Solar Power Reboots Gaza’s Business Potential

Ibrahim Hassouna is rarely surprised when the power fails at Al Seksek, the plastics company where he works in Gaza. On a bad day, its 130 employees suffer through dozens of blackouts that halt assembly lines. “Every time the current goes out, it delays production for up to 30 minutes,” says Hassouna, a 41-year-old manager. “It’s a big waste of time and money.”

Hassouna’s frustration is shared by people across Gaza. The territory between Egypt and Israel is facing one of its worst power crises in decades, with blackouts routinely stretching up to 16 hours a day. The shortages have shrunk Gaza’s economy and have been especially devastating to its manufacturing sector, which has shriveled by 60 percent since the late 1990s.

The World Bank Group is aiming to help reverse that decline. In early December, IFC pledged $8 million to help the area’s biggest business park, the Gaza Industrial Estate, install solar panels on the roofs of several of its buildings. The investment was part of a financing package that included guarantees of up to $7 million issued by the Multilateral Investment Guarantee Agency (MIGA) and grants of $1.8 million from the World Bank. The solar panels will form the largest solar array in the West Bank and Gaza and produce 10 gigawatt hours of cheap, green electricity per year.

When the new solar array comes online a year from now, it will power all 32 businesses in the Gaza Industrial Estate, including Al Seksek. The steady stream of electricity is expected to help manufacturers ramp up production, which could create 800 new jobs. As more companies move into the zone—around 20 have already inquired about setting up shop—those numbers are expected to rise. The project could even send some electricity to the beleaguered national grid.

Solar Offers a Second Chance

The new solar array can’t come quickly enough for Nehad Al Sawafeeri, who owns a furniture-making company in the Gaza Industrial Estate. He’d like to run his shop 24 hours a day, but because of blackouts, his production lines go dormant after about four hours.

“We need this (solar power source) and we need it fast,” says Al Sawafeeri, whose company has 50 workers. He reckons that with a steady supply of power he could double his production and add another 50 workers. “This project is extremely important for the industrial park. It’s the only way to sustain businesses here.”

The situation has become so dire because Gaza’s lone power plant has been hobbled by fuel shortages, outdated transmission lines, and damage from three wars in the last decade. Gaza needs about 570 megawatts of power to function. Right now, it has less than one-quarter of that.

That’s why doing business is an uphill battle for companies throughout Gaza. Al Seksek, for example, has nine assembly lines, but only one is operational. When the power cuts out, the factory fires up its four gas-powered generators—and while they keep the lights on, they bellow greenhouse gas into the atmosphere. The costs are also excessive because generator power is three times as expensive as grid power. Such expenses drive up Al Seksek’s production costs and make it impossible to export to other countries.

The new solar array promises to change that. And the number of jobs that may be generated are vital for Gaza, whose economy has been hobbled by a decade-long blockade. Unemployment is nearly 40 percent, among the highest rate in the world, and nearly eight in 10 Gazans receive some form of aid.

Reminding the World of Gaza’s Business Potential

“The project comes at a critical time in Gaza as the only existing power plant suffers from lack of fuel, aging feeding lines, and damage caused by three wars in the last decade,” said Bashar Al Masri, a board member at Padico, owner of the real estate company that runs the Gaza Industrial Estate, Prico. “The agreement is part of our strategy to support the renewable-energy sector and boost investments in industrial cities.”

Financing for the solar array is part of a larger effort by IFC to create a market for renewable energy in the Middle East and North Africa. It also represents an important partnership between IFC and MIGA, which provided 10-year-long risk guarantees—crucial for a project in a challenging environment like Gaza.

Read more about IFC’s work in infrastructure at www.ifc.org/infrastructure.

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Published in March 2018.