The UAE, like India, has great expectations for renewable energy generation.
Renewable energy on the rise in the UAE and India
Energy demand in both India and the UAE is likely to soar this decade.
To meet this demand, it is pivotal for both countries to establish a strong foundation to adopt renewable energy.
India and the UAE have independently announced plans for adoption of renewables. India has set a target of 29.8 gigawatts in additional renewable energy capacity by the end of 2017, taking its total to almost 55GW.
In the UAE, the various emirates have individual plans for renewable energy. Dubai has announced a target of generating 5 per cent of its total energy through renewables by 2030 and Abu Dhabi has plans for 7 per cent by 2020, which would make for 3GW more of renewable energy in the UAE.
While the countries have very different requirements that are driving the adoption of renewables, there are also some similarities. Both are striving to diversify their energy mix with an aim to enhance energy security and reduce dependence on conventional sources of fuel.
India has already made significant progress in this area, having installed a capacity of 30GW by the end of last year, 13.2 per cent of the country’s total power generation capacity. The country provides a well-structured and attractive market for renewable power generation, with both government and industrial participation spurring its growth. However, the high capital associated with renewables, coupled with high financing costs and insufficient power transmission and distribution infrastructure, has challenged and restrained renewable energy adoption in India.
The UAE, on the other hand, is relatively new to the adoption of renewable energy and is still in the process of developing an environment that would be conducive and attractive for private sector participation, a must for accelerated development. Some key short-term achievements for the UAE have been:
• Setting up the Masdar Institute, which has helped to start and sustain research and development
• Hosting the International Renewable Energy Association, which in turn has led to greater commitment from the UAE to deliver on areas such as sustainability and energy efficiency
• Creating plans to adopt renewable resources. Dubai’s recent announcements of rooftop solar and energy service companies are clear examples of this approach.
Renewable energy promises to be environmentally friendly and allows the UAE to diversify its energy mix and attain a higher degree of energy security. However, these benefits are not adequate to counter the various challenges that the energy sources faces in the UAE and the rest of the region.
The foremost challenge for renewables adoption in the UAE is the practice of subsidising fuel for energy generation, and then subsidising electricity as well. In spite of recent price increases, non-renewable electricity is still available at a low cost, making renewables superfluous for most individuals. Renewables will face difficulty in the UAE as long as this practice is in place.
The regulatory environment in the UAE is also not as conducive as in other countries that are promoting renewables. Lack of clarity on policies relating to private electricity generation through renewables will be a crippling factor, if it is not sorted out this year. Recent moves on the parts of Dubai and Abu Dhabi appear to be aimed towards sorting this out, sending a positive signal on this front.
One final factor challenging renewables adoption in the UAE is the insufficiency of supply through local sources, for both services and products. Given the UAE’s excessive dependence on imports to cater to demand, the country could face difficulty creating the infrastructure for renewables.
However, other factors will need to be considered that bode well for renewables. For instance, there is the dependence on generators that run on diesel to generate electricity for construction projects, telecoms and other facilities not within the reach of the existing power networks.
A recent Frost & Sullivan analysis shows sales of more than 6,000 diesel generators in the UAE for last year alone, and more than US$60 million is spent each year on non-diesel generator rentals. Multiply this by a large-scale construction ramp-up because of the Expo 2020 and the remoteness of some of the places the infrastructure would need to reach, and the UAE presents a very feasible case for the adoption of renewables.
Abhay Bhargava is the head of energy and power systems for the Middle East and North Africa at Frost & Sullivan