The big picture:

Crowne Plaza Hotel, Amman

September 18-19, 2018

Dr. Pedro HortaHead of Group Solar Process Heat and Industrial Systems, Fraunhofer

ISE

Ms. Elena CuadrosEnergy Consultant, World Bank

Competitiveness and investment perception for

CSH in Middle East & North Africa

INCREASING PRICE OF FUEL: crude oil and natural gas prices (IEA New Policies Scenario)

30

60

90

120

150

2000 2010 2020 2030 2040

Do

llars

per

bar

rel (

20

16

)

Current Policies 5.14%

New Policies 4.25%

3

6

9

12

15

18

2000 2010 2020 2030 2040

Do

llars

per

Mb

tu(2

01

6)

Japan 1.85%

European Union 2.85%

United States 3.42%

GAS PRICE INCREASE

(2018-2040)

CRUDE OIL PRICE INCREASE

(2018-2040)

UNSTABLE GENERAL INFLATION IN THE REGION: IMF forecast 2014-2023

-10

-5

0

5

10

15

20

25

%

Inflation rate, average consumer prices (Annual percent change)

Egypt Jordan Lebanon Morocco Tunisia

•Egypt 11.93%

•Jordan 1.95%

•Lebanon 1.92%

•Morocco 1.57%

•Tunisia 4.93%

AVERAGE VALUES

Competitiviness

DNI boiler efficiencySolar average

efficiency

2250

kWh/m2/year

80% 40%

produces per year the same amount of heat as:

104 kg of fuel

oil

99 kg of diesel

92 kg of

LPG/Gas

1 m2 of CSH

$104

$72

$166

$60

$17 $19

Assumptions

CAPEX OPEX Lifetime Residual Valueboiler

efficiencySolar average

efficiency

523 $/m2 2%

CAPEX/year

20 years 0% CAPEX 80% 40%

➢ What is the Internal Return Rate (IRR) for a CSH investment considering

the investment lifetime (20 years)?

➢ What is the Levelized Cost of Heat (LCOH) of a CSH system for different

solar resource values (DNI)?

➢ What is the maximum CSH technology cost (CAPEX) for a CSH

investment to have a simple payback of 5 years?

Jordan

Critical LCOH [US$/MWh.th] 47 44 41 39 36 35 33

General Inflation

Disc. Rate Diesel LPG

% %USD/

MWh.th net

USD/MWh.th

net

1.95 7.44 108.9 45.2

Jordan is producing heat

now with diesel at higher

price (1.3 to 3 times more)

than with CSH.

Jordan: IRR and Critical CAPEX for a 5 year Payback

General Inflation

DieselLPG

USD/MWh.th

netUSD/MW

h.th et

1.95% 108.9 45.2

Jordan can have

10-33% IRR for a

CSH investment

For diesel critical

CAPEX between

$625-$850/m2,

above current

market prices

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

2045 2191 2337 2483 2629 2775 2922

IRR - Jordan

250

350

450

550

650

750

850

1607 1753 1899 2045 2191 2337 2483

US

D/m

2

Critical CAPEX 5 years PB- Jordan

TECHNOLOGY

COST

Lebanon

Critical LCOH [US$/MWh.th] 89 81 75 70 65 61 57 54

General Inflation

Disc.Rate Diesel LPG

% %USD/

MWh.th net

USD/MWh.th

net

1.92 11.98 84 92

Lebanon is producing heat

now at much higher price

(12% to 85% higher cost)

than with CSH.

Lebanon: IRR and Critical CAPEX for a 5 year Payback

General Inflation

DieselLPG

USD/MWh.th

netUSD/MWh.th net

1.92% 84 92

12,0%

14,0%

16,0%

18,0%

20,0%

22,0%

24,0%

26,0%

1607 1753 1899 2045 2191 2337 2483 2629

IRR (20 years)

Lebanon can have

a 15-26% IRR for a

CSH investment

Critical CAPEX is

between $401-

$673/m2, above

current market

prices

350

400

450

500

550

600

650

700

1607 1753 1899 2045 2191 2337 2483 2629

$/m

2

Critical CAPEX - Lebanon

TECHNOLOGY

COST

West Bank and Gaza

Critical LCOH [US$/MWh.th]

General Inflation

Disc.Rate Diesel LPG

% %USD/MWh.

th netUSD/MWh.

th net

1.89 12.76 170 90

80 74 69 65 61

West Bank and Gaza is

producing heat now with

diesel at more than double

price than with CSH.

Energy and Extractives

West Bank and Gaza: IRR and Critical CAPEX for a 5 year Payback

General Inflation

DieselLPG

USD/MWh.th

netUSD/MW

h.th et

1.89% 170 90

West Bank and

Gaza can have a

16-49% IRR for a

CSH investment

Critical CAPEX is

between $500-

$650/m2, above

current market

prices

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

1899 2045 2191 2337 2483

IRR - West Bank and Gaza

350

450

550

650

750

850

950

1050

1150

1899 2045 2191 2337 2483

US

D/m

2

Critical CAPEX 5 years PB- West Bank and Gaza

TECHNOLOGY

PRICE

Tunisia

Critical LCOH [US$/MWh.th] 47 44 41 39 36 35 3370 64 59 55 51 48

General Inflation

Disc. Rate Diesel LPG

% %USD/MWh.

th netUSD/MWh.

th net

4.93 9.39 75 18.3

CSH in Tunisia could be

competitive when gas is

not available and only in

areas with excellent

solar resource

Tunisia: IRR and Critical CAPEX for a 5 year Payback

General Inflation

DieselLPG

USD/MWh.th

netUSD/MW

h.th et

4.93% 75 18.3

Tunisia can have a

2-19% IRR for a

CSH investment

Critical CAPEX is

between $125-

500/m2, above

current market

prices

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

20,0%

1534 1680 1826 1972 2118 2264

IRR - Tunisia

100

200

300

400

500

600

1607 1753 1899 2045 2191 2337

$/m

2

Critical CAPEX - Tunisia TECHNOLOGY

PRICE

Morocco

41 38 35 33 31 29 27Critical LCOH [US$/MWh.th]

General Inflation

Disc.Rate Diesel LPG

% %USD/MWh.

th netUSD/MWh.

th net

1.53 4.51 132.7 62.5

CSH in Morocco is

competitive with

diesel

Morocco: IRR and Critical CAPEX for a 5 year Payback

General Inflation

DieselLPG

USD/MWh.th

netUSD/MW

h.th et

1.53% 132.7 62.5

Morocco can have

a 11-35% IRR for a

CSH investment

Critical CAPEX is

between $325-

925/m2

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

1680 1826 1972 2118 2264 2410 2556

IRR - Morocco

250

350

450

550

650

750

850

950

1607 1753 1899 2045 2191 2337 2483

$/m

2

Critical CAPEX - Morocco

TECHNOLOGY

PRICE

Egypt

110 102 95 89 84 79 75Critical LCOH [US$/MWh.th]

General Inflation

Disc.Rate Diesel LPG

% %USD/MWh.

th netUSD/MWh.

th net

11.93 19.31 36 20

Egypt has access to

highly subsidied fossil

fuels making CSH not

competitive

Egypt: IRR and Critical CAPEX for a 5 year Payback

General Inflation

DieselLPG

USD/MWh.th

netUSD/MW

h.th et

11.93% 36 20

Egypt can have a

7-13.5% IRR for a

CSH investment

Critical CAPEX is

between $125-

500/m2, above

current market

prices

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

1899 2045 2191 2337 2483 2629 2775

IRR - Egypt

100

200

300

400

500

600

1607 1753 1899 2045 2191 2337 2483

$/m

2

Critical CAPEX - Egypt TECHNOLOGY

PRICE

MENA

109 87 72 62 54 48 46Critical LCOH

[US$/MWh.th]

0,0%

10,0%

20,0%

30,0%

1168 1461 1753 2045 2337 2629 2775

IRR - MENA

REFERENCES

Palestine Jordan Lebanon Morocco Tunisia Egypt REF. MENA

CAPEX US$/m2 523 523 523 523 523 523 average http://ship-plants.info/ 523

Diesel US$/kWh_final*

0.17 0.1089 0.084 0.1327 0.075 0.036

end-users for Palestine,

https://www.globalpetrolprices.com/

Jordan/diesel_prices/ by EY for other

countries

0.1011

NG (LPG for Lebanon and Palestine) US$/kWh0.09 0.0452 0.092 0.0625 0.0183 0.02

end-users for Palestine, several by EY

for other countries0.054667

General inflation*** %

2.61% 2.33% 2.88% 1.90% 5.08% 10.75% average 2018-2023, IMF (by Elena)

(average Jordan + Israel for Palestine)

4.26%

OPEX % CAPEX/year 2% 2% 2% 2% 2% 2% Fraunhofer ISE 2%

Residual value % CAPEX 0% 0% 0% 0% 0% 0% Fraunhofer ISE 0%

Lifetime years 20 20 20 20 20 20 Fraunhofer ISE 20

Discount rate** % 12.76% 7.44% 11.98% 4.51% 9.39% 19.31% EY 10.90%

* 80% conversion efficiency (boiler)

** 25% Equity, 75% Debt

*** value for Palestine resultas from average between Jordan and Lebanon

WBGaza