Dubai: International Finance Corporation (IFC), the private sector arm of the World Bank Group said on Thursday it is fully committed to investments in renewable energy sector in the Middle East region and intends to fund up to $300 million in different projects across the region this year.
“IFC can bring funding to private sector renewable projects through equity participation and debt financing through financial institutions and banks. We take equity exposure up to 20 per cent of the paid-up capital of renewable energy companies,” said Mouayed Makhlouf, Regional Director, Middle East & North Africa region.
IFC, a leader in emerging market renewable energy finance, is actively involved in helping countries transition to a low carbon future. As part of a wider programme to help mitigate climate change, IFC is investing in and providing advisory services to private enterprises in the renewable energy sector, throughout emerging markets, including the Middle East and North Africa.
Currently, renewable energy projects represent nearly 70 per cent of IFC’s commitments in the power sector, in terms of number of investments and dollars invested. Since 2005, IFC has financed more than $2.3 billion in renewable energy projects and from 2009, it has committed to providing a further $3 billion in financing for renewable energy and energy efficiency projects worldwide.
“In the face of fast rising population and dwindling hydrocarbon resources, the Middle East region faces an urgent need to invest in renewable energy sector. While comprehensive overhaul of energy policies across many countries in the region are required, many countries have begun modest investments in this sector,” said Makhlouf.
With the cost of renewable power projects coming down significantly in the recent years, energy industry experts say the investing in renewable energy is sustainable in terms of return on investments; and as the technology improves, returns could become better than conventional sources of energy.
ACWA Power, a Saudi Arabia based power company that operates in 8 countries in the region has ventured into investing in renewable energy projects in the region. The company is running a 160 mega watt concentrated solar power (CSP) plant in Morocco with three hours of storage where it delivers power at a very competitive tariff of 18.9 cents per kilo watt (kw).
“The capital cost of gas fired energy generation works out to be $800 per kw whereas for CSP it could by 1600 per kw. But over a period, CSPs would work out to be more economical as it incurs zero fuel cost and very low level of maintenance cost,” said Paddy Padmanathan, President and CEO of ACWA Power.
According to the World Energy Outlook 2012 of International Energy Agency, the share of renewables in the total power generation in the Middle East is set to increase to 12 per cent in 2035 from 2 per cent in 2010. The World Bank estimates that by 2040, total investment needs of Mena’s energy sector will exceed $30 billion a year, about 3 per cent of the projected GDP.
“Clearly, embracing renewables will be a boon for the region. Awareness and government support to private sector is the key to attracting investors into the renewable energy sector,” said Makhlouf.
