Power Infrastructure Tracker in Northern Africa

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Jan 07, 2014, 09:59 ET

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Power Infrastructure Tracker in Northern Africa
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Can the Region Diversify its Energy Mix Away from Fossil Fuels to the Benefit of Renewable Energies?

Northern African countries need significant investments in their power infrastructure, as existing infrastructure cannot meet the increasing power demand. However, since early 2011, the year of the start of the Arab spring protests, instability in the region has been high, particularly in Libya, Egypt, and Tunisia. This political instability, causing security issues, has been detrimental to the development of the region's power sector. Further development of the sector will be dependent upon the success of the transition process. This is particularly the case in Libya, Egypt, and Tunisia, as foreign investors have adopted a wait-and-see attitude. Nevertheless, each government has set up ambitious plans to develop renewable energies.

Executive Summary

-Since early 2011, the year when the Arab spring protests began, instability in the region has been high, particularly in Libya, Egypt, and Tunisia.
-Political instability and security issues have been detrimental to the development of the power sector. Further development of the sector will depend on the success of the transition process in the short term.
-This is particularly the case in Libya, Egypt, and Tunisia, as foreign investors have adopted a wait-and-see attitude in countries where violence rose unexpectedly.
-Northern African countries need significant investments in their power infrastructure, as the existing power supply infrastructure cannot meet the increasing power demand.
-Moreover, regional grid integration remains marginal despite numerous initiatives, supported by the European Union, aiming to foster the development of a so-called Mediterranean power grid.
-Restricted financing, technical issues, inappropriate subsidies towards conventional energy, and inadequacies in regulatory frameworks are some of the main impediments constraining the development of the region's power sector.

-Except Morocco, a resource-strained country which mainly uses coal, all Northern African countries strongly depend on natural gas for electricity generation.
-This is expected to remain the case at least until 2020.
-Nevertheless, each government has set up ambitious plans to develop its renewable energy potential, but concretisation of these plans will take time.
-Indeed, the renewable energy potential is deemed strong in the region with numerous feasibility studies confirming the abundant solar and wind potential.
-However, insufficient incentive schemes are currently constraining the development of renewable energy projects, despite some progress shown in the last five years.
-Compared to sub-Saharan Africa, the level of electrification and electricity consumption per capita in North Africa is high.
-Electricity demand has continued to increase significantly in the last decade, however, there was a demand slowdown in 2011 due the revolutions and the consequent disruptions to economic activities.
-Sustained population growth, combined with improving living standards, implying the increasing usage of electrical appliances, has been the main factor driving the strong electricity demand growth in recent years.
-Power outages are recurrent during the summer months and some countries are trying to adopt various energy efficiency measures to alleviate the power supply-demand gap.
-Electricity prices and fossil fuel products have been heavily subsidised.
-A profound reform of each country's system of fossil fuel subsidies is required to ensure long-term sustainability of the Northern African power sector.

Scope

This study, including a regional and per country analysis, outlines the existing power infrastructure and the associated power expansion projects in North Africa.

Definitions

-For the purpose of this study, North Africa includes Morocco, Algeria, Tunisia, Libya, and Egypt.
-However, Frost & Sullivan decided to limit the overview of the power infrastructure in Egypt to what has been installed as of June 2012 given the recent political situation.
-Similarly, forecasts in terms of installed capacity and energy mix are not available for Libya, given the high uncertainty and lack of details of the new build programme, following the on-going security issues prevalent in the country.
-Power infrastructure includes power generation, transmission, and distribution assets in each respective country.

Regional Overview—Political and Economic Outlook

-North Africa has been the centre of strong political and social turmoil, which started in 2011 and was commonly called the Arab Spring protests.
-Since 1990, the region's growth has not been sufficient to create quality jobs, especially for the youth, resulting in an employment rate of about xx% over the past two decades.
-Wealth inequalities, job scarcity, and rising cost of living led to widespread social unrest, more particularly in Tunisia, Egypt, and Libya.
-The uprisings of 2011 and the consequent unstable political environment disrupted economic activities, predominantly in Egypt, Tunisia, and Libya.
-This tense economic situation was also exacerbated by the European economic downturn, as Europe is the main trading partner of the region.
-Revolutions took place in Egypt, Libya, and Tunisia whilst a gradual transition is happening in Morocco and Algeria.

-All countries in the region are now in a transitional phase, conducting very important reforms to tackle social, economic, and political issues such as youth unemployment, government cronyism and corruption, wealth inequality as well as high inflation.
-However, discontent among the population persists, particularly in Egypt, Libya, and Tunisia, where it is felt that there has been no progress and, for some, the situation has worsened since the Arab Spring protests began.
-In fact, disruptions to economic activities have aggravated the problems raised by the population.
-Foreign direct investment (FDI) in the region dropped significantly following the 2009 financial crisis and more particularly ensuing the 2011 Arab Spring protests. Yet, the situation varies widely from one country to another and year to year, with Egypt having been the worst affected.
-The tourism sector, a strong contributor to the region's economic development, has also been severely affected.
Executive Summary
Scope and Definitions
Regional Overview
Drivers and Restraints
Country Overview
Morocco
Algeria
Tunisia
Libya
Egypt
Regional Integration
Conclusions
The Last Word
Appendix
The Frost & Sullivan Story