Unlocking North Africa’s Renewable Potential for a Sustainable Energy Future
The nations of North Africa – Algeria, Egypt, Libya, Morocco, Tunisia, and Sudan – are confronting substantial challenges emanating from climate change, posing a threat to economies centered around agriculture, fisheries, and tourism. Focusing on climate mitigation measures, including the widespread deployment of renewable energy, becomes imperative for bolstering the region’s climate resilience and fostering continued economic development. Fortunately, North Africa boasts abundant potential in renewables, particularly solar and wind energy, positioning it as a key player in a transition toward sustainable energy.
As the largest energy market on the African continent, North Africa (excluding Sudan) exhibits notable socio-economic development, industrialization, and access to modern energy. These attributes, coupled with the vast renewable energy potential, position North Africa to spearhead the global energy transition.
The business case for renewables in North Africa is compelling, with significant reductions in the costs of solar and wind technologies. Consequently, the region leads Africa in deploying new utility-scale wind and solar projects, contributing nearly half of Africa’s total installed wind power generation capacity and a fifth of its grid-based solar power generation capacity.
Moreover, North Africa stands as a potential major producer and exporter of green hydrogen. Leveraging high renewable potential at low costs, coupled with geographical proximity to Europe, where demand for renewables-based or green hydrogen is escalating, many North African countries are engaging in agreements with other nations and private enterprises to explore pilot projects for green hydrogen production and export.
Despite these promising prospects, investments in the region require a significant boost. While 2017 witnessed a peak in investments at USD 5.7 billion, subsequent years have seen figures below the USD 3 billion mark, reaching USD 2.4 billion in 2021. Moreover, efforts are needed to ensure a more equitable distribution of investments, as the majority remains concentrated in Morocco and Egypt.
In contrast to the global trend from 2013 to 2020, where private sector financing dominated funding for renewables development, North Africa stands out with public finance playing a more substantial role. Multilateral development banks, development finance institutions, export credit agencies, guarantee funds, and private reinsurance have been pivotal in providing direct funding, risk mitigation support, and technical assistance, fostering a consistent pipeline of future renewable energy projects in the region.
Investing in renewables not only aligns with environmental sustainability but also generates significant job opportunities, outperforming fossil fuels in job creation by two to five times per dollar invested. Given North Africa’s sizable and educated workforce, the region has the potential to capitalize on job creation, driven by well-crafted labor market and education policies, including technical and vocational training programs. While competitive auctions emerge as the primary mechanism to stimulate investments in renewables, future policies such as net metering and feed-in-tariffs could further incentivize investments, bringing the region closer to its socio-economic objectives, including those outlined in the Agenda 2030.