the world. As a result, the IFKC represents a
one-stop shop for practitioners who seek to acquire knowledge and competency in different areas of
technical expertise and Islamic finance practice.
57
Key contacts
Joe El Fadl Khaled Hilmi Aejaz Ahmed Irshad Mahmood

Partner Lead Partner Partner Partner
Regional FSI Leader FSI Consulting Risk Advisory Audit & Assurance
Tel: +961 1 364 700 Tel +971 4 376 8888 Tel + 96612828400 Tel +973 17 214490
jelfadl@deloitte.com khilmi@deloitte.com aeahmed@deloitte.com imahmood@deloitte.com
Nipun Srivastava Nauman Ahmed Akbar Ahmed Dr. Hatim El Tahir

Director Partner Clients & Industries Director
Financial Advisory ME Tax Leader Leader Deloitte IFKC ME Leader
Tel +971 56 6882507 Tel +966 1 3 887 3739 Tel+971 4 376 8888 Tel +973 17 214490
nipsrivastava@deloitte.com nahmed@deloitte.com aahmed@deloitte.com heltahir@deloitte.com
Vishal Rander
Director
Project & Infrastructure
Finance
Tel +971 4 506 4939
vrander@deloitte.com
58
This publication has been written in general terms and therefore cannot be relied on to
cover specific situations; application of the principles set out will depend upon the particular
circumstances involved and we recommend that you obtain professional advice before acting
or refraining from acting on any of the contents of this publication.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network
of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and
each of its member firms are legally separate and independent entities. DTTL does not provide
services to clients. Please see www.deloitte.com/about to learn more.
Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk
advisory, tax and related services. Our network of member firms in more than 150 countries
and territories, serves four out of five Fortune Global 500® companies. Learn how Deloitte’s
approximately 280,000 people make an impact that matters at www.deloitte.com.
Deloitte & Touche (M.E.) (DME) would be pleased to advise readers on how to apply the
principles set out in this publication to their specific circumstances. Deloitte & Touche (M.E.)
accepts no duty of care or liability for any loss occasioned to any person acting or refraining
from action as a result of any material in this publication.
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Sustainable finance

Can Sukuk become a driver of

Foreword from Deloitte

This is the second Deloitte renewable Resource thought leadership, senior

The methodology for developing this set

Foreword from ISRA

We extend our gratitude and appreciation

regulatory and policy role in financing the ‘real economy sector

In the past decade, the world has

180 179 Solar 161

Market development and investment

IRENA’s renewable energy market analysis

In Abu Dhabi, about US$ 870 million was

Structured finance mechanisms and tools

Source: IRENA, 2018

MENA solar projects

Project Country Capacity (MW) Status

Source: MESIA, Solar Outlook Report 2019 and other

GCC: Installed renewable energy capacity at end of 2018

Country Photovoltaic (PV) Concentrated Total renewable Share of RE in total

Source: IRENA, Renewable Energy Market Analysis: GCC 2019

Utility-scale renewable energy projects in the GCC as of January 2019

Country Project/site Technology Size (MW) Details

Industry and business leaders’ outlook

0% 5% 10% 15% 20% 25% 30%

The economic viability 28%

The profiles of participants 9%

The financing structures 21%

Technology suitability 19%

Public awareness and community 20% 20.14%

0% 5% 10% 15% 20% 25% 30% • Majority (~70%) of industry experts

Figure 10: What is the level of regulation and

Public awareness and Not considering Islamic finance as a source

• Majority (83%) of respondents expect to

Many government Figure 14: If you are considering Islamic

project development, Large number of investors have shown

Islamic financing strategy

Transaction details Wakalah

Issuer Perusahaan Penerbit SBSN Indonesia III (“PPSI-III”)

In October 2017, Mudajaya Group Berhad (Sinar Kamiri Sdn Bhd)

issued one of the world’s

purposes of financing the Country Malaysia

construction of three Use of proceeds

Kedah, Melaka and Facility Green SRI Sukuk

Terengganu. Issue size MYR 245 million (US$ 62.8 million)

Quantum Solar Park (Semenanjung) Sdn Bhd

Transaction details Murabahah

Issuer Quantum Solar Park (Semenanjung) Sdn Bhd (“QSP

Facility Green SRI Sukuk

The IsDB provided

Several solar energy projects approved for financing by IsDB

Project Country Size of support Year Details

Source: Islamic Development Bank (IsDB)

Gulf Solar Farm Gulf

Forward Ijarah contract

Istisna’ contract Forward Ijarah

1. Asset originator (GM) 5. Financers (Sukuk holders)

Business practice and support initiatives

MENA Asia Europe

Financial initiatives and policies

Balanced commercial and New innovative project Disruptive innovation

Appendix A: Growth drivers and market

Some of the projects supported by IRENA are listed below:

Country Name of project Capacity Loan Value Project description