Protagonists of the global transformation

Over the past few years, the Gulf countries have reached the stage of asking themselves “how to go further the renewables”.

by Adnan Z. Amin
20 March 2019
6 min read
by Adnan Z. Amin
20 March 2019
6 min read

The world is undergoing a fast-moving global energy transition which is redefining the way we produce, distribute and consume energy today. Renewables are at the heart of this transition, powering the future with sustainable, affordable and reliable energy sources. Accelerated renewables deployment is driven by its strong business case, underpinned by cost reductions, innovations, and enabling frameworks. Analysis by the International Renewable Energy Agency (IRENA) shows that by 2020, renewables will be the cheapest choice for power generation in many parts of the world. Furthermore, the urgency to tackle climate change is adding impetus to the uptake of renewables. As a result, countries across the world are raising their level of ambition to develop their renewable energy resources.

The countries of the Gulf Cooperation Council (GCC) are increasingly part of this global momentum as they seek to meet their growing energy demand and diversify their economies. Traditionally known for their oil and gas reserves, the Gulf countries have considerable renewable energy potential, namely solar, as they lie in the so-called Global Sunbelt with some of the highest solar irradiances in the world. IRENA’s report, Regional Energy Market Analysis: for the GCC for 2019, launched last January, analyses the progress made in the establishment of enabling policy, regulatory and investment frameworks in these countries and offers an outlook for renewables deployment in the region.

Cutting costs in the UAE and Saudi Arabia

The United Arab Emirates (UAE) is at the forefront of such developments. It is the host country of IRENA and a strong proponent of renewable energy. It launched its ‘Energy Strategy 2050’ in 2017 which aims to generate 44 percent of its power from clean energy by 2050, cut carbon emissions by 70 per cent and improve energy efficiency by 40 per cent. It has contributed significantly to cost reduction for renewables, particularly for solar photovoltaic (PV) and concentrated solar power (CSP) technologies. Large-scale solar PV price broke world records in May 2018 with a bid of 2.99 US cents/kWh for the 800 MW Phase II of the Shaikh Mohammed bin Rashid Al Maktoum Solar Park in Dubai. An even lower price of 2.4 US dollar cents/kWh was seen for the 250 MW of solar PV for Phase IV of the park in late 2018. The 700 MW CSP for the Phase IV of the park was awarded the record-low of 7.3 US cents/kWh with storage. Such cost declines make renewables the cheapest source of electricity for new projects in the Gulf.

Saudi Arabia is also contributing to this downward price trend. In May 2018, the 300 MW Sakaka solar project in Saudi Arabia saw a record low price at that time of 2.34 US cents/kWh. Additionally, in January this year, the country awarded the contract for a 400MW wind farm for a record low price of 2.13 US dollar cents/kWh. It also announced to add 40GW of solar and 20GW of wind capacity by 2030. Under its ‘Vision 2030’ economic development plan, the country aims to source 10 per cent of its power from renewables by 2023.

In the near term, the region is set to see major acceleration in renewable deployment. Led by the UAE, Oman and Kuwait, a total of nearly 7 GW of new power generation capacity from renewables is planned to come online by the early 2020s. Although, solar PV and CSP is leading this, there is a growing momentum to harness the region’s wind energy potential as well, particularly in Kuwait, Oman and Saudi Arabia.

Social and economic objectives

Renewables will also deliver on environmental, social and economic objectives. IRENA’s analysis shows that by harnessing renewable resources, the Gulf countries will add 220,500 new jobs through 2030. They will also reduce water withdrawal for power production and associated fuel extraction by 11.5 trillion litres in 2030. This is particularly important given the water stressed nature of the region. Saudi Arabia, the largest consumer of fossil fuels for power production in the region, will account for about 40% of the GCC wide fuel savings in that year. The UAE will account for 39%.

As the momentum of energy transition continues to strengthen, its impacts will reverberate beyond the energy system. There will be far-reaching geopolitical implications for which countries need to prepare. The report of the Global Commission on the Geopolitics of Energy Transformation, convened by IRENA, highlights that the transformation will result in changes in the relative position of states, the emergence of new energy leaders, more diverse energy actors, changed trade relationships and the creation of new alliances. It will present both opportunities and challenges and the benefits will outweigh the challenges, only if the right policies and strategies are put in place.

Under such circumstances, it is critical for fossil fuel exporters to reinvent their economies to be less reliant on fossil fuels. Once again, the UAE is a prime example with its forward-looking economic diversification strategy. Masdar, a subsidiary of the state-owned Mubadala Investment Company, has invested 2.7 billion US dollars in wind and solar projects worldwide, with nearly 3 GW in generation capacity that displaces nearly 2.5 million metric tonnes of carbon dioxide per year. With Equinor, it has a 25% stake in the 30 MW Hywind, the world’s first floating offshore windfarm off the coast of Scotland. It is pushing boundaries in innovation as well. Just last month, Etihad flew the first commercial jet on biofuel that Masdar sourced and developed using locally grown algae.

It was not too long ago that the Gulf countries were debating if they should have renewables. In just a matter of few years, not only have they moved the needle of the discussion to ‘how much renewables can we integrate’, but they are now asking ‘how do we go further’ within and beyond the region.

The author: Adnan Z. Amin

Outgoing Director-General of IRENA. During his 8-year term, the Agency expanded its membership to the current 160 member states. He previously held numerous positions at the United Nations relating to renewable energy, environmental policy and sustainable development, particularly at UNEP.