Abstract
The organization of the sector in the different countries of the MENA region has been changing overtime. These countries share several common features which impacted the governance and the organisation of the electricity sector, but can widely differ in terms of economic and human development standards, sources of revenue, private sector development, credit ratings, to cite a few. The social challenges, the urgent need to create employment, the need for infrastructure, housing and various utilities are common. This region is unique and accounts for the world’s highest electricity demand growth rates and the highest consumption per capita. High demographic growth, rapid urbanisation and accelerated industrialization are some of the first limits faced when attempting to apply generic models. Economic growth is “distorted” by international oil prices. The presentation of the first three experiences of electric reforms in the region (Morocco, UAE and Oman) provides interesting insights on the peculiarities of this region.
“A long-run view of history reminds us of the presence of changes, ruptures, and discontinuities. It should warn us against simply extrapolating from a brief period of a few years, and projecting the future simply as a continuation of the immediately lived and experienced past.”
—Professor Harold James, Princeton University and author of The End of Globalization: Lessons from the Great Depression
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Notes
- 1.
“More than half of the 300 million residents of the Middle East are people under 25 years of age. The region has the fastest growing labor force in the world. With an already high unemployment rate of 15%, the Middle East must create 80 million new jobs in the next 5 years just to keep apace of our demographics. Unemployment is a problem afflicting all 22 member states of the Arab League, but it is most conspicuously a youth issue. Fifty percent of the jobless are under the age of 25, roughly double the world average. Women have an especially difficult time finding jobs. These increasingly restive youths are particularly vulnerable to those who would preach radicalism and hostility toward the West, especially the U.S. Why did Arabs fail to make deep structural reforms in education and in stimulating employment opportunities? The Arab world’s track record on education, particularly girls’ education, is discouraging. Sixty-five million adult Arabs are illiterate and two-thirds of them are women. More than 10 million Arab children between the ages of 6 and 15 are still not enrolled in any schooling, and on current trends this number will increase by 40% over the next decade. This is a monumental waste of human capacity.” H. H. Sheikh Mohammed bin Rashid al Maktoum, Education vs. Extremism, the Wall Street Journal, June 3 2009.
- 2.
See for example Nabli & Keller « The macroeconomics of labor markets outcomes in MENA over the 1990s: how growth has failed to keep pace with a burgeoning labor market », World Bank, June 2002.
- 3.
Almost every country in the region, particularly Gulf countries, had a program of nationalization of the workforce. Foreign companies willing to invest in the country have to hire and train a quota of local citizens. See for example Kapiszewski, “Nationals and Expatriates: Population and labour dilemmas of the Gulf Cooperation Council States”, Ithaca Press, 2001.
- 4.
“The Middle East as an emerging hub”, Walid al Attar, Emirates Global Aluminum, Platts Aluminum Symposium, January 2014.
- 5.
85% of the output is exported outside of the region.
- 6.
The “conventional wisdom” attributes this change to 9/11, but there are no consistent data to prove that Middle Eastern countries pulled out a large part of their money of the western banking system after 2001 because of that.
- 7.
Large industrial zones include Ras Laffan and Messaied in Qatar, Jubail and Yanbu in Saudi Arabia, Ain Sebbaa and Jorf Lasfar in Morocco, Sohar in Oman.
- 8.
Saudi Arabia is developing five economic cities by 2030 ($80 billion of estimated total investments), hubs for development and growth. Among the five economic cities by 2030, Jizan is probably the most spectacular: an industry-focused city with $30 billion of Saudi investments. Foreign investors can take part in several projects within the city. Moreover, the King Abdullah Economic City (KAEC), on the Red Sea coast near Rabigh, is the first project to have been launched (in December 2005).
- 9.
CERA’s capital cost index shows that power capital costs nearly doubled between 2000 (100) and 2007 (194). It even exceeded 230 during the summer of 2007. It reaches 171 in 2007 if nuclear is excluded.
- 10.
Based on empirical evidence from projects’ costs and on CERA’s Capital Costs Forum data.
- 11.
By way of comparison, the Arab Petroleum Investments Corporation (APICORP) estimates MENA’s capacity expansion needs in the MENA region at 60 GW between 2007 and 2011, at a cost of $61 billion. MEED estimates that 113 GW are needed between 2007 and 2015, at a cost of $109 billion.
- 12.
In the United States, the Obama administration announced in April 2009 the distribution of $4 billion in federal grants to start upgrading the electrical grid and introduce smart grids. This is part of the $787 billion stimulus package passed in February 2009.
- 13.
In reference to the 2007 McKinsey study, Reducing US greenhouse gas emissions: how much at what cost? This study concluded that GHG reductions opportunities are widely scattered across the US economy, and that 40% of abatement options can be achieved at negative costs (the concept of negative costs is debatable). But more importantly, reducing the carbon intensity of the power sector and improving the energy efficiency of buildings and appliances are the two most effective approaches out of the five clusters identified in terms of Gigatons of CO2 avoided. The third cluster is pursuing a range of targeted measures in energy intensive sectors of the industry. The last two clusters are higher energy efficiency and lower emissions in transportation (vehicles) and expanding/enhancing carbon sinks.
- 14.
Dubal and Alba are aluminum companies while SWCC (Saline Water Conversion Company) is a state-owned desalination utility in Saudi Arabia.
- 15.
Bouayad (2001) compares 25% electrification in Morocco in 1993 to 86% in Algeria or 70% in Tunisia during the same year.
- 16.
« PERG allows to accelerate rural elerification and to commit ONE until 2006 to the mission of assuring the universality of the electric public service » Benhima (1999).
- 17.
The Urban Community of Casablanca was the first one to delegate the management and the distribution of electricity and water. It was followed by Rabat (Rabat-Témara-Salé).
- 18.
Three private autonomous régies are responsible of distribution in five cities: LYDEC (Suez 30%, ELYO 21%, Fipar Holding 21%, Wataniya 15% and stock exchange 14%) in Casablanca and Mohammadia, REDAL (Compagnie Générale des Eaux 51%, Compagnie Marocaine des Services à l’Environnement 49%) in Rabat, AMENDIS (Veolia Environment, HydroQuebec, ONA, SOMED) in Tangiers and Tetouan. Other cities in the country are serviced by state-owned régies (ONE) like RADEMA for Marrakech and RADEEF for Fes.
- 19.
Jorf Lasfar was responsible of 60% of the electricity generated in the country in 2004. This share decreased in 2005 with the commissioning of the Tahaddart power plant but Jorf Lasfar will remain a predominant player.
- 20.
See Benali (2002).
- 21.
Sheikh Dhiyab bin Zayed al Nahyan is the 17th son of the late Sheikh Zayed, former President of the UAE and ruler of Abu Dhabi. Shaikh Dhiyab has also been the Director of the UAE presidential Diwan (consultative council).
- 22.
The first step was to start a process of internal restructuring to separate activities into “asset owner/manager” and “service provider”, to focus greater attention on asset management and investment planning while driving down operating costs and improving levels of service.
- 23.
All controls, with separate price controls for Water and Electricity, are meant to last 4 years. All Income from licensed activities is to be included within the definition of “regulated revenue”. Procurement charges and transmission service charges for both water and electricity are passed-through.
- 24.
John Cunneen, Executive Director, Authority for Electricity Regulation, Oman, POWER-GEN Middle East 2006—Abu Dhabi, 30 January 2006.
- 25.
This is just the direct subsidy and does not take into account the indirect subsidy of below-market gas price offered to generation companies.
- 26.
Most countries in the region adopted the RPI-X regulation. That was notably the case in Abu Dhabi and Oman.
References
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Benali, L. (2019). A Unique Confluence: Demographics, Socio-Economics and Politics. In: Electricity-sector Reforms in the MENA Region. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Cham. https://doi.org/10.1007/978-3-319-96268-9_2
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