GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
Building domestic capabilities in renewable energy in MENA: A case study of Egypt
Paper Proposal Text :
Under pressures of climate change and energy security, discussions on the European energy sector have become closely interlinked with the existing potential for clean energy generation in the Middle East and North Africa (MENA). The wide availability of renewable energy resources in the MENA region is at the core of several large scale European initiatives to generate clean energy from the southern Mediterranean countries and import part of it to Europe via a pan-regional ‘super grid’ of high-voltage-direct-current lines. The German-led DESERTEC initiative is the flagship project. The initiative draws on the argument that, with large investments and technology transfer efforts, MENA countries could potentially produce enough energy from renewable sources to satisfy their fast increasing energy demand as well as that of Europe.

Despite the associated challenges and the required high investment costs, the benefits for European countries are evident, in terms of satisfying increasing energy demand, climate mitigation, and market expansion. But, for these positive outcomes to materialize, strong commitment from the MENA countries is needed to achieve unprecedented energy market integration and to transform the regional energy system. To implement an initiative such as DESERTEC, the MENA countries should be willing and able to share in the ownership of the vision. This can happen if the renewable energy sector can become a channel for local industrial development, private sector competitiveness and a source for employment and capacity building.

The development challenges that the MENA region is facing in the aftermath of Arab Spring are enormous, primarily in terms of unemployment and social equality. In addition, most countries have relied for decades on a social contract aimed to maintain social stability through heavy state intervention and distribution of rents, at the expense of social equality and private sector competitiveness. Hence, the driving force for expanding the renewable energy sector in the MENA region is not the climate change mitigation agenda, but rather the promise it holds for job creation and revitalization of the private sector.

Within the MENA region, Egypt is a particularly interesting case to examine for several reasons. With over 80 million inhabitants, Egypt is the most populous country, hence offering a large market in itself. Also, the extensive education program and early industrialization efforts offer a strong base of local capabilities. In addition, from a cultural and geo-political perspective, Egypt is viewed as the anchor point for the MENA region, a strategic political mediator, a historically important partner for European countries, and a transcontinental nation between Africa and Asia. While in Egypt the endowment with fossil-fuel resources is limited, renewable energy resources abound. Given its strategic location and existing capabilities, it appears that a large untapped potential exists in utilizing these resources for electricity generation and economic development purposes.

For Egypt to pursue such a development strategy, policy efforts should be aimed at localizing (parts of) the supply chain for renewable energy technologies and strengthening capabilities in manufacturing and service provision. In addition, capabilities for enhancing knowledge assets and for technological adaptation to harsh desert conditions (i.e. dust, heat, water scarcity) are needed to sustain such a vision.

To capture this complex undertaking and our analysis is framed by the following research questions:
- Which parts of the wind and solar value chains offer the best prospects for generating local benefits in terms of growth linkages and building local capabilities?

- What needs to be done to take advantage of this potential? (What capabilities exist? How can the required capabilities be built up?)

- What overall policy and political obstacles need to be overcome to reap the internal benefits?

The concern with the challenges that initiatives such as DESERTEC pose for localizing the benefits in the MENA region led us to focus on two technologies: Concentrated Solar Power (CSP) and wind energy. CSP, a less mature technology, is suitable for harnessing solar energy from the desert areas for several reasons. By contrast, wind energy is a more mature technology, hence less expensive and the know-how more accessible; as a result, the potential for localization is higher, as demonstrated by the relatively large deployment rates in the MENA region.

The data used to examine the above research questions have been collected using two approaches. Semi-structured interviews were conducted with key stakeholders in the renewable energy field in Egypt between October 16th and November 4th, 2011 (i.e., government officials, policy makers, local and international private sector companies, professionals in R&D organizations, education institutions and members of civil society such as environmental and renewable energy activist groups). We complemented the information gathered from interviews with various secondary sources, such as relevant studies on the technological potential, socio-economic and institutional aspects as well as the political economy context in the MENA region.

Results from this study aim to: (a) contribute to the growing literature on technological capabilities and renewable energy industry development in the emerging countries; (b) offer policy-makers (in both the north and south of the Mediterranean) a more comprehensive understanding of the development challenges in the region and a strategic roadmap for achieving the set goals; and (c) identify policy recommendations for overcoming existing barriers to deploying renewable energy and localizing the supply chain for these technologies.