Gulf Arab countries’ renewables projects are attracting outside investors and achieving world-beating low tariffs. Claudia Carpenter and Dania Saadi look at the project pipeline as well as the tailwinds and challenges ahead.
Gulf Arab countries are forging ahead with renewable projects despite an abundance of fossil fuels and the coronavirus pandemic.
Record-low tariffs and plans to reduce dependence on crude oil and natural gas as feedstock for power and energy-intensive water desalination plants are the main factors behind the rapid development of renewables in the region.
The renewable power sector was the only energy source to grow its share of the power market globally during the pandemic, while oil, natural gas and coal have all declined, IRENA Director General Francesco La Camera said in June. Even as oil prices slumped due to the pandemic, the share of renewables in the generation of electricity has grown in all parts of the world, he said.
The oil-rich Gulf region is among the areas benefiting most from the global appetite for renewables projects. The UAE, Saudi Arabia, Qatar and Oman are the four countries in the six-member Gulf Cooperation Council that have developed renewables projects over the last few years. Bahrain and Kuwait also belong to the GCC.
Saudi Arabia, the world’s largest oil exporter, is forecast 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 to add 1.2 GW of solar capacity is advancing after 49 companies pre-qualified for lead roles. Energy minister Prince Abdulaziz bin Salman told local media in June that the kingdom would “very soon” announce a solar energy project with the lowest electricity cost per kilowatthour. The world record-low solar cost is was by Abu Dhabi, the oil-rich emirate of the sevenmember UAE federation, until Portugal got a lower price in August.
“We expect renewables capacity in the Middle East to more than double within the next five years, given that there are almost 7 GW of utility-scale solar and 1.5 GW of wind projects in development,” head of global power planning at S&P Global Platts Analytics in New York, Bruno Brunetti, said.
The pipeline of utility-scale solar projects has not changed much so far this year, indicating the damage done by the coronavirus has so far been largely contained, Brunetti said. The Middle East had over 5.1 GW of solar PV and 700 MW of wind installed as of the end of 2019, according to the International Renewable Energy Agency.
Solar and wind accounted for about 1% 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% in 2020, and about 3% of the total by 2025 in the region.
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