To understand the uphill battle clean energy faces in the UAE, consider the case of a villa owner who wants to install solar panels on his roof.
Solar energy efforts still in the shade
To understand the uphill battle clean energy faces in the UAE, consider the case of a villa owner who wants to install solar panels on his roof. The environmentally conscious homeowner will pay an average of Dh50,000 (US$13,615) for the system. The problem is that bureaucratic hurdles will make it next to impossible to connect his panels to the larger grid to sell - or even give away - his surplus electricity. He will also find that the average cost of producing electricity from the system, even if it is spread over decades, is far above what he would normally pay to get power from his local utility.
The result is that solar firms today are focused on marketing their systems to the Government and the largest firms, and they have seen little, if any, interest from private homeowners. If the UAE is to become a global hub for renewable energy, as government leaders say it will be, policymakers must encourage the technology at a grassroots level, enacting changes to regulation and energy pricing, and teaching residents to reduce consumption in one of the world's most wasteful societies.
Smoothing out regulation on private solar power is the easy part. Government officials say new electric meters being installed across the capital will make it easier for utilities to reverse the flow of electricity into individual homes and credit homeowners for the power they produce. Residents should be able to sell power back to the utility - at least in Abu Dhabi - "within a few years", said a regulatory official who asked not to be named on policy grounds.
Leaders and experts from the UAE's fledgling renewable energy agency say the hard but obvious truth is that renewable energy is held back by below-market rates for electricity, a result of artificially low prices for natural gas, the key fuel source for power plants. Utilities buy gas from the UAE's energy firms at prices set between a quarter and a half of that of international market rates. Even in places like Germany and Spain, where electricity is pricey, solar power is unable to compete with the low price of fossil-fuel power without financial support. In the UAE, it does not stand a chance.
Expatriates in Abu Dhabi currently pay Dh0.15 per kilowatt hour (kw/h) of power, while Emiratis pay Dh0.05. This compares with the US, which has some of the lowest rates in the developed world, where residents pay an average of Dh0.41. The most cost-efficient solar power systems generate each kw/h at a cost of between Dh0.73 and Dh0.91. While government planners privately concede eventual increases in the price of electricity are inevitable, any change will be unpopular since it will raise bills for all residents, said Dr Sgouris Sgouridis, an assistant professor at the Masdar Institute of Science and Technology in Abu Dhabi.
"Even reaching half of the actual price would be a struggle politically," he said. Initial increases will be driven by economic realities as utilities confront rising costs for obtaining natural gas and buying liquid fuels to cover gas shortages, says Robin Mills, a Dubai-based energy economist. "New [gas] fields exist and they're big, but they're more challenging," he says. "Current gas prices in the Gulf are not sufficient to incentivise these developments. Gas prices are going to have to rise and that makes alternative energy more competitive."
Beset by power cuts, Sharjah took the first step earlier this month when it increased residential power prices by 50 per cent to Dh0.30 per kw/h. The government said the costs of generating each kw/h had risen to Dh0.65. Even if price increases are inevitable, they will probably be very gradual, so the Government will also have to create some form of subsidy that pays a premium for electricity produced from solar power systems. Such "feed-in tariffs" have been hugely successful at encouraging solar's growth in European markets.
The Abu Dhabi Government is expected to create some sort of financial support mechanism for renewables in its overdue energy policy. The plan will include a new formula for calculating power costs, Dr Sultan Ahmed al Jaber, the chief executive of the green energy firm Masdar, said in July. Changes to policy will ultimately be ineffective unless residents and commercial businesses reduce their use of energy. It makes no sense for society to pay a premium for energy without undertaking efforts to reduce energy use, experts say.
The scope for improvements to the efficiency of cooling and lighting systems is significant: a study commissioned by the Executive Affairs Authority has found that the Government could save itself the cost of two power stations if it undertakes a full-scale effort to encourage energy-saving appliances and convince consumers to adopt less wasteful habits. "Once you start reducing your demand and increasing your efficiency, you start thinking about delivering energy in different ways," Dr Sgouridis said. "We need to change our behaviour. It's not an easy thing to do."