Gulf’s renewables push faces headwinds
Despite an abundance of fossil fuels and the impact of the pandemic, countries in the Middle East are still forging ahead with international and local renewables projects. The oil- rich Gulf is among the areas benefiting most from the global appetite for these projects. The UAE, Saudi Arabia, Qatar and Oman are the four Gulf countries that have developed renewables projects over the last few years.
Saudi Arabia is expected to lead the push in the Middle East in the next few years, having launched several renewables projects, including its first wind farm, to free up crude burned in power plants for export. The country’s third renewables round— whichwould add 1.2 GWof solar capacity— is advancing after 49 companies pre- qualified for lead roles. The kingdom announced it would “very soon” announce a solar energy project with the lowest electricity cost per kilowatt- hour in theworld.
Strip downthe barriers
Record- lowtariffs and plans to reduce dependence on crude oil and natural gas as feedstock for power and energy- intensivewater desalination plants are themain factors behind the rapid development of renewables in the region. But growth would be even faster if regulatory barriers to new market entrants outside of auctions were removed, according to the International Energy Agency. Examples include the world’s first large- scale chemical production site to be run entirely on renewable power pioneered by Saudi Basic Industries Corp. However, both
Kuwait and Saudi Arabia have delayed renewables programmes, raising questions about their respective renewable goals, according to S& P Global Platts Analytics.
Even before the pandemic, Saudi
Arabia had put on hold a $ 200 billion solar project with Japan’s
Softbank Group. Although there are risks fromthe pandemic, most renewables projects haven’t been rolled back or cancelled, potentially showing how environmental, social and governance concerns have become more central to oil- exporting countries. Saudi Arabia has set a target of 27.3 GW of renewables by 2024.
S& P Global Platts Analytics expect renew ab les capacity in the Middle East tomore than double within the next five years, building on almost 7 GW of utility- scale solar and 1.5 GW of wind projects in development. Solar and wind accounted for about 1 per cent of power production in the Middle East in 2019, according to the S& P Global Platts World Energy Demand Model. It is expected to be slightly higher at around 1.3 per cent or roughly 8 TW h in 2020, and about 3 per cent of the total almost 35 TWh by 2025.
The UAE targets 50 per cent clean energy by 2050, including nuclear power, with renewable sp laying a lead role. It has conducted several large-scale competitive solar auctions that yielded low prices, and Abu Dhabi’s 2GW tender in April drew close to global record- lowsolar bid of $ 13.50/ MWh, submitted by TAQA, France’s EDF and China’s Jinko Solar for a 30- year contract. It will be the largest solar farmin theworld.
Further, the Dubai Electricity & Water Authority this year awarded Saudi Arabia’s ACWA Power the 900- MWfifth phase of the Mohammad Rin Rashid Al Maktoum Solar Park, a project that aims to have 5 GW of solar power by 2030. Oman this year began operations of its first utility- scale solar power plant. In July, ACWA Power, the Saudi future city of NEOM and the US’s Air Products, signed a $ 5 billion deal to build an ammonia production facility powered by renewable energy.
According to a survey published in May by UK- based law firm Ashurst, only 18 per cent of executives in the Middle East expect to see growing opportunities to invest in the energy transition in the next 12 months, the lowest percentage globally. The jury is still out on whether the coronavirus will slow future renewables plans in the region.
Growth would be faster if regulatory barriers to new market entrants were removed.