x Abu Dhabi, UAEThursday 27 July 2017

Silver lining for UAE over black gold price rise

High oil prices can boost renewable energy investments in the Gulf region as they increase the opportunity cost of consuming fossil fuels and increase government revenues - with video.

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A two-year high for Brent prices brings with it the potential not only to boost the Government's oil revenues, but also to buoy renewable energy investment across the region.

An elevated oil price gives producing countries more of an incentive to export conventional fossil fuels rather than burn them to generate electricity, and revenues from oil exports can translate into more government funding for renewable energy projects.

"We refer to it as almost the perfect storm," said Sami Khoreibi, the founder of Enviromena Power Systems, an Abu Dhabi solar company.

"Anytime we see an increase in oil prices it's a positive thing for the industry." Mr Khoreibi's firm is working on the UAE's largest renewable energy project, a 100-megawatt solar park that will be owned by Abu Dhabi's clean energy company, Masdar.

To achieve scale, such alternative energy projects have relied on government funding. Masdar, for example, is owned through Abu Dhabi's strategic investment firm Mubadala.

An increase in alternative energy investment would fall in line with Abu Dhabi's 2030 plan, which sets targets to diversify the economic base of the country away from an oil-based economy.

The Government has set a goal to source 7 per cent of its energy from renewable sources such as wind and solar within the next decade. "The higher the oil price, the more competitive renewables become," said Frank Beckers, who manages regional project financing for Deutsche Bank in Dubai.

A report by the consulting group Booz & Company on alternative energy investment shows that global investment in renewables has waxed and waned with oil prices in recent years.

As fossil fuels become pricier, the cost of renewable energy technology is also dropping. Some analysts estimate that grid parity - the elusive point at which energy from, say, the sun becomes as cheap as that from the ground - could be achieved in some parts of the world within the next five years.

ayee@thenational.ae