Engineering and Financial Guide to Renewable Energy Projects in the Arab Region 2026

Feasibility Study of Renewable Energy Projects

A Guide to Investing in the Future of Arab Energy – 2026

Executive Summary

The Arab world is witnessing a historic transition toward renewable energy, driven by the abundance of natural resources particularly solar and wind and by global trends aimed at reducing carbon emissions.

Feasibility studies for renewable energy projects differ from traditional projects in that they rely on long-term contracts, advanced technologies, and technical risks related to grid connection and integration with national electricity networks.

This paper presents the technical, financial, and legal methodology for evaluating solar and wind energy projects, and explains how to calculate the Levelized Cost of Energy (LCOE) to ensure project competitiveness and long-term sustainability.

Key Terminology

1. Regional Context: Why Now Is the Ideal Time for Green Investment

The Arab region enjoys some of the highest solar irradiation levels in the world, making solar energy projects highly attractive from an economic feasibility perspective.

• Egypt, Jordan, and Morocco: Leading models in launching renewable energy auctions and attracting foreign investment.

• Gulf countries and Oman: Strong momentum toward green hydrogen and localization of solar panel manufacturing.

• Emerging opportunities: Distributed energy projects for industrial facilities and farms to reduce high electricity bills.

2. Technical Methodology: Assessing the Natural Resource

Before financial modeling begins, the “fuel” (solar or wind) must be verified:

1. Solar Irradiance Assessment (GHI / DNI):
   Using satellite data (such as SolarGIS) and ground-based measurements for at least one year.

2. Wind Speed Measurement:
   Wind projects typically require installing meteorological masts for several years to confirm production stability.

3. System Losses:
   Calculating the impact of dust and high temperatures—critical regional factors—on panel efficiency.

3. Legal and Contractual Feasibility: The Backbone of the Project

In energy projects, the contract is the investor’s primary safeguard:

• Power Purchase Agreement (PPA):
  Typically spanning 20–25 years at pre-agreed tariffs, making the project bankable.

• Grid Connection Permits:
  Ensuring the national grid can absorb the generated electricity without curtailment risk.

• Environmental Compliance:
  Environmental and Social Impact Assessments (ESIA) required by international financing institutions.

4. Financial Modeling: Beyond NPV and IRR

In the energy sector, LCOE is the preferred benchmark for comparison:

• LCOE:
  Aggregates capital and operating costs and divides them by total energy produced, with the objective of achieving the lowest possible cost to win tenders.

• Financing Structure:
  Projects typically rely on project finance with high debt ratios (up to 70–80%), requiring careful assessment of interest rate and currency risks.

LCOE Formula (Simplified):
LCOE = Total discounted costs ÷ Total discounted energy produced

5. Efficiency Levers and Future Technologies

• Robotic Cleaning:
  Addresses dust challenges in the region and can improve efficiency by up to 15%.

• Battery Energy Storage Systems (BESS):
  Enhance supply stability during nighttime hours and are increasingly included in modern feasibility studies.

• Internet of Things (IoT):
  Enables real-time monitoring and predictive maintenance to reduce unplanned downtime.

6. Trusted Data Sources (2020–2026)

• International Renewable Energy Agency (IRENA) – global and regional cost reports

• National Renewable Energy Atlases (e.g., Egypt or Saudi Arabia)

• World Bank – Global Solar Atlas

• National grid operators – technical requirements and indicative tariffs

Case Study: Solar Power Plant for a Cement Factory in Jordan

Challenge:
Electricity costs accounted for 30% of the factory’s profits.

Solution:
A solar power plant designed under a wheeling arrangement.

Outcome:

• Payback period: 4 years

• Energy cost reduction: 50%

• Transformation of energy from a cost center into a competitive advantage, enabling lower export prices

Renewable Energy Project Checklist

1. Have certified multi-year solar or wind resource data been obtained?

2. Is the site close to national grid connection points?

3. Has land usufruct been secured for the full project lifetime?

4. Does the study address dust and harsh weather conditions?

5. Does the PPA include protection against foreign exchange volatility?

6. Has Tier 1 technology (panels/turbines) been selected?

7. Is there a technical study ensuring voltage and frequency stability upon grid connection?

Common Mistakes in Renewable Energy Feasibility Studies

• Ignoring degradation rates:
  Solar panels lose around 0.5% efficiency annually; ignoring this inflates projected returns.

• Over-optimistic operating hours:
  Failure to account for cloudy days and maintenance downtime.

• Neglecting decommissioning costs:
  Overlooking the cost of dismantling the plant and recycling panels after 25 years.

Key Takeaways

1. Renewable energy is a financial investment, not just an engineering project—contracts and financing drive success.

2. LCOE is the true benchmark: the lowest cost per kilowatt-hour wins the market.

3. Grid integration is the largest technical hurdle and must be addressed early.

4. Technology is evolving rapidly; feasibility studies must remain flexible.

5. Government incentives, tax exemptions, and carbon credits significantly enhance profitability.

7-Step Action Plan for Energy Investors

1. Define the project type (grid sale, self-consumption, or hybrid).

2. Conduct an initial site assessment to identify potential constraints.

3. Acquire certified solar or wind resource data.

4. Engage early with grid authorities to obtain preliminary connection approval.

5. Build a robust financial model focused on LCOE and long-term cash flows.

6. Select an EPC partner with a proven regional track record.

7. Secure financing through development banks or commercial lenders offering green finance windows.

References

• International Renewable Energy Agency (IRENA) – Renewable Power Generation Costs Report 2024

• Arab Ministries of Electricity and Energy – Energy Strategies 2030–2035

• World Bank – Renewable Energy Project Finance Guide for Emerging Markets