Saudi leads the way as Arabian Gulf countries embrace renewable energy

Keenly aware that oil and gas supplies will not last forever, regional governments are looking into alternative sources.

Powered by automated translation

The UAE’s Arabian Gulf neighbours have announced various renewable energy plans aimed at reducing their reliance on oil and gas for power and water generation, with Saudi Arabia leading the way with an ambitious programme, as the drop in solar energy prices encourages governments.

“Governments are well aware that our oil and gas resources are not infinite and require careful management,” said Gus Schellekens, Middle East sustainability leader, and Hannes Reinisch, senior manager for sustainability and renewables, at PricewaterhouseCoopers. “There is a crossover point where our own domestic economies will use more of the hydrocarbon production than is exported, reducing the revenues we can derive from international markets.

“Prices have dropped dramatically over the past year for certain renewable technologies, most notably solar photovoltaic. The business case for pursuing solar projects is now stronger than ever.’’

For example, Saudi Arabia, the world’s biggest oil exporter, plans to generate 54,000 megawatts (MW) from renewable energy by 2032, with 41,000MW coming from solar, 9,000MW from wind, 3,000MW from waste-to-energy and 1,000MW from geothermal power.

The kingdom is expected to spend more than US$100 billion to reach these figures over the next two decades and has indicated that it will favour local producers.

“Solar enables the governments to not only diversify their fuel mix, but to introduce a new sector for job creation and therefore it is doubly attractive and we are seeing more governments introduce local requirements so that they do not import the energy by importing the solar panel, they are instead manufacturing the energy domestically,’’ said Vahid Fotuhi, the head of strategic advisory at the consultancy Access Advisory.

Saudi Electricity, a state-owned utility, has invited companies to build, own and operate Saudi Arabia’s first fossil-fuel fired power plant to use solar energy to cut carbon emissions. The utility’s plan is for the 550MW integrated solar combined cycle plant to run on natural gas, but rely on solar thermal energy to boost fuel efficiency.

“Having announced ambitious generation targets for solar and wind in Saudi Arabia, it will be important that a number of pilot projects are delivered successfully at the start,’’ Mr Schellekens and Mr Reinisch said. “This will both help to develop the local skills and experience needed to deliver the larger projects, and reassure international players that the procurement and delivery of new capacity is proceeding in line with international standards and expectations.’’

Kuwait, for example, wants to produce 15 per cent of its power from renewable energy by 2030. Last year, it invited proposals for the first phase of a 2,000MW clean energy park that will be located west of Kuwait City and completed by 2030.

Phase one of the Shagaya energy park is expected to produce 70MW of electricity, including 50MW from solar-thermal plant, a 10MW solar photovoltaic facility and 10MW from wind.

In Qatar, the world’s biggest exporter of liquefied natural gas expects to have about 1,800MW of solar power by 2020.

Meanwhile, Oman has used solar energy as an enhanced oil recovery technique to help boost its oil production.

But the use of renewables, mainly solar, to produce energy presents a set of problems for Gulf states.

“There are some technical challenges in knowing where to put your site and which technology to use. There are operational challenges with regard to maintaining the system and making sure it is clean,’’ said Mr Fotuhi.

“There is some reluctance both from the regulators and banks to fund and finance these projects because there is no track record and banks are conservative by nature and they don’t like new things.’’

Other challenges include the continued energy and electricity subsidies that make renewable energy not as attractive as conventional energy.

“If countries have a demand that needs to be met for electricity or water and there is a proven relatively low cost way of delivering that, history suggests that they will stick with that approach rather than try a newer, slightly more expensive option,’’ Mr Schellekens and Mr Reinisch said. “There is an institutional inertia that will need to be overcome — not only because there is no pre-existing manufacturing and capability already in place to make this happen, but also because this by its very nature, developing renewable capacity and capability, is a journey with a long target horizon beyond the delivery of individual projects.”

business@thenational.ae