All Gulf Cooperation Council countries will have to embrace industrial-scale alternative energy if they were to continue profiting from their oil and natural gas resources.
Saudi Arabia’s decision to postpone its renewable energy strategy by eight years shook investor confidence as intensely as it raised hopes when first announced. Kuwait, too, has been slow to move with its Shagaya Renewable Energy Park and in the United Arab Emirates clean-tech companies are urging regulators for solar feed-in-tariffs.
Soon though, all Gulf Cooperation Council (GCC) countries will have to embrace industrial-scale alternative energy if they were to continue profiting from their oil and natural gas resources.
“In every case the GCC’s interest in alternative energy comes from economics and desires to preserve oil and gas for export, rather than environmental reasons,” said Robin Mills, head of consulting at Dubai-based Manaar Energy. “Especially with recent falls in the price of solar and wind power, they have become very cost-competitive versus generation from gas — particularly imported LNG [liquefied natural gas] — and oil.”
By not burning their own fossil fuels for domestic consumption, GCC economies would be freeing up a valuable resource for the more profitable export and for use in downstream industries, where there is better utilisation of hydrocarbons and thus a higher return on investment.
The situation is most critical in Saudi Arabia, the largest oil-consuming nation in the Middle East and one of a handful of countries that burns crude oil directly for power generation, according to the Joint Organisations Data Initiative.
“Saudi Arabia is consuming a large portion of its oil wealth through power generation and water desalination. And, as power demand increases annually, the country’s position as the global oil swing producer will be under serious threat,” Justin Dargin, global energy expert at the University of Oxford told The Arab Weekly.
In Kuwait, an oil-dependent nation facing rising electricity demand, power cuts that used to occur in summer months have extended to winter, as witnessed in February’s widespread blackout. “Saudi Arabia and Kuwait use large amounts of oil for power — very expensive at current prices — while the others do not,” remarked Mills.
The UAE faces a different scenario. Although the country has the seventh largest proved reserves of natural gas, it has been a net importer since 2008 due to heavy dependence on natural gas-fired facilities.
“The position of the UAE is quite different as the majority of its power generation is derived from natural gas, not oil,” said Dargin. “Therefore, what drives the Saudi focus on renewable energy generation is primarily to preserve its position as a dominant oil producer. Whereas, what drives the UAE is to continue producing enough natural gas to meet its domestic power demand as well as demand from its extensive downstream gas industries.”
Dubai, with modest oil reserves, is especially vulnerable to fluctuating fuel prices. Of the UAE’s proven oil reserves of nearly 98 billion barrels, the emirate holds just 4 billion barrels and thus imports most of its petroleum requirements.
Despite its vast oil reserves, the UAE is by far leading the region’s alternative energy drive. This is evident from achievements as early as Masdar’s 10-megawatt (MW) solar photovoltaic (PV) plant and the 100MW Shams 1, to the more recent, Dubai Electricity and Water Authority (DEWA)-managed Mohammed bin Rashid Al Maktoum Solar Park. The 1-gigawatt (GW) project has already seen the completion of a 13MW PV plant and tendering of a 200MW PV plant.
“The UAE is the frontrunner in renewable energy development. It has funnelled billions of dollars in development of both alternative (nuclear) and renewable energy projects across the country. Other Gulf countries have developed plans to do so, however, the UAE has a significant lead ahead of its neighbours,” Dargin said.
Meanwhile, Saudi Arabia’s original strategy that envisioned 54GW of renewable energy by 2032 was scaled down earlier this year to 30GW by 2040. But the market is not at a standstill. Saudi Aramco has been preparing tenders for 300MW of solar-diesel projects and Saudi Electricity Company is integrating concentrated solar power in its Duba 1 and Waad Al Shamal power plants.
Many of the projects completed benefited from the support of experienced foreign developers. Spain-based Abengoa, for example, participated in building Shams 1 and is helping develop Saudi Arabia’s first solar-powered desalination plant.
Spanish engineering firm TSK has also been active in the region with its bid for Kuwait’s Shagaya project and construction of DEWA’s 200MW PV plant in partnership with ACWA Power. Similarly, US developer First Solar, which built Dubai’s 13MW PV plant, is supplying DEWA’s 200MW project.
On the nuclear energy front, the UAE is also ahead of Saudi Arabia, having completed 61% of the first of its four reactors and more than 50% of the second. Together, the four units of the Barakah nuclear power plant will supply a quarter of the country’s electricity needs.
“The different GCC countries have moved on to different extents in alternative energy, with the UAE well ahead — in both renewables and nuclear power, Saudi Arabia having big plans but not having done much yet, Kuwait now moving ahead, Oman thinking about it, and Qatar and Bahrain having done little,” Mills concluded.
“The UAE in particular has been ready to take credit for the environmental benefits.” The Arab WeeklyBy: Heba Hashem is an Arab Weekly contributor in Dubai.