Renewable Energy in Libya: An Unexplored Market for the Future

Team Leader: Michael Brown

Analysts: Hannah Barltrop, Alli McDonald, Ashmeet Siali, Frannie Sims, Lucas Tersigni

Despite the region’s rich oil industry, renewable solar energy has been an area of interest for the energy sector in Libya from the 1970s until the 2011 civil war. The Center for Solar Energy Research and Studies was established in Libya in 1978 to shift Libya’s hydrocarbon based energy output to cleaner solar energy. However, Libya’s switch to renewable energy did not gain ground until 2007 when former President Moammar Gaddhafi launched a plan that would have Libya only producing 30 percent of its energy output through hydrocarbons. The same year, he also established the Renewable Energy Authority (REA) to oversee this switch. The REA continues to work on plans to balance renewable and hydrocarbon-based energy sources, although its work has been somewhat hampered due to the instability the country has suffered since the 2011 civil war.

Libya’s geographic location makes it one of the most naturally suited countries to produce solar energy. Libya is comprised of 88 percent desert and is located close to the tropic of cancer. This means that it gets plenty of direct sunlight and solar radiation, which if harnessed, could equal the same energy output as 4,000 barrels of oil per day. This is six times higher than Libya’s regular oil production.

Despite its geographic advantage, much of Libya’s solar energy infrastructure was damaged during the 2011 civil war. This has prompted the government and media in Libya to neglect the possibility of realizing Gaddhafi’s energy plans, instead relying more heavily on hydrocarbon production. However, solar energy has better long term advantages than oil production does which could help to stabilize Libya’s economy. Solar-generated power has very stable associated costs compared to the fluctuating prices of oil and the cost of adhering to environmental regulations when drilling. Libya’s traditional energy production partner, Italian company Eni, also has a large and well developed solar power production department. Eni has developed the Concentrated Solar Power System (CSP) which has the potential to provide energy for most power plans. CSP can also work alongside other energy systems to prevent energy shortages due to the increasing demand for hydrocarbons. The issue with this system is that it requires a large initial investment to develop which could exceed the cost of oil exploration and production. The initial cost for Libya may be too great for the fragile government to take on as it is not able to finance such a large-scale project.

Investment in Libya’s solar energy potential is very risky due to the country’s unstable position and damaged infrastructure. However, there is a high reward for this investment since Libya could sell its surplus solar energy to the European market, which is looking for renewable energy. Under ideal circumstances, Libya could potentially supply 12,000 megawatts of electricity to European clients. Achieving these conditions could be very profitable for investors and the Libyan government. However, questions of security and the stability of the Libyan government could jeopardize solar energy production in Libya. If the renewable energy sector can make progress in establishing itself as a part of the local economy, the financial and employment boost could help to stabilize the country.

Libya’s reliance on hydrocarbons, which annually make up approximately 94% of its revenue, has left them vulnerable to regional groups. They have taken control of key areas of the oil industry to push their own agendas while crippling the ability of the government to recover from the Civil War. For Libya to be a more attractive place for investors, diversifying the government’s revenue will prevent internal factions from using the oil fields as a hostage. Renewable energy can help the new Libyan economy to recover and diversify its revenue stream, making it a safer place to invest.