Energy Strategy Reviews xxx (2012) 1e12
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Energy Strategy Reviews
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ANALYSIS
Model-based analysis of the future strategies for the MENA energy
system
Panagiotis Fragkos, Nikos Kouvaritakis, Pantelis Capros*
National Technical University of Athens, Department of Electrical and Computer Engineering, 9 Iroon Politechniou Street, Zografou Campus, 15773 Athens, Greece
A R T I C L E
I N F O
Article history:
Received 28 September 2012
Received in revised form
7 December 2012
Accepted 14 December 2012
Available online xxx
Keywords:
Energy strategies
Energy modelling
Energy policy
A B S T R A C T
This paper introduces a large-scale energy demand and supply model that is used to
quantify alternative energy system strategies for the Middle East and North Africa (MENA)
region to 2030. MENA contains major hydrocarbon producers and a vast and currently
untapped potential for renewable power generation.
It examines mutual benefits that MENA and the EU could derive by cooperating in the
field of energy and climate policies. It also investigates a strategy emphasising decentralised RES deployment together with accelerated market reform leading to a reduction
in power generation costs and a large increase of exportable hydrocarbon surpluses.
Recognising the risks that characterise the region a case of policy failure is also
considered.
Ó 2012 Elsevier Ltd. All rights reserved.
1. Introduction1
The Middle East and North Africa (MENA) countries face major
energy policy challenges in rapidly changing situations. Fossil fuel
producing countries are concerned with an optimal intertemporal
management of their ultimately finite resources, while net importers of
fossil fuels aim at reducing their dependence in order to decrease their
vulnerability and improve their economic development prospects. The
region contains countries that fall in both categories. At the same time
most of them are characterised by a very large potential for expansion
of the use of renewable energy sources. CO2 emissions in MENA have
been growing very fast and there are strong indications that costeffective abatement options exist opening the way for collaboration
with the EU where climate policy is high on the agenda.
In view of these policy goals, there has been a growing interest with
respect to the development of the Mediterranean energy system,
aiming at determining the optimal future mix of electricity generation
and specifically addressing the central question of deployment of
renewable or nuclear energy. Marktanner and Salman [4] focus on the
wider economic and geopolitical impacts of large-scale development of
* Corresponding author.
E-mail address: [email protected] (P. Capros).
1
We acknowledge research funding by the European Commission within the framework research program MEDPRO (http://www.medpro-foresight.eu/).
RES and nuclear technologies in North Africa, while Brand and Zingerle
[5] summarise the renewable energy targets of the Maghreb region and
then employ a linear power market optimisation model to assess the
impact of the accomplishment of these targets on electricity supply
costs. Supersberger and Führer [6] present the effects of integration of
RES and nuclear energy into North African energy systems for the
region’s balance of trade and highlight the fact that while RES
deployment will allow North Africa to ensure independence from
energy imports and to guarantee fossil exports for a longer period, in
the case of nuclear development the North African countries will
strongly depend on fuel and technology imports.
Reflecting the increasing interest on the potential cooperation of
Mediterranean countries on the fields of energy and climate action,
several studies have been published recently (e.g. Trieb and MüllerSteinhagen [7], Folkmanis [8]). The MENA region has huge potential for
solar and wind energy, which has remained to a large extent untapped.
Boudghene-Stambouli [10] emphasises the vast RES potential of Algeria
(mainly concerning CSP). Viebahn et al. [9] identify the CSP technology
as the most cost-effective carbon-free power generation option for the
MENA countries. In the last decade the concept of large-scale CSP
deployment in North African countries together with the potential
export of green electricity to the EU through high-voltage directcurrent (HVDC) lines has attracted a growing attention. Both national
regulatory authorities and international (mainly European) private or
governmental initiatives, like the Desertec Foundation, MEDGRID and
EUROMED, have conducted feasibility studies and costebenefit analysis
2211-467X/$ e see front matter Ó 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.esr.2012.12.009
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
2
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
[11,12,14] in order to assess the sustainability and the economic
viability of this concept and project the future evolution of the EUMENA power supply system.
Another strand in the literature investigates econometrically the
long-term relationship between GDP per capita, energy consumption
and CO2 emissions. In Ref. [1] El Hedi Arouri et al. use a panel model to
estimate the long run elasticities of CO2 emissions with respect to
energy consumption and real GDP and “to explore the nature of the
causality relationship between economic growth, energy consumption
households, services and transportation. These activity forecasts, together
with consumer prices for fossil fuels which are themselves derived from
international fuel prices (coming from the latest PROMETHEUS projections
[19]), taking into account country specific characteristics, such as distribution costs, taxation and fuel subsidies, are used to determine the
evolution of energy demand by sector. Long-term and short-term price
effects are accounted for separately by using different elasticities. The
general equation below describes the main mechanism for determining the
evolution of final energy demand ðCi;t Þ in each sector i at time t
n APi;tk 4ðk=nÞ*g
ACTVi;t a
APi;t b1 APi;t1 b2 Y
Ci;t ¼ Ci;t1 *
*
*
*
ACTVI;T1
APi;t1
APi;t2
APi;tk1
k¼1
and emissions of CO2”. In Ref. [2] Al-Mulali examines the impacts of oil
consumption on economic growth in the MENA region.
The literature is much poorer with regard to the development of
model-based energy system analysis for the MENA countries apart from
the power generation sector. Only IEA [13] and the Mediterranean Energy
Observatory (OME) [15] quantify energy demand and supply projections
for the entire energy system. OME uses an econometric model to simulate the evolution of final energy demand, power generation mix and
primary fuel supply for the Mediterranean countries.
This paper presents a detailed2 and technology rich integrated
demand and supply model for the countries of the region (Section 2). This
model has been used to analyse contrasting and policy induced
demandesupply configurations and the main results of the analysis are
presented in the remainder sections. In view of the rapidly evolving social
and political context in the region, the emphasis of the policy cases
examined is placed on alternative positions with regard to integration in
the world economy and the development of bilateral and multilateral
cooperation and their implications on the entire energy system.
(1)
where 4ðk=nÞ are the weights of the polynomial distributed lag used to
estimate the long-term price elasticity in each subsector, ACTVi;t is the
activity indicator for each sector (either GDP, sectoral value added,
disposable income, tn-km or passenger-km), APi;t is the average energy
price for sector i a represents the activity elasticity, b1 and b2 the short-term
price elasticities that capture demand reactions to price that do not require
significant investments and g the long-term price elasticity reflecting
energy saving investments over a longer period. All the above parameters
have been estimated econometrically and 4ðk=nÞ is a second order polynomial distributed lag scheme of depth n with near and far zero restrictions.
Final energy demand is simulated for five main sectors:
Industry, where ten sub-sectors are included in the analysis
depending on data availability
Services
Households
Agriculture
Transport (including private passenger cars, road freight transport,
passenger aviation and rail transport depending on data
availability)
2. Methodology e model description
MENA-EDS3 is a large-scale energy demand and supply model4 that
simulates the formation of prices in energy markets, estimates the
quantities demanded and supplied by the main energy system actors in
an exhaustive manner and incorporates energy related CO2 emissions,
environmentally oriented policy instruments and emission abatement
technologies. MENA-EDS is designed for medium-term and long-term
projections and produces analytical quantitative results for each
country until 2030. Historical energy demand and supply data for the
years up to 2010 are derived from the IEA and ENERDATA databases.
The model has been applied to the “MED-9” region that includes
Algeria, Morocco, Tunisia, Egypt, Libya, Israel, Syria, Lebanon and
Jordan. It calculates CO2 emissions and energy system costs (including
power generation costs) and can simulate energy strategies and policy
instruments such as taxes and subsidies, carbon pricing mechanisms
and incentives promoting energy efficiency and renewable sources.
MENA-EDS is a recursive dynamic model with annual resolution and has
a predominantly triangular structure in order to limit contemporaneous
simultaneity. On the other hand, simultaneity is modelled through lagged
instances of endogenous variables. The MENA-EDS model takes as an
exogenous input demographic, macroeconomic and sectoral activity
projections, covering the major energy consuming sectors in industry,
2
3
4
The model contains approximately 6000 equations for each country.
Middle East and North Africa Energy Demand and Supply model.
E3MLab constructed and operates the model.
Energy demand arises from net increases in consumers’ energy
needs, the replacement of scrapped capacity and surviving equipment.
Regarding new energy demand, a compact but analytically rich specification encapsulates the dynamic process of technological substitution
in all sectors taking into account the technical and economic characteristics (investment costs, energy efficiency, fixed and variable
operating costs) of the technologies available. The evolution of the
passenger car stock in different countries is simulated in detail by
considering the effect of economic development and behavioural
changes on both the number and the use of vehicles, also allowing for
potential saturation effects.
A detailed representation of the power supply sector has been
implemented in the MENA-EDS model, as electricity generation is
projected to play an increasingly important role in energy and climate
policies. Generation requirements are determined by final electricity
demand, own-consumption of power plants, electricity trade between
countries and transmission and distribution losses in each country. The
sectoral origin of electricity demand is used to construct an annual load
duration curve, by taking into account that demand in energy intensive
industrial sectors is mainly base load, while pronounced peaks characterise demand in services and households.
A wide variety of technological options compete to satisfy electricity demand. The main categories of power generation options are:
Gas-fired technologies, using steam turbine, gas turbine or
combined cycle technology
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Coal-fired technologies, which include thermal, fluidised bed,
supercritical and integrated gasification technologies using coal or
lignite as a fuel
Oil-fired technologies, including thermal fuel oil and peak devices
fuelled by diesel
Nuclear technologies, third and fourth generation
Biomass-fired technologies, including thermal and integrated
gasification technologies
A wide variety of renewable technologies, including hydroelectricity (large or small scale), wind (onshore and offshore), solar
(CSP,5 photovoltaic) and geothermal
Capacity installation decisions are based on long-term marginal
costs (that include the annualised and discounted capital costs, the
fixed and variable operation and maintenance costs and fuel costs) in
combination with expectations for the load duration curve. The market
share of each technology in new investments for the year t is modelled
as a quasi-cost minimisation function and is determined by the longterm marginal costs ðCj;t Þ of the competing options.
(2)
In this specification, the parameters wj;t can be interpreted as
reflecting the relative economic and technical “maturity” of each
technology while the parameters g represent the sensitivity of the
market share with respect to the total cost of each technology. For the
calculation of long-term marginal costs the technical and economic
characteristics of the PRIMES model [18,20] are used, taking into
account regional specificities, such as the higher capacity factors for
CSP and photovoltaics.
Scrapping rates of power plants are endogenous in the model and
include both normal scrapping, due to plants reaching the end of their
lifetime, and premature scrapping, due to changes in variable and fuel
costs which render the continuation of a plant’s operation economically unsustainable. The model also accounts for already decided
investments in specific power plants and the plans adopted for
decommissioning of old and inefficient ones, as obtained from a wide
variety of literature review.
The annual load duration curve together with variable operating
costs and the installed capacity of the different technologies are used
to determine capacity utilisation for each time segment (dispatching of
power plants) and hence electricity production and associated fuel
inputs for each technology. Firstly, the year is divided into 9 h
segments, which are symbolised by the index u, u ¼ 0,.,8. The annual
load duration curve is approximated by a rectangular section representing base load and an exponential section accounting for the shorter
durations. Total electricity production for the year t (TOTPRODt ) is
then approximated by the following formula:
TOTPRODt ¼
8 h
X
i
ðMt Bt Þ*elt *ð0:25þuÞ þ 9*Bt
(3)
u¼0
where Mt is the highest load demand considered, Bt is the base load
demand and the parameter lt is calculated implicitly from the
equation:
1 e8:76*lt
lt
¼
PRODt 8:76*Bt
Mt Bt
where PRODt represents electricity generation.
5
Concentrated Solar Power.
The price of electricity is determined as a function of long-term
average marginal costs and is differentiated between the sectors
(industry, residential), reflecting the differential costs for each sector
(differences mostly arise from the fact that different technologies
supply different segments of the load duration curve and from differential distribution costs). Any taxes and subsidies are added exogenously and constitute policy instruments.
Primary production of fossil fuels is a function of reserves, investments in productive capacity and, in the case of gas and coal, demand
(both internal and for export). For crude oil it is assumed that the world
market can absorb whatever quantities can be produced. Reserves are
determined by a motion equation that calculates net additions in terms
of discoveries minus production. The rate of discovery depends on fuel
prices and the undiscovered resources of the fuel as estimated by
geologist experts [3]. The difference between primary consumption
and primary production gives net trade through an identity. Natural gas
trade between countries takes into account existing pipeline and LNG
infrastructure and projects their future evolution.
3. The policy alternatives
g
wj;t *C
j;t
sharej;t ¼ P
g
w
*C
j j;t
j;t
3
(4)
The MED-9 region has been over many decades in a state of political,
social and economic flux. There are as yet no clear indications that this
situation is changing. Consequently, any projection concerning the
region is subject to greater uncertainty than is usually the case with
medium to long-term projections. Clearly the evolution of its energy
system will depend largely on these uncertainties. The MENA-EDS
model has been used in order to address questions arising from
possible directions of energy policy in the various countries covered by
the model. Such policies will to a large extent depend on the international context within which the region may evolve and in particular
the degree of cooperation between the countries themselves and their
integration in the wider regional and global economic systems. The
analysis involves the examination of alternative courses that such
cooperation and integration may follow in the two coming decades.
The results of the present work are presented in terms of comparison of alternative quantified projections primarily with a reference
projection. The latter assumes a very gradual normalisation of the
region with energy policies and measures that are currently on the
political agenda of the different countries implemented at varying but
generally cautious rates. Since this projection is used as the benchmark
for comparisons it is presented separately and briefly on Section 4. This
presentation aims to introduce exogenous assumptions on the most
important drivers and trends for key variables that characterise the
energy system of the region.
The Mediterranean region is of strategic importance to the EU both
in economic and political terms. In the 1995 meeting in Barcelona, the
EU committed itself to promoting Euro-Mediterranean economic and
political cooperation and at the July 2008 summit decided to upgrade
the Barcelona Process and to create the Union for the Mediterranean.6
The Mediterranean and the EU countries cooperate in the field of
regional environmental protection and sustainable development [16].
These initiatives indicate that there is political will for cooperation
across the Mediterranean. It is clear however that there is plenty of
scope for deepening relationships and in particular engaging MED-9
countries in EU climate policy efforts. The “MED-EU Initiatives”
strategy assumes that projects such as Desertec will to a large extent
materialise and that the EU Emissions Trading Scheme (ETS) will expand
to include MED-9 with special provisions for these countries (free
allocation of permits to the extent of reference projection emissions).
Only energy intensive industries and power generation are subject to
6
See: http://www.eu2008.fr/PFUE/lang/en/accueil/PFUE-07_2008/PFUE
2008/sommet_de_paris pour_la_ mediterranee_4758.html.
13.07.
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
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P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Table 1
Main scenarios assumptions.
Reference
MED-EU Initiatives
Global Integration
Fragmentation
Energy price reform
Gradual, incomplete by 2030
Accelerated, complete by 2025
Continuation of present
energy subsidies
Electricity exports
No
Limited depending on costs
No
RES policies
Only policies that are
already firmly decided
Present policies
Accelerated, especially in
industry and power generation,
incomplete by 2030
235 TWh in 2030 to the EU,
assisted by EU feed-in tariffs
RES facilitating policies
RES facilitating policies
Delays in present plans
Additional standards, vigorously
but gradually introduced
No
Multilateral
Present policies
Efficiency standards
ETS carbon prices
Cooperation
Investment climate
No
Continuation of the
present situation
Gradual reduction of risks
Present policies gradually
strengthened
For industry and power generation
With the EU primarily in the fields
of climate policy and RES promotion
Lower risk premiums leading to
higher capital turnover and more
FDI, mainly industry and power
generation
allowance obligations. The MED-9 countries do not face an additional
cost associated to emissions, but may benefit from an opportunity of
generating revenues by reducing their emissions and by selling their
allowances to EU countries. Such sales are projected to amount to 64.6
bn V’08 cumulatively between 2012 and 2030. Apart from direct sales
of emission permits, the exploitation of emission reduction opportunities may result in benefits for MED-9 countries arising from an
increase in foreign direct investment (FDI). This prospect implies that
renewable facilitating policies (licensing and others) accompany the
ETS enlargement. Renewable electricity exports to the EU will require
investments into new electricity high-voltage DC interconnectors
linking the MED-9 countries with the southern countries of Europe. The
exported renewable electricity is charged at pre-defined fixed tariffs
which are set at a sufficient level to allow recovery of total capital and
operating costs and allows for a reasonable rate of return on capital (at
an 8% discount rate). The cumulative value of electricity exports
between 2020 and 2030 amounts to 85.9 bn V’08.
The “MED-EU Initiatives” strategy assumes cooperation and actions
affecting essentially emissions from energy intensive activities and in
particular the power generating sector with few spillovers to other
sectors. On the other hand, there is a huge potential for improvements
on a very wide front addressing challenges such as economic and energy
reforms, trade liberalisation, infrastructure upgrading and sustainable
development. The “Global Integration” strategy assumes that MED-9
countries individually undertake vigorous measures in order to
promote energy efficiency, the development of renewable energy
sources, a reduction of import dependence for net importers of energy
and enhancement of the export capability of the energy exporting
countries. More specifically price reform is accelerated, grid
improvements are brought forward and additional measures promoting
efficiency standards are introduced. It also assumes that relations of
individual MED-9 countries with the rest of the world deepen and as
a consequence perceived risks are diminished thus encouraging FDI. On
the other hand, the promotion of renewable electricity exports to
Europe is assumed to be at a much more limited scale compared to the
massive effort assumed in the “MED-EU Initiatives” strategy. The
“Global Integration” strategy is characterised by multiple decentralised actions, often at a small local scale, that taken together constitute
a major attempt at transforming the energy system. Naturally, for such
conditions to prevail within the forecast horizon, very rapid political
normalisation must occur and there are currently no clear signs that
this is happening. It is considered here primarily in order to chart the
potential for rationalisation of the energy system of the region.
The MED-9 area in the “Fragmentation” case is characterised by
increased fragmentation, sporadic and festering conflicts and a failure
Much improved with lower perceived
risk vis a vis the rest of the world and
internally
No
No
Continuation of the
present situation
of concerted action with the EU and other global players. In terms of
the energy economy the main implications are a shortage of capital,
increased investment risks leading to high risk premiums and a stalling
of market reform including the price reform that is assumed to be
introduced gradually in the reference. Under these circumstances of
course there is no scope for investing in interconnections to enable the
export of renewable electricity to the EU. The perceived risks assumed
in this “Fragmentation” case are not evenly associated with the
different countries and they depend on their current condition and
their recent history thus they are most strongly felt in countries like
Syria and Lebanon and less acute in countries like Israel and Tunisia.
Table 1 summarises the main assumptions of the four scenarios
examined.
4. The reference projection
4.1. Present situation e summary
MED-9 consists mostly of emerging economies that are characterised by different stages of development. These differences are to
a certain extent reflected in the primary energy demand and electricity
production per capita indicators. In most cases there is clearly a large
scope for MED-9 countries to increase their consumption per capita in
line with economic development and standards of living and comfort.
On the other hand, the region is characterised by a different climate
than EU-27 and need not necessarily converge at saturation levels
comparable to Europe.
Looking at dynamic trends as they are reflected by crude elasticity
measures of energy demand with respect to GDP it is worth noting that
over the period 1990e2010 the region as a whole has registered a value
that is very close to unity compared to a mere 0.12 for EU-27. Over the
same period the empirical elasticity of power generation with respect
to GDP for the region has been more than double the equivalent for EU27 (1.59 instead of 0.717). In general electricity demand in the MED-9
countries shows little sign of reaching saturation levels in the
medium term.
4.2. Assumptions for the reference projection
The MED-9 region as a whole has been characterised by relatively
high rates of population growth in the recent past. The reference
7
Calculated by the authors using historical data from the IEA and ENERDATA databases for the MED-9 region and EUROSTAT for the EU.
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Table 2
International fossil fuel prices in $2010/boe.a
Oil price
Gas price
Coal price
a
Table 3
Shares (in %) of energy forms in final energy demand of industry in the MED-9 region.
2000
2010
2015
2020
2025
2030
36.2
25.3
10.0
79.5
50.2
21.2
111.5
69.8
28.5
114.9
79.8
29.3
115.7
76.4
30.7
120.8
83.7
31.1
Solids
Oil
Gas
Electricity
2005
2010
2015
2020
2025
2030
4.7
45.0
27.4
22.9
3.6
29.8
40.6
26.0
3.1
22.1
44.2
30.6
3.1
17.6
47.4
31.9
3.1
14.2
48.6
34.0
2.9
11.7
48.9
36.5
Barrel of oil equivalent.
projections are derived from the medium fertility variant of the World
population prospects of the United Nations [17]. This projection implies
a marked deceleration in population growth for all countries in the
region. This trend is particularly pronounced in Jordan, Lebanon, Israel
and Syria. The reference projection also assumes a continuation of the
trends in terms of urbanisation with marked consequences for changes
in lifestyles and energy consumption patterns.
Economic activity growth in MED-9 countries over many years has
been strongly influenced by political instability. Nonetheless in the
period from 1990 to 2010 growth has on average occurred at high rates.
For the reference projection a certain amount of political normalisation is assumed leading to increased trade and cooperation.
Another driver for energy demand is the evolution of consumer
prices for energy. In principle movements in international fuel prices8
(Table 2) should be reflected in domestic consumer prices. However,
the MED-9 region is characterised by a great variety of pricing regimes.
Looking at transportation fuels, Israel and Morocco have prices and
taxation comparable to the prices that prevail in the EU. In Tunisia and
Lebanon transport fuel taxation is very low. The other countries in the
region effectively subsidise transport fuels since prices for the
consumer are lower than tax-free spot prices for exports. Clearly this
situation makes little economic sense since such spot prices (i.e. the
prices at which the fuels could be sold if they are not consumed locally)
constitute an opportunity cost. The reference projection assumes
a very gradual movement towards rational transport fuel prices in these
countries.
Concerning electricity prices, it is generally agreed that in order to
have a sustainable generation and distribution system consumer prices
must cover long-term marginal costs (i.e. apart from operating costs
they should also include appropriate capital annuities to ensure that
investments will be profitable). Industrial consumer prices in Jordan,
Syria and Egypt do not cover long-term marginal costs calculated using
an 8% discount rate. In the case of Algeria and Libya industrial prices
are particularly low but they cover long-term marginal costs because of
the extremely low prices of natural gas inputs. Residential prices in the
region cover long-term marginal costs only in Tunisia and Israel. Even in
countries like Morocco where energy price reform has progressed
significantly residential electricity prices are still subsidised albeit to
a lesser extent. The usual justification for such subsidies is that electricity uses in households effectively perform a social service in facilitating the enjoyment of material civilisation for every citizen. In the
reference projection price reform is assumed to take place gradually
and at a different pace depending on the country (more slowly for
Algeria, Libya, Egypt and Syria).
4.3. Industrial energy demand
In the projection period due to the gradual opening up of the
economies and a shift in domestic demand towards services, the share
of industrial value added in GDP is forecast to follow a declining trend
(between 2010 and 2030 the average industrial growth is 2.7%
8
5
International fuel prices are derived from the latest PROMETHEUS model reference
projection, carried out in 2012.
compared to almost 4% for GDP). On the other hand, the persistence of
low energy prices in most MED-9 countries means that international
specialisation will favour more energy intensive sub-sectors and as
a consequence specific energy consumption of industry declines rather
slowly.
The projection implies a big increase in the share of electricity in
total final energy demand for industry9 as a result of a penetration of
electrical industrial processes and increased demand for specific
electricity needs, such as electric motors. Another striking feature of
the projection is the increased penetration of natural gas for heat and
steam raising purposes mostly at the expense of oil (Table 3). This
substitution occurs primarily for purely economic reasons: with the
expansion of the natural gas grid there is greater potential for more
attractively priced gas to substitute residual fuel oil.
4.4. Energy demand in residential/commercial sectors
The residential/commercial sectors currently account for around
30% of the MED-9 region’s total final energy demand. Energy demand
for space heating is not particularly important, while for cooking and
water heating purposes there is a big variety of fuels used, including
LPG, natural gas, traditional biomass and electricity. The use of
traditional biomass is projected to decline continuously throughout the
period because of increased urbanisation and rising living standards.
LPG use is projected to lose share to the extent that households are
connected to the natural gas grid. Natural gas is forecast to increase its
share in total residential/commercial demand from 16% at present to
26% by 2030 (Table 4).
Electricity demand, which is projected to increase 2.8 times from
its 2010 level, is pushed forward by the rapid penetration of electric
appliances, such as refrigerators and deep freezers, washing machines,
television sets and many other appliances that in many countries of the
region are far from having reached saturation levels. A special mention
in this context concerns air-conditioners mostly used for cooling
purposes. They already tend to modify the load curve in many
countries.
4.5. Energy demand in the transport sector
The major uncertainty with regard to energy consumption for
transport in the region arises from the possible evolution of car
ownership in the different countries (Table 5). At present most countries have very low car ownership rates [22]. Lebanon is an exception
with a rate approaching 400 vehicles per thousand inhabitants. The
model-based projections resemble to S-shaped penetration curves
simulating take-off and saturation effects.
There is an overall tendency for reduction in vehicle utilisation
rates as motorisation increases. On the other hand, the share of urbandriving in conditions of congestion increases significantly over the
forecast horizon in all countries of the region. The average size of
vehicles will have a slight tendency to increase as incomes rise. Better
9
Electricity demand for desalination purposes primarily through reserve osmosis is
included in industrial demand. The projections have been introduced exogenously
following [23].
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
6
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Table 4
Shares (in %) of energy forms in final energy demand of residential/commercial
sectors in the MED-9 region.
Solids
Oil
Gas
Traditional
biomass
Electricity
2005
2010
2015
2020
2025
2030
0.1
36.6
13.7
7.5
0.1
30.8
16.0
6.5
0.1
23.5
19.9
5.5
0.1
17.6
24.1
4.6
0.1
13.6
26.1
3.6
0.1
10.8
26.0
2.8
42.1
46.7
50.9
53.5
56.7
60.3
vehicle efficiency will occur through car imports. The modest pump
price reform assumed for some of the countries will have a relatively
small effect on vehicle choices. The net result of all the above is that
fuel consumption per vehicle displays a modest improvement of 1.2%
p.a.
Commercial road transport in 2010 accounted for approximately
35% of total energy consumption in road transport. Energy consumption
for trucks is closely linked to economic activity and is projected to
increase vigorously (2.7% p.a.). Air transport activity is expected to
show particular dynamism as the number of passengers carried is projected to grow by 5.1% p.a. over the forecast period, compared to
a growth of 3.9% p.a. for GDP. Aircraft occupancy rates will slightly
decline but improvements in the energy efficiency of aircrafts will
mean that fuel consumption by the air transport sector will grow at an
average rate of 4% p.a.
4.6. Electricity sector
The sustained electrification of industry and the rapid penetration
of electrical appliances in the residential sector translate into vigorous
growth in final demand for electricity (Table 6) for most countries in the
region (the main exception is Israel where saturation effects become
apparent). Growth of demand for electricity is projected on average
faster than the growth of GDP and means that by 2030 the region
becomes a major electricity market (1042 TWh) requiring large-scale
expansion of productive capacity (from 92 GW in 2010 to 243 GW in
2030). In all countries of the region (with the exception of Israel) there
is considerable scope for transmission and distribution losses reduction.
The reference scenario assumes their gradual but sustained
reduction.10
The nuclear option has at various times been considered by
a number of countries including Algeria, Morocco, Israel and Jordan.
The Fukushima accident has brought into the fore a considerable
amount of scepticism concerning most of these projects. Even if some
of them finally go ahead, experience from the past shows that given
present concerns the whole process of planning, tendering, licensing
and construction may take even more than the two decades that
separate us from the projection horizon. The hydro-electric potential
of the region has already to a large extent been tapped. A minor
expansion of hydropower is projected for Morocco (it concerns 560
additional MW).
Wind power is already being exploited in the region notably in
Egypt, Morocco and Tunisia. Most countries have ambitious plans for
increasing the contribution of wind power. The main instruments used
for promotion are direct investment by state owned enterprises,
investment subsidies, feed-in tariffs and quotas accompanied by
10
In the cases of Syria and Algeria recorded losses are so high that they clearly point to
unrecorded and unpaid deliveries. The projection incorporates adjustments on demand
in the household and services sectors in these countries in order to avoid biased electricity requirements. In this sense for these countries the figures for these sectors
represent electricity purchases rather than consumption.
Table 5
Evolution of private cars per thousand inhabitants in the MED-9 countries.
2010
2020
2030
ALG
MOR
TUN
EGY
LIB
ISR
LEB
SYR
JOR
MED-9
82
122
176
61
89
126
82
135
213
33
50
75
235
377
495
273
382
508
395
440
495
31
46
71
115
148
223
73
106
147
economic instruments. The reduction in capital costs of recent years
together with the availability of many suitable sites (enabling high
utilisation rates) in combination with the various promotion policies are
likely to produce a large expansion of wind capacity in the coming two
decades (Table 7). However, even so this represents a small fraction of
the potential.
With regard to solar thermal power production the main technology
considered in the model is CSP with varying storage capacities. The
region as a whole but especially its Saharan parts is considered to
contain among the most suitable sites for this type of technology in the
world. CSP is characterised by relatively high cost especially when
compared with its most obvious competitor, which is the combined
cycle gas turbine technology. Under these conditions CSP deployment
necessitates a special support system that goes even beyond the one
created in order to encourage wind power. In very recent years such
support systems have started being put in place and there is considerable interest in the promotion of many CSP projects in a number of
countries, such as Algeria, Morocco, Egypt, Israel and Jordan. The
reference projection presented here does not incorporate large-scale
exports of renewable electricity from MED-9 countries to the EU.
However, it assumes that the present effervescence concerning the
possibility of such exports leads to the undertaking of a number of
projects and the creation of a suitable framework in which CSP is
initially deployed.
Photovoltaic generation is less systematically pursued than CSP. It
involves mainly relatively small units and also requires considerable
support to become competitive under the conditions prevailing in the
energy markets of the MED-9 countries; another factor limiting wide
development of PV is the lack of adequately meshed low/medium
voltage grids and the relatively high investment that would be needed.
Only two countries (Morocco and Israel) currently use coal for power
generation and no other country is projected to use such options. The
share of coal in power generation will substantially decrease in the
forecast period, as no new investments in coal-fired power plants are
projected for Israel since domestically produced gas fuels the majority
of additional capacity.
Oil as a fuel for power generation has seen its shares drop sharply in
recent years. This process is forecast to continue in all countries until
2030 by which time many of them will generate virtually no oil-fired
electricity. This rapid transition takes place in the light of competition
from gas, facilitated by higher production and increased intraregional
trade for the latter.
Natural gas already dominates the power generating sector of the
region and its position overall is projected to strengthen in the coming
two decades. The dominant option for new gas-fired capacity is the
combined cycle gas turbine technology. It combines relatively low
capital costs with very high efficiency rates thus making it attractive
even in natural gas importing countries where the prices of the fuel
Table 6
Average annual growth of total final electricity demand (in %).
2010e2030
ALG
MOR
TUN
EGY
LIB
ISR
LEB
SYR
JOR
MED-9
6.3
6.3
6.6
5.2
4.1
2.0
3.8
6.5
5.6
5.2
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
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P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Table 7
Evolution of electricity production in the MED-9 region in the reference projection
(in TWh).
Electricity supply
Nuclear
Gas
Oil
Solids
Hydro
Wind
Biomass & waste
Solar
2010
2020
2030
392.4
0.0
247.6
82.2
41.7
18.0
2.9
0.1
0.0
651.0
0.0
486.3
68.0
46.4
19.1
20.1
0.6
10.4
1042.0
0.0
824.8
62.6
47.8
20.0
46.9
3.3
36.5
approach international levels. Gas-fired power generation is also
convenient in complementing intermittent renewable power production and facilitates load management especially when renewable
shares are relatively high.
5. Analytical comparisons
5.1. Impacts on final energy demand
In the MENA-EDS model, consumer prices are major drivers of final
energy demand. The different strategies examined involve price
reform aimed at economic rationality and providing appropriate signals
to consumers that promote efficiency gains and the desired substitution between fuels. The scope and pace of such reform differs
according to the strategy pursued and varies between countries
depending on existing pricing practices. Fig. 1 below illustrates the
extent of price reform as reflected on two key consumer prices
(average prices for gasoline at the pump and electricity to residential
consumers). The averages shown exclude Israel, Tunisia and Morocco
where the need for reform is less urgent. It is worth noting that with the
exception of the Fragmentation projection, the strategies imply a clear
and early break with the recent past. Nevertheless prices in the region
remain generally lower than those currently prevailing in the EU even
for the proactive strategies.
In the MED-EU Initiatives strategy energy intensive industry is
specifically targeted (participates in the common EU-MED-9 ETS). As
a consequence final demand in industry is strongly affected. This is
particularly pronounced in countries like Algeria and Libya, where fuel
7
prices in the reference projection are very low, implying a very large
increase in fuel costs. On the other hand, countries like Tunisia, Israel
and Morocco, where fuel prices are high even in the reference
projection, the impact of the MED-EU Initiatives strategy is relatively
small. In Algeria, Tunisia, Egypt and Libya, where natural gas in the
reference projection overwhelmingly dominates industrial energy
demand, substitution possibilities are more limited. In the “Global
Integration” strategy the industrial sector has a more limited potential
for efficiency gains compared to residential uses. This is mainly due to
the fact that industrial consumers who generally make intertemporal
decisions using much lower implicit discount rates than private individuals, already in the reference projection achieve a considerable
amount of energy efficiency gains. In the Fragmentation case failure of
price reform combined with a relative scarcity of capital, result in
considerably higher consumption in most countries (with the exception
of Israel which is less affected).
In the MED-EU Initiatives strategy, the residential/commercial
sectors are only slightly and indirectly (through somewhat accelerated
price reform) affected since they are not specifically targeted. On the
other hand, in these sectors the scope for specific energy consumption
reductions is large as indicated in the results obtained for the “Global
Integration” strategy (Table 8). It materialises primarily through the
introduction of standards for lighting and appliances as well as insulation of buildings. The opposite trends are registered for the Fragmentation case where current account difficulties imply a slower
turnover of energy consuming equipment. This is particularly the case
in the residential sector due to a combination of subsidised electricity
prices and low credit for the purchase of more efficient electrical
equipment.
In the “MED-EU Initiatives” strategy energy demand for transport is
virtually unaffected. Even in the “Global Integration” efficiency gains
are somewhat more limited than in other sectors, especially in countries like Morocco and Israel where prices in the reference projection
are already high. In this context earlier retirement of vehicles is
assumed and hence a faster turnover of the fleet with new vehicles
generally having lower specific consumption characteristics than older
vintages, but the process of transformation remains relatively slow.
The proportion of new technologies like hybrid vehicles in the total car
fleet increases from 8.1% in the reference to 12.8% in the “Global
Integration” strategy in 2030. In general, using MENA-EDS, the transport sector as a whole and more specifically road transport appears to
be less responsive to price signals than most other sectors. This is
Fig. 1. Comparison of average fuel prices of the region in the alternative strategies.
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
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P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Table 8
Changes in MED-9 final energy demand in 2030.
In Mtoe
Changes from reference in 2030 (in %)
Present Reference MED-EU
Global
Fragmentation
situation (2030)
Initiatives Integration
(2010)
Final demand
129.6
268.0
L5.5
L17.7
12.0
By sector
Industry
Residential
Services
Agriculture
Transport
35.2
31.2
8.1
6
49.1
65.5
69.4
18.5
10.9
103.7
12.8
4.5
4.5
2.7
2.3
15.4
25.2
18.4
15.2
13.3
14.4
19.5
12.1
6.8
6.2
By fuel
Solids
Oil
Gas
Electricity
Traditional biomass
1.2
77
20.1
28.7
2.6
1.4
124.1
57.8
80.1
4.6
59.1
3.4
2.5
11.0
0.0
61.3
18.1
22.2
14.5
3.9
5.1
9.0
15.4
12.7
18.0
Share of hybrids
0.0
in car stock (in %)
8.1
8.5
12.8
1.6
illustrated by the relatively modest increase registered for the Fragmentation case despite the fact that in this context the average life of
vehicles increases thus rendering the renovation of fleets and the
subsequent improvements in efficiency slower. Hybrid vehicles’ shares
remain so low that they merely represent a niche market.
Overall the different projections examined have important implications in terms of the final energy intensity of GDP. Over the period
1990e2010 the MED-9 region was characterised by a complete stagnation in this index. The Reference projection represents a slight
improvement (0.21% p.a. between 2010 and 2030). The Fragmentation case marks a deterioration (0.29% p.a.). In the “MED-EU Initiatives” strategy the improvement is of the order of 0.5% p.a., while for
the Global Integration an improvement of 1.15% is registered and is
directly comparable to the performance of EU-15 over the period
1990e2010. On the other hand, the EU-15 region is projected to
improve this intensity at a rate of 1.9% p.a. in the period 2010e2030
[21].
5.2. Impacts on primary energy supply
Hydrocarbon supply plays a major role in the economies of the
region. For important exporters like Algeria and Libya hydrocarbon
exports constitute a major item in their current account. On the other
hand, predominantly importing economies are particularly vulnerable
especially when international prices are high. Furthermore, there are
countries like Egypt and Syria that have in the past produced exportable surpluses, are currently close to self-sufficiency but could become
much more import dependent as fewer and smaller new fields are
discovered while demand is growing at a fast pace. Under such conditions variations in the balance between demand and supply, such as
those that result in the projections examined, can have important
economic ramifications for the countries involved.
Libya has good prospects for production expansion in the short term
through enhanced recovery and in the longer term with the development of known fields and the parallel expansion of pipeline infrastructure (Table 9). Algerian production in the reference projection is
projected to increase in the short term (2020) but decline in the longer
term on the basis of the maturity of its oil fields. Similar trends but at
a different scale apply to Egypt and Syria (the former is already
marginally an oil importer, while the latter is projected to become one
by 2030). The “Global Integration” strategy assumes an increase in FDI
but not to the same extent as the “MED-EU Initiatives”. Consequently,
primary production of oil increases compared to the reference
projection but stands below the “MED-EU Initiatives” levels. On the
other hand, the “Global Integration” strategy has a much wider scope
for reduction in oil demand, especially because of the efficiency gains
in the transport sector that play a key role in determining the overall
demand reduction. The exportable surplus for Libya in 2030 goes from
148.5 Mtoe in the reference projection to 167 Mtoe in the “Global
Integration” strategy. The quantities for Algeria are 52.1 and 58.3 Mtoe
respectively. However, even the higher figure for the “Global Integration” strategy does not prevent a reduction in Algerian oil exports
between 2020 and 2030. In this context, Syria clearly remains in a net
oil exporting position by 2030 (exports representing one third of
primary production), while the import dependence of Egypt is only 22%.
All other countries experience considerable reductions in net imports,
compared to reference.
According to the reference projection, gas production in MED-9
region is set for a major expansion (more than doubling between
2010 and 2030). This result is dominated by projected developments
in Algeria and Egypt where increased production is sufficient to meet
the rapidly expanding local demand and at the same time nearly
double exportable surpluses (Table 10). Libya’s exports also expand
considerably albeit from a smaller base. Israeli production expansion
from offshore fields in the Mediterranean produce a surplus equivalent to almost 50% of output. The remainder countries meet their
expanding needs primarily from imports with intraregional trade
projected to increase sharply from a very small base. The “Global
Integration” strategy has pronounced impacts on gas demandesupply
balances. Unlike the “MED-EU Initiatives” strategy, where the
participation of Europe in a major decarbonisation effort means
a substitution away from gas and hence a contraction of this crucial
market for MED-9 suppliers, the “Global Integration” strategy sees an
expansion in exports arising from higher production due to more
investment in productive capacity as well as a sharp reduction in
domestic demand due to the efficiency gains in final demand sectors
and substitution towards renewables in the power generation sector.
The exportable surplus of the region stands not only higher than the
reference, but also a full 54% higher than the “MED-EU Initiatives”
strategy.
The negative investment climate assumed for the “Fragmentation”
case produces pronounced effects on the supply of crude oil in the
region. The effects (particularly strong in Libya) are due to delays in
exploration programs that produce lower reserves and a more limited
expansion of productive capacity. In this context Jordan does not
undertake shale oil production by the end of the forecast period. The
drop in production in conjunction with increased primary consumption
of oil leads to major changes in hydrocarbon trade for the countries of
the region. In the Fragmentation case net importers increase their
dependence and net exporters reduce exported volumes as a consequence of higher domestic use. Viewing the MED-9 region as a whole, it
is worth noting that in the reference projection it continues to be a net
exporter of oil (131.3 Mtoe in 2030), while in the Fragmentation case
the situation is reversed and it becomes a marginal net importer.
Underinvestment in the hydrocarbon sector has a negative influence
on gas productive capacity. Production in 2030 is 8.5% lower compared
to the reference. Intraregional exchanges are either heavily reduced or
completely eliminated as a matter of policy. Israel does not develop its
LNG export capability and hence produces for the local market. Algeria
registers a relatively small reduction in production and its primary
consumption increases by more than 20%. Consequently its total
exports drop from 93.6 Mtoe in the reference to 77.8 in the Fragmentation case. Egypt registers a bigger drop from 30.1 Mtoe to 11.4 Mtoe
mainly as a consequence of the contraction of its export markets in
Syria, Jordan and Lebanon.
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
9
Table 9
Comparison of primary production and consumption of oil (in Mtoe) in 2030.
Present situation (2010)
Reference
MED-EU Initiatives
Global Integration
Fragmentation
Primary
Primary
Primary
Primary
Primary
Primary
Primary
Primary
Primary
Primary
production
consumption
production
consumption
production
consumption
production
consumption
production
consumption
ALG
MOR
TUN
EGY
LIB
ISR
LEB
SYR
JOR
MED-9
78.7
16.4
74.4
22.3
78.9
21.8
77.1
18.7
70.0
24.2
0.0
10.7
0.0
16.0
0.0
13.2
0.0
12.5
0.0
23.5
3.9
3.9
2.7
6.2
2.8
6.0
2.8
5.3
2.3
7.0
34.7
35.3
32.0
54.2
33.5
48.2
32.8
40.2
29.5
62.8
74.6
11.9
165.3
16.8
187.7
14.6
178.9
12.0
98.3
20.2
0.0
10.7
0.0
16.9
0.0
16.7
0.0
15.2
0.0
18.5
0.0
4.9
0.0
4.2
0.0
2.7
0.0
2.4
0.0
8.8
19.1
14.6
17.5
18.0
17.9
14.2
17.9
11.9
15.9
42.5
0.0
5.1
1.8
7.9
3.1
6.1
2.6
5.2
0.0
14.1
211.0
113.5
293.8
162.5
323.8
143.4
312.0
123.4
216.0
221.6
5.3. Impacts on power generation supply
photovoltaics expands vigorously in almost all countries assisted by
active promotion in the form of subsidies and/or high feed-in tariffs,
but their contribution in total electricity needs remains rather limited
addressing small scale development needs (6.8% of MED-9 total
generation compared to 0.6% in the reference in 2030). Biomass
contribution increases fivefold compared to the reference projection
but it remains insignificant and is concentrated essentially in only one
country (Israel). Overall renewables in the two proactive strategies
reach very high shares in total generation (43% for the “Global Integration” and 51% in “MED-EU Initiatives”).
The brunt of the renewable expansion is naturally taken by fossil
fuel based generation, which is reduced by 377 TWh in “MED-EU
Initiatives” and 411 TWh in “Global Integration” in 2030 compared to
the reference projection. Oil based generation virtually disappears in
both strategies while coal is abandoned in Israel and only makes a slight
contribution in Morocco. Natural gas-based power generation is in
a way the swing option in the region (supplying the remainder once
renewable contributions and backing out from coal and oil are determined). For the “Global Integration” strategy by 2030 natural gas-fired
capacity is 56 GW lower than in the reference projection. This represents a drop of 30%, while at the same time gas-based generation drops
by 42%. Gas in this context assumes increasingly the role of following
the load especially in the context of an increase in intermittent
renewable energy share in the generation mix. Backing out from gas for
power generation gives a major boost to exportable surplus. The
amount saved represents 75% of the additional net exports generated in
the “Global Integration” strategy for 2030.
The Fragmentation case with respect to the power generating
sector represents an almost opposite view compared to the proactive
strategies. Lower electricity prices, expensive investment and the lack
of coordinated measures to improve efficiency result in an increase in
generation requirements (by 2030 17% higher than the reference
projection). The share of renewable electricity in total generation
stagnates (5% in 2030 compared to 5.3% in 2010). Hydro production
remains constant while wind and CSP expand relatively slowly only in
The impact of the projections examined on the power generation
sector is very pronounced primarily because of the great number of
options that are available to power producers, the large proportion of
fuel costs in total fossil fuel based generation and the importance of
technical progress and financial considerations for capital intensive
modes (Fig. 2).
The “MED-EU Initiatives” and the “Global Integration” strategies
have produced results that are in many aspects similar. This is because
they both imply the opening up of the sector to competition, higher
fossil fuel prices either through the carbon permit prices or faster price
reform, accelerated learning-by-doing for some renewables and
greater access to finance at better terms involving lower risk
premiums. The major difference between these two strategies lies in
electricity exports to the EU which in the “MED-EU Initiatives” build up
rapidly in the period after 2025 (67.7 TWh in 2025 and 235 TWh in 2030).
By 2030, the “MED-EU Initiatives” implies eight new HVDC lines bringing
renewable electricity from the MED-9 region deep into the EU. These
connections are: from Algeria to Italy, France and Spain, from Libya to
Italy, from Morocco to Spain and from Tunisia to Italy. They correspond
broadly with the vision developed in the TRANS-CSP scenario [11].
Apart from exports, production takes place at a large scale for the
satisfaction of domestic needs. By 2030, in most countries of the region
CSP penetrates significantly in the local market. This penetration is
highest in the main exporting countries: Algeria (36%), Libya (35%),
Morocco (23%) and Tunisia (21%). This is because in these countries
there is earlier technology transfer and “learning-by-doing” in anticipation of the large export volumes. Other renewable forms (primarily
wind and photovoltaics) are more extensively developed in the “Global
Integration” strategy. This is because the latter puts more emphasis on
decentralised generation. Wind generation gets an important boost
(12.1 GW higher than the “MED-EU Initiatives” strategy). Egypt
accounts for nearly half of MED-9 wind capacity, while important
increases are registered for Morocco and Algeria. Generation from
Table 10
Comparison of primary production and consumption of natural gas (in Mtoe) in 2030.
Present situation (2010)
Reference
MED-EU Initiatives
Global Integration
Fragmentation
Primary
Primary
Primary
Primary
Primary
Primary
Primary
Primary
Primary
Primary
production
consumption
production
consumption
production
consumption
production
consumption
production
consumption
ALG
MOR
TUN
EGY
LIB
ISR
LEB
SYR
JOR
MED-9
71.2
21.5
143.5
49.8
127.2
37.4
150.0
33.4
139.4
61.6
0.0
0.5
0.0
9.9
0.0
9.7
0.0
6.3
0.0
5.8
2.7
3.8
3.4
9.7
3.2
7.3
3.0
6.4
3.7
12.7
53.0
34.4
119.9
89.7
94.4
68.5
105.5
61.5
114.0
102.7
13.7
5.4
35.0
12.8
30.3
9.0
42.6
8.9
28.5
16.0
2.5
4.2
20.5
10.5
21.3
11.3
23.1
10.1
10.0
10.0
0.0
0.6
0.0
3.8
0.0
4.3
0.0
3.8
0.0
1.6
6.4
6.5
10.2
20.1
12.2
15.8
11.8
15.2
9.1
9.2
0.2
1.7
0.2
5.9
0.2
5.1
0.2
4.7
0.2
3.0
149.6
78.7
332.7
212.3
288.9
168.3
336.3
150.2
305.0
222.6
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
10
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Fig. 2. Changes in MED-9 power generation mix in 2030 compared to the reference (in TWh).
countries that have concrete development programs already in place
(which are assumed to be implemented with considerable delays). Coal
generation in Morocco expands faster than in the reference but the
main characteristic of the Fragmentation case is the maintenance of
a high share of oil based generation in most countries. This comes as
a result of a slower equipment turnover and difficulties associated with
the expansion of the intraregional gas trade infrastructure. The latter
of course plays an important role in determining the impacts on gasbased generation: for natural gas producers it tends to increase,
while importers tend to desist. The net result of these two opposing
trends for the region as a whole is a slight reduction in gas-based
generation compared to the reference projection (1.6% in 2030).
5.4. Implications on power generation costs
The “MED-EU Initiatives” and the “Global Integration” strategies
imply drastic changes in the structure of power generation costs
(Table 11). Substitution away from hydrocarbons and towards capital
intensive renewable energy sources means that investment costs
increase considerably, especially in the “Global Integration” strategy,
where this substitution goes further (the calculations in the table do
not include the export projects the cost of which is assumed to be
Table 11
Cumulative power generation costs (2012e2030) in the MED-9 region.
Investment costs
Variable costs
Total power
generation costs
In billions % Change In billions % Change In billions % Change
V’05
from
V’05
from
V’05
from
reference
reference
reference
Reference
MED-EU
Initiativesa
Global
Integration
Fragmentation
a
323.2
436.3
35.0%
415.4
145.8
64.9%
738.6
582.1
21.2%
459.4
42.2%
121.3
70.8%
580.7
21.4%
322.4
0.2%
599.0
44.2%
921.5
24.8%
The variable costs reported do not include the price of carbon permits.
borne by EU operators). On the other hand, variable costs (which
include fixed and variable operation and maintenance costs and fuel
costs) drop very sharply. Because of the persistence of fuel price
distortions, in at least part of the projection period, the fuel prices
used to determine fuel costs are set at international levels, i.e. the fuel
costs used represent opportunity costs, which reflect better the true
cost to the economy as a whole. The net result of these contradictory
movements is however a reduction in total generation costs (around
21%). Because both strategies involve a contraction of electricity
consumption, the total cost per kWh generated for the domestic
market drops more modestly (9.2% in the “MED-EU Initiatives” and 8.6%
in the “Global Integration” strategies).
Despite the much reduced role of renewable energy sources, total
cumulative investment costs in the Fragmentation case are only
marginally lower than in the reference projection. This is because the
Fragmentation case projects much higher electricity generation for the
domestic market. Variable costs on the other hand rise very sharply due
primarily to the increase in fossil fuel use. Overall cumulative generation costs stand 24.8% higher than the reference projection (but only
6% higher if generation costs per kWh produced are considered).
5.5. Impacts on energy related CO2 emissions
The “MED-EU Initiatives” and the “Global Integration” strategies
project similar evolutions of carbon emissions, which lie significantly
below reference projections. This is due to renewables penetration and
the bigger energy efficiency gains. The latter play a particularly
important role in the “Global Integration” strategy and as a result
emissions stabilise in the 2020s despite vigorous economic growth and
increasing living standards.
The opposite occurs in the Fragmentation case where CO2 emissions
increase steadily and in 2030 stand 163% higher than their 2005 level
with no sign of deceleration (Fig. 3). Such an outcome would mean that
the MED-9 region’s emissions represent 40% of the emissions projected
for the EU-27 in the reference projection [21]. Emissions per capita in
the MED-9 region would increase from 2.7 tnCO2 to 4.7 in 2030
compared to 5.8 tnCO2 projected for the EU [21].
Please cite this article in press as: P. Fragkos, et al., Model-based analysis of the future strategies for the MENA energy system, Energy Strategy
Reviews (2012), http://dx.doi.org/10.1016/j.esr.2012.12.009
P. Fragkos et al. / Energy Strategy Reviews xxx (2012) 1e12
Fig. 3. Evolution of energy related CO2 emissions (in Mtn of CO2) in the MED-9 region.
6. Conclusions
Despite a deceleration in population growth, the MED-9 region is set
for a very rapid growth in energy consumption. The main driver of this
growth is economic activity bringing in its wake increased prosperity
and standards of living. The next twenty years are unlikely to see
a significant deceleration in energy consumption due to saturation
effects in most MED-9 countries. Electricity demand is projected to
increase even faster as a result of continuing electrification of industry
but especially due to improvements in standards of comfort in households. Energy demand for transport grows vigorously in all projections
quantified. The most dynamic segment in this respect is road transport
and in particular the rate of private motorisation which is projected to
more than double in the region as a whole despite some signs of saturation in the more prosperous countries of the region.
Natural gas is projected to increase its share in meeting energy
needs under sharply contrasting assumptions concerning key drivers.
Failure of cooperation and modernisation will normally cause gas
producing countries to expand use as a low cost means of insulating
their energy system. On the other hand such conditions would tend to
stall gas development in importing countries. In cases of cooperation
and concerted modernisation, gas use would be assisted by an expansion of distribution grids, competitive pricing and increased intraregional trade premised on improving stability in the region. Natural gas
assumes a key swing role in the power generating sector. Since it is the
most readily available option in most countries, any reduction in fossil
fuel generation implies cuts in the natural gas share.
In all strategies examined that assumed a normalisation of the
situation in the region, oil becomes very markedly concentrated on
transport uses. In conditions of high risk and therefore obstacles to
investment oil maintains a considerable share in other market
segments including power generation. This is particularly the case in
countries with few natural gas resources.
The region as a whole is characterised by a huge potential for
renewable energy sources, especially solar thermal, photovoltaics and
wind. The extent to which these untapped resources are exploited will
depend to a very large extent on active government support, an
improved investment climate, local greenhouse gas emission reduction
policy initiatives as well as foreign direct investment. An engagement
in climate mitigation efforts jointly with the EU could provide a major
boost for large-scale deployment of solar thermal power. Such cooperation can lead to massive exports of the region’s RES power
production accompanied by mutual benefits. Even very high RES
penetration rates are feasible given higher storage capabilities for solar
thermal and the complementary use of natural gas. Large-scale
deployment of RES implies a massive increase in investments in the
11
power generating sector. However, this increased investment cost is
accompanied by drastic reductions of variable, operating and maintenance costs, especially fuel costs. On balance they result in a reduction
of total generation costs.
A good investment climate facilitates the development of hydrocarbon resources into productive capacity, exports expand for the main
producers, while import dependence decreases in countries without
a major resource base. This situation produces important economic
benefits for all countries in the region. An expansion of natural gas
production does however depend on the evolution of domestic
demand, intraregional exchanges and the gas market situation in
Europe.
With the continuation of present policies and trends energy related
CO2 emissions are on course to nearly double between 2010 and 2030.
There are important risks that this result is even worse if price reforms
are stalled and there is no specific effort to improve energy efficiency
and reduce CO2 emissions. On the other hand there is considerable
potential for reversing this situation and leading to an early stabilisation of CO2 emissions while at the same time deriving important
economic benefits. This would require greater stability in the region
and the will to address the problems associated with the evolution of
the energy system. The EU has the political will and can play an
important role in this direction by engaging the countries of the region
in common efforts in the field of emission abatement and renewable
energy promotion that could produce clear short to medium-term
advantages that can be substantial for the MED-9 region while also
producing benefits for the EU.
The cooperation strategy is essentially based on centralised actions
involving large-scale investments on specific options (e.g. CSP) and
infrastructure, focuses on emission reduction in major CO2 emitting
sectors (power generation and energy intensive industry) and inevitably concentrates on a more restrained geographical area (offering
the best cost-effective prospects for electricity exports). Such interventions can produce beneficial spillovers to other parts of the energy
system, but such effects will tend to be indirect and may spread over
a long period of time. An alternative strategy can employ decentralised
means in order to address directly the main challenges affecting the
energy system of all MENA countries. It can address, as a matter of
urgency, market reform and especially pricing distortions that inhibit
rational decision-making of energy suppliers and consumers of all sizes.
It can create incentives and establish norms for energy savings
affecting all energy consumers (down to the individual household or
driver). The quantitative analysis carried out with the model has
identified a huge potential in this respect. It also indicates that such
a strategy will result in more diversified and therefore more resilient
choices including a wider range of RES deployment (more wind and
photovoltaics in line with the potential of the different countries). Such
actions will have to be inscribed in a framework of a political normalisation of the MED-9 countries and their integration in the world
economy through strong multilateral links producing a favourable
investment climate for both local investors and FDI. Such investments
will result in higher supply of hydrocarbons which combined with the
reductions in demand will produce bigger exportable surpluses especially for natural gas which is the key fossil resource of the region
characterised by a very large base (more than double oil’s) and a more
even distribution across the region. Unlike the centralised cooperation
strategy, initialisation and implementation of the decentralised
strategy is however less obvious.
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