Electricity Markets in the Resource-Rich Countries of the MENA: Adapting for the Transition Era

Fattouh, Bassam; Sen, Anupama; Poudineh, Rahmatallah

Abstract

The Middle East and North Africa’s (MENA) resource-rich economies are pursuing two parallel strategies in their electricity sectors: (i) increasing and integrating renewables into their power generation mix to mitigate the impact of rising domestic oil and gas demand on their economies and boost hydrocarbon export capacities; and (ii) undertaking power sector reforms to attract investment in generation capacity and networks, remove subsidies, and improve operational efficiency. These goals imply that the design of reforms (including regulations governing wholesale and retail markets and networks) needs to be carried out with a view to a rising share of non-dispatchable resources. The lack of an integrated approach to simultaneously address these two strategies is likely to lead to several misalignments between renewables and various components of future electricity markets, as the share of intermittent resources increases in the generation mix. The key challenge is that the ‘ultimate model’ capable of reconciling these two goals is as yet unknown, and is still evolving, due to uncertainties around the development of technologies, institutions, and consumer preferences. We argue that resource-rich MENA countries can, however, move towards adopting a transition model of electricity markets, the individual elements of which can be adapted to suit either centralized or decentralized future electricity sector outcomes. We outline the key components of this model for the wholesale market, retail market, and network regulation, considering governments’ objectives and the specific contexts of the countries in the region.

Citation

Fattouh, B., Sen, A., & Poudineh, R. (2021). Electricity Markets in the Resource-Rich Countries of the MENA: Adapting for the Transition Era. Economics of Energy & Environmental Policy, 10(1), https://doi.org/10.5547/2160-5890.10.1.rpou

• Journal Article Type: Article
• Acceptance Date: May 5, 2020
• Publication Date: Jan 1, 2021
• Deposit Date: May 11, 2020
• Publicly Available Date: May 11, 2020
• Journal: Economics of Energy and Environmental Policy
• Print ISSN: 2160-5882
• Electronic ISSN: 2160-5890
• Publisher: International Association for Energy Economics
• Peer Reviewed: Peer Reviewed
• Volume: 10
• Issue: 1
• DOI: https://doi.org/10.5547/2160-5890.10.1.rpou