MENA Region: Marhaba to the world


Over the past 30 years, Middle East and North Africa (MENA) region’s total energy consumption has grown faster than that of any other region in the world, because of energy intensive industry expansion, Alessandro Leona, Milan office, and Koosha Kaveh, Dubai office growing population and energy subsidies. According to IEA and ESMAP4, energy intensity in MENA has grown faster than GDP in the last 15 years, resulting in a 14 percent increase in energy intensity, whereas most OECD (Organization for Economic Co-operation and Development) countries have experienced steady declines in the same period. This is true for both resource-rich countries – like Bahrain, Iran, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria, and UAE – and resource-poor countries – such as Jordan, Yemen and Lebanon – where International Energy Agency and Energy Sector Management Asenergy intensities are comparable to OECD standards, as other countries in the MENA sistance Program (established by region: Algeria, Egypt, Oman, Israel, Morocco, and Tunisia. the World Bank and the United

A new oil for the region

Nations Development Program)

Moreover, energy consumption is the most significant source of pollution and, in terms of particulate matter (PM10) concentrations, MENA represents the second most polluted region in the world – after South Asia – and the highest CO2 producer per dollar of output. The energy sector in the MENA region is historically based on subsidies, whose costs have become extremely high and no longer sustainable (e.g. they represented, on average, 7 percent of 2006 GDP and one fifth of government annual spending). MENA countries have a great opportunity: rapidly catching up with western standard technologies, to finance the accelerated expansion of their economies, through resources coming from a widespread adoption of energy efficiency schemes. Energy efficiency is an area where little effort has been dedicated so far, but it will certainly attract, in the short term, the attention of government agencies, consumers, industrial players, technology providers and investors5. Energy subsidies are surely one of the first areas to address. Currently, most MENA countries subsidise electricity and all countries do the same with hydrocarbon products, as a way to redistribute oil profits. Some industries strongly rely on subsidies for their existence, hence reducing overall value for their country. Little effort is being made by consumers to reduce energy wastes, since energy prices in some MENA countries do not even reflect marginal generation costs.

To further deepen the topic, please refer to Infrastructures and new energies: from planning to realization (www.valuepartners. com), Value Partner’s contribution to the 9th Italian Energy Summit, organised in Milan in September 2009 by Il Sole 24Ore. Energy efficiency program in the construction sector in the Mediterranean, a co-operation between European Union Energy Initiative ‘after Kyoto’ and Mediterranean area countries.


In order to cut off electricity subsidies without causing social problems, an organised set of actions could be thought through. First of all, a differentiation of tariff schemes by income (having poor segments adhere to a social tariff), by hour group (peak vs. off peak), and by service continuity (e.g. special premium tariff for uninterruptible supply). Some of the tariff incentives should be directed to energy efficiency investments both in industrial sectors (e.g. frequency drives for motors, high efficiency plants, efficient cooling equipment or thermal insulation) and in residential (e.g. compact fluorescent lamps, A class appliances or insulation). In this latter area, some of the results of the MED-ENEC6 program can already be appreciated. In addition, energy waste should be penalised by introducing progressive tariff schemes – based on total consumption per point of delivery – or by banning inefficient products like incandescent lamps. Last but not least, renewable self generation should be promoted through feed-in tariff schemes for photovoltaic, mini wind turbine and trigeneration. Instead of subsidising running costs, some of the incentives could be directed to energy efficiency investments that would in turn reduce social costs – e.g. housing insulation, lighting efficiency, better appliances –, increase GDP thanks to lower production costs, develop a new industry, and reduce pollution. An example is Masdar, the zero carbon city, situated in the Abu Dhabi emirate, which will become the new Silicon Valley for clean, green and alternative energy, besides providing useful ideas to other regions in the world. With the aim of promoting investments in energy efficiency, most countries have created Energy Service Companies (ESCOs), which diagnose energy consumption and suggest


laws and decrees. Moreover. engineers and consultants. in the long run. with overall savings of US$ 2-3 billion and 50 million tons of avoided CO2. to recruit and train future generations of energy efficiency specialists. planning. All these measures have to be introduced in an orderly manner.possible counter measures. such as cogeneration. Some of these companies only require a change of behaviour in energy usage to reduce waste. and therefore poses ageing problems and pays little attention to emissions and generation efficiency. reducing losses to an affordable 10 percent would free up 7 GW of capacity. the energy saving repays the upfront investment and. communicating. enabling. against OECD standards of 7-8 percent (distribution alone weighing an average 10 percent): considering an overall installed capacity of 130 GW. a strong role will be played by national energy agencies. working in close contact with governments for issuing energy plans. taking into consideration structural differences country by country and applying a framework of analysing. investors. research institutes. becomes an advantage that the end-client keeps. deploying and monitoring. Transmission losses in the area account for an average 14 percent. the power generation park in the MENA region is strongly relying on fossil fuels. 29 NEWSLETTER . Another area of intervention in the MENA region relates to system efficiency. In such an effort. Others require upfront investments. In return. and scouting for fundings. motor frequency drives or photovoltaic roofs. investors and R&D programs. which the ESCO can facilitate having access to external funding.

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