Renewable energy investment set to reach $16B by 2020

DUBAI — Annual investment in GCC renewable energy could reach $16 billion in 2020, given the considerable potential member countries have for deployment of such energy resources, according to consultancy Strategy& Middle East.

Across the world, renewable energy continues to attract an increasing share of investment, with annual investments expected to grow by $130 billion, compared to 2016 figures, reaching around $370 billion in 2020, Strategy& Middle East, a study released by part of the PwC network said.

Investments in the GCC will reach a cumulative total of $40 billion between 2016 and 2020, provided the correct decisions and policies are adopted, said the study. While the UAE has a set a goal to generate 75 per cent of its electricity from renewables by 2050, Saudi Arabia, the world’s biggest oil exporter, has ambitions of adding 9.5 gigawatts of renewable energy to the grid by 2023, which will be around ten per cent of its energy mix.

“To unlock the potential, GCC governments must develop a carefully planned framework and make careful decisions. The transition to a modern, renewables-based energy system is fraught with risk if governments take an ad hoc approach. Instead, they must act quickly and deliberately,” the study said.

The case for rapid deployment of renewable energy in the GCC is compelling, said Dr Raed Kombargi, partner with Strategy& Middle East.

“The GCC has ample solar and wind resources, a regional gas shortage along with growing domestic demand for hydrocarbons as fuel and feedstock, and an affordable means of financing renewable energy. With the right policies and decisions an increasing number of utilities in the GCC could add renewables to their energy supply mix,” said Kombargi.

Located in the heart of the global sunbelt, the GCC countries have some of the highest solar exposures in the world; solar power plants in the region can expect 1,750 to 1,930 hours of full-load operation a year, compared to 940 hours in Germany. The region also has the independent power plant (IPP) model, a commercial credit mechanism that makes cheap long-term financing affordable and available through private and foreign investors.

While the global investment cumulative total is estimated at $1.5 trillion between 2016 and 2020, GCC countries thus far have made little investment in renewables technology – less than $1 billion in 2016 – and are at risk of falling further behind other countries if they do not create a supportive, coherent policy framework to facilitate renewables investment, said the study.

Dr Shihab Elborai, principal with Strategy& Middle East, said the speed of transition to a new energy mix across the GCC is accelerating, with international investors showing considerable interest in renewables. “To further take advantage of the renewables opportunities will require considerable funds and commitment, along with a careful approach that minimizes risk.”