Monday, April 22, 2013

Renewable energy plans face testing year

Middle East & North Africa
By Camilla Hall
Oil-rich Gulf countries have announced some of the world’s most ambitious renewable energy plans but analysts say the next year marks a big test to show whether these pledges will turn into contracts.
Both Saudi Arabia, which has announced a $109bn spending drive into solar energy, and Qatar, which aims to use a sustainable energy base to host the World Cup in 2022, have signalled they intend to launch tender contracts for solar energy projects.
But while Gulf countries have placed themselves at the forefront of a very public investment drive into renewable energy, questions remain over the implementation of such plans as international companies look to the region’s potentially lucrative projects.

“Generally speaking, for the Gulf countries, the scepticism is rightfully there,” says Scott Burger, solar markets analyst at GTM Research, who while optimistic about the prospects, is holding out to see the tenders come through. In the kingdom, “they haven’t invested serious dollars yet, and dollars speak louder than words.”
Saudi Arabia, the world’s biggest oil exporter, has said it hopes to generate solar power of up to 41GW by 2032, or 30 per cent of peak power demand. That is almost double the current capacity of Germany, the world’s leading solar power.
Such vast plans have caught the attention of the renewables industry but have also drawn their fair share of sceptics.
The forces underlying the proposed investment drive – the need to meet growing domestic energy demand without the loss of revenue from hydrocarbon exports – are real.
“Rapidly growing populations and a push towards industrialisation are driving energy consumption at an unprecedented pace,” says Dietmar Siersdorfer, chief executive of Siemens Energy Middle East. “The future of power generation in the Middle East must include renewable sources.”
Underscoring the economic impetus are the vast subsidies paid by Gulf governments to provide electricity and petrol to its citizens cheaply. All hydrocarbons used inside each country are an opportunity cost for the government.
Adnan Amin, director-general of Irena, the renewable energy agency, says moving away from fossil fuels could help governments to bypass the subsidy issue.
“Renewable energy investment presents one possibility of trying to leapfrog the issue of subsidies by creating an energy paradigm that can still be low cost,” says Mr Amin. “It can be offset by increased exports of oil in the short term, which would release a lot of revenue to support investment back home.”
Given the booming energy demand that has come hand in hand with population growth and industrialisation, Saudi Arabia could become a net importer of oil by 2030, according to Citigroup estimates.
With that in mind, the kingdom is expected to announce its first tender targeting 2,000MG of solar energy early this year, while Qatar plans to tender its first solar project in the first quarter, the country’s energy minister said in December.
But, green energy may not be the Gulf’s only solution. The recent development of shale gas in the US for example is already shifting the geopolitics of energy and the Gulf has yet to really explore it. There are also ways to improve their current power infrastructure.
“Investments in improving efficiencies can go a long way towards reducing the impact of energy use on the environment and saving natural resources.
“What’s important today for the region is to boost efficiencies in existing infrastructure such as power plants as well as industrial plants and even buildings,” says Mr Siersdorfer of Siemens.
And while at different stages, the United Arab Emirates and Saudi Arabia are also pursuing nuclear energy.
As Gulf countries explore targets for renewable energy, there is some disparity in their ambitions. While analysts question the scale of such projects in Saudi Arabia and Qatar, they say that the United Arab Emirates has set itself quite achievable goals.
As one of the early movers, Abu Dhabi hopes to meet 7 per cent of its energy needs with renewables by 2020 and Dubai is targeting 5 per cent by 2030. Abu Dhabi, the oil-rich capital of the UAE, has already built its first solar power plant, Shams 1, which was commissioned in March.
The project, managed by Masdar, is the largest solar concentrated power plant in the Middle East, sprawling over 2.5 sq km, with a capacity of 100MW.
While the region has its doubters, other observers say that domestic energy demands will force the Gulf to move forward on its renewable plans.
“Given the nature of the economies and the oil wealth, you’ve always had the big bang approach to developing projects and that can be transformative if it’s successful,” says Mr Amin. “The preconditions for this are there for it to be successful.”
He adds: “There is some scepticism in some quarters with regards to Saudi’s intentions on solar but I’m absolutely convinced that they’re dead serious about it.”