En­ergy fo­cus

As the re­gion scales back its re­liance on fos­sil fu­els, we ex­am­ine the new era for the GCC’s en­ergy in­dus­try

Gulf Business - - FRONT PAGE -

The re­new­able en­ergy sec­tor no longer re­mains at the pe­riph­ery as an in­dus­try for so­cial good alone; but has emerged as a prof­itable al­ter­na­tive to con­ven­tional sources of power gen­er­a­tion.

The case is even stronger for the GCC, which is now at cross­roads as the oil slump ex­tends into its third year. A shift to re­new­able en­ergy will not only re­duce the cost of power pro­duc­tion and car­bon emis­sions but also free up more oil for ex­ports. We en­vis­age re­new­able power to be a sig­nif­i­cant con­trib­u­tor to the eco­nomic progress of the re­gion and strongly be­lieve that it is time to sit up and take no­tice of this sec­tor. But where the GCC stands in com­par­i­son with the rest of the world in this seg­ment?

Glob­ally, re­new­able power gen­er­at­ing ca­pac­ity saw an in­crease of 9 per cent in 2016 com­pared to the pre­vi­ous year. In­vest­ment flow to­wards re­new­ables has been steady with the spend­ing ex­ceed­ing $200bn every year for the past seven years. New in­vest­ment of $264.8bn was seen in 2016 with the main fo­cus on so­lar power closely fol­lowed by wind power. In the same year, re­new­ables ac­counted for an es­ti­mated 62 per cent of net ad­di­tions to global power gen­er­at­ing ca­pac­ity.

The to­tal power gen­er­ated through re­new­ables in the GCC has risen from 20 GWh in 2010 to 620 GWh in 2015. But it con­sti­tutes to less than 1 per cent of the to­tal power gen­er­ated in the re­gion while the global fig­ure is at 23.3 per cent. Europe and North Amer­ica stand at 34.2 per cent and 22 per cent re­spec­tively in 2016 with Nor­way on top at 97.87 per cent.

This puts into per­spec­tive the cur­rent state of re­new­ables in the GCC. While there is a huge scope for im­prove­ment, we need to take into con­sid­er­a­tion the fact that his­tor­i­cally, power gen­er­a­tion through fos­sil fuel has been cost-ef­fec­tive for GCC coun­tries that have an abun­dance of th­ese re­sources. With ad­vance­ments of re­new­able en­ergy tech­nol­ogy and de­clin­ing costs in the re­cent years, re­new­able en­ergy now looks more eco­nom­i­cally vi­able.

Glob­ally, there has been a re­duc­tion in Levelised Cost of En­ergy (LCOE) ranges of re­new­able en­ergy sources be­tween 2010 and 2016 with so­lar pho­to­voltaic's weighted av­er­age LCOE com­ing down by more than 50 per cent from $350/MWh to $140/MWh. This brings the cost of power pro­duc­tion by so­lar en­ergy within the range of fos­sil fu­els.

So­lar to re­place oil?

Re­new­able en­ergy po­ten­tial is high in the GCC, par­tic­u­larly for so­lar pro­jects with nearly 90 per cent of the in­vest­ments in GCC flow­ing to­wards them. So­lar in­so­la­tion lev­els in the re­gion are among the high­est in the world (as high as 6.5 kWh/m² per day, ac­cord­ing to the IRENA Year­book 2016) mak­ing it a favourable re­gion for so­lar power gen­er­a­tion.

Cost of pro­duc­tion of re­new­able en­ergy is com­pet­i­tive in the GCC de­spite the re­cent fall in the prices of fos­sil fu­els. The LCOEs of the so­lar PV pro­jects at util­ity scale in the GCC re­gion are com­pa­ra­ble to the LCOE of elec­tric­ity gen­er­a­tion from oil when oil

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