Renewable Energies in the Middle East and North Africa

The combined effects of the economic crisis and the recent popular uprisings
in parts of the Middle East and North Africa have brought social and economic
challenges back to the centre of attention of policy makers. For governments
searching to create jobs, to satisfy the growing energy demand of their
populations and to diversify their economies, the appeal of renewable energies
is strong. However, the right policy framework and support need to be put in
place if the region wants to attract private investment in the sector and reap
the benefits of its favourable resource endowment, especially as regards solar
and wind energy.

This report makes the case for a stronger deployment of renewables in the
Middle East and North Africa and identifies the appropriate support policies
required to stimulate the necessary private investment. An assessment of
existing policy frameworks in the region and examples from OECD good practice
are used as pointers to help guide policy makers in their choices.

The analysis contained in this report suggests that support policies targeting
the life cycle of renewable energy projects such as feed-in tariffs and power
purchase agreements are more effective and less distortive than policies
subsidising the initial investment, such as cost reductions. The optimal
incentive scheme provides investors with stability through a guaranteed but
declining minimum return while imposing enough market risk to foster
technological progress.