By Courtney Trenwith
Coal and gas are no longer the power of choice, but subsidy cuts are what’s really needed to flick the switch on the GCC’s clean image, says Courtney Trenwith
It’s a powerful switch: more electricity is now generated by renewables than coal. And new predictions by the International Energy Agency provide an even brighter picture, with the pace of renewables growth expected to only get faster, accounting for 60 percent of all new electricity generation over the next five years.
An average 500,000 solar panels were installed every day in the year to September, a record, the IEA revealed last week. Coupled with record levels of wind-generated power, and renewables added an additional 153 gigawatts (GW) of capacity – more than three times the total generation capacity of Saudi Arabia.
The higher-than-expected installation of renewables led the IEA to revise its energy forecast for 2015-2021, increasing the expected growth rate of renewables by 13 percent. It now says renewables will increase their share of global electricity generation to 28 percent in 2021, from 23 percent in 2015.
The UAE is expected to lead growth in renewables in the Middle East, with an additional 1.9 gigawatts, mostly through solar photovoltaic cells, over the next five years. The region’s total contribution is expected to grow by 78 percent, the IEA says.
Other GCC states have reasonable renewable targets too; for example, Saudi Arabia has announced its first wind turbine to help meet an initial target of generating 9.5GW of renewable energy by 2030.
For an industry in its infancy in the Middle East there are, of course, a list of measures experts say are required to spur it along. They include strengthening institutional and human capacity in the field, promoting research and development and creating an investment-friendly environment.
But at the top of the list is – again – the reduction of subsidies for oil- and gas-generated energy, which still accounts for tens of billions of dollars of state budgets. As the world gets cleaner and GCC states continue to deal with budget pressures, energy subsidies will remain under the spotlight.
Governments have made some tough but necessary decisions on scaling back state support for commercial and household bills, cutting the total GCC subsidy bill from $160bn in 2014, but even stronger action will be needed to meet energy goals.
Efficiency improvement also has lagged as oil prices remain low, reducing incentives, particularly for cleaner vehicles. While Dubai is pushing electric cars, a lack of convenient public transport is discouraging more efficient use of vehicles. Saudi Arabia, Qatar and the UAE each have new light or heavy rail networks underway but residents need to be better educated and encouraged to use the services.
The GCC has done well out of pumping oil and gas, but as the value of those commodities declines and domestic energy consumption rises, renewables become increasingly attractive. Not only will renewables better safeguard domestic energy supplies but they will free up oil and gas for exports, and create hundreds of thousands of jobs. The Abu Dhabi-based International Renewable Energy Agency estimates 210,000 people could be working in the sector in the GCC by 2030.
Abu Dhabi’s and Dubai’s respective record-breaking bids for solar power plants, potentially bringing down the cost to 2.42 cents a kilowatt-hour, demonstrate the economic promise of renewables.
The new industry also provides opportunities for a whole gamut of stakeholders, from construction to manufacturers and research and development.
The latest results are commendable but renewables are still outpaced by electricity demand and are barely working to keep global CO2 emission stagnant, remaining insufficient to meet the climate goal of keeping average temperature increases below 2 degrees Celsius, according to the IEA.
The spark has been lit but more energy is needed to power what will inevitably be an industry of the future.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.