While the Gulf region has plentiful natural resources, from oil to day long sunshine, a move to leverage the potential of the sun is only just getting started, a recent report from Arthur D. Little shows. To get the region basking in the technological and economic benefits of solar power, the consultancy considers delineating responsibility, creating clear policy and developing the economics of scale locally.
The deserted sand dunes, upon which the harsh warmth of the sun beats day in day out, are an ideal environment in which to build solar power instillations. As the world turns to consider different ways of accessing energy, renewables have been slated for some time as a way out of the fossil-fuel predicament. In a recently released report, titled ‘GCC Solar Energy: Turning plans into reality’, Arthur D. Little considers solar energy in the Gulf; the region’s commitment and efforts so far.
In the past five years, the cost of solar energy has reduced significantly, with PV solar systems declining 65-70% in costs, and the LCoE* of solar energy in high irradiation areas, down to around $100 per MWh. In addition to generating electricity to offset fossil fuel production, entering the solar market can potentially drive economic development, employment and technology industries.
The research highlights that Gulf countries have already committed to a number of large scale solar projects, which may in coming years become very competitive with fossil fuels. This will especially be true if the international agreement seeking to curb the high use of carbon derivatives comes into force over the coming decades.
According to the consulting firm, although the economics of a ‘solar industry’ in the gulf region is becoming ever more economically viable, the actual progress made so far has been somewhat lacklustre.
Particularly Saudi Arabia has pledged big yet delivered little. The country has planned to install 41,000 MW by 2040. However, since the inception of this plan in 2012, the country has installed just 50 MW of capacity and is currently only constructing 50 MW more. UAE – Dubai has committed to installing 1,000 MW of capacity by 2030, however, only 13 has so far been installed – although a further 200 are under construction. Qatar and Kuwait have both pledged to install around 2000 each, by 2020 and 2030 respectively, yet are only just getting started. So far, Qatar has installed 4 MW of capacity in 2014 and Kuwait 50.
The biggest issues faced by GCC countries towards keeping their commitment to install is the confusion between the role of various utility players, oil and gas companies and SPVs regarding their respective mandate to participate in this sector. Another issue is the need for clear policy initiatives to push forward industry participation without resorting to costly subsidies. These could include the provision of project financing support, the disbursement of competitive PPAs (power purchase agreements) and the application of less stringent local content rules. A further initiative that may be able to help the region open up to the positive economic consequences of the technology, would be to create large scale capability development in R&D. These R&D initiatives need to be undertaken with focuses on local technical issues and promote innovation in locally relevant applications, with technology hubs in the region attracting and allowing for the deployment of high technically skilled work.
According to the authors: “It is imperative for solar energy to emerge as a key focus area in government narrative and communication. For any sector to emerge, political will and government backing is essential. Re-energising the renewable energy narrative will give a new lease of life to the solar energy industry in the GCC.”
* Levelised cost of electricity.