A culture of energy innovation
Over the past decade, several GCC countries have announced ambitious renewable energy targets. With power capacity requirements expected to increase at an annual rate of over 6% until 2022,2 GCC countries are moving fast to adapt their energy mix. Renewable energy is gaining momentum, backed by strong support from governments that recognize the urgency of tackling rising demand for energy. Investment is rising in exploring the greater adoption of energy technologies, including solar photovoltaics (PV) and concentrated solar power (CSP). This is attributed to the region’s vast availability of solar resources and access to finance and auction designs that have delivered low prices. The GCC smart grid market is also gaining prominence, with battery storage forming a crucial component in the integration of renewable energy to the grid.
These initiatives also reflect the GCC’s strong track record in innovation and adoption of new technologies — smart meters arrived relatively late to the region, but their speed of deployment and acceptance by customers was much quicker than that seen in other regions. And, anyone who has visited Dubai recently can attest to the fact that electric vehicle (EV) adoption is accelerating fast in the region — a trend that is driven more by consumers’ eagerness for the technology than any economic benefit.
In particular, solar energy has clear potential in the GCC. The region has some of the highest solar exposures in the world, enjoying more than 300 days of sunshine a year. Solar power plants can typically expect around 1,900 hours of operation per year, double the levels typically found in Europe. The added benefit is that solar output tends to match daily variations in demand, especially from high air conditioning use. Meanwhile, the region has plentiful land and a deep talent pool to draw upon. Across GCC countries, investment in new solar is therefore increasing in size and scope:
- Solar prices in the GCC are following the international trend. Large-scale solar PV projects have dropped from 5.98 US cents/kWh in 2014 to 2.4 US cents/kWh in 2018, making it the most cost-effective source of electricity generation in the GCC.
- The UAE has announced a power strategy to achieve 50% clean energy by 2050, with solar power expected to contribute 25% of its generation mix. The Mohammed bin Rashid Al Maktoum Solar Park in the Emirates will generate 1,000 MW by 2020 and 5,000 MW by 2030.
- Bahrain has raised its renewable energy target from 5% to 10% by 2035 and has mandated installation of solar panels on new buildings.
- Rooftop solar installations are gaining in popularity in the UAE following the introduction of net metering schemes. These allow customers to use solar power to generate electricity for their own use, with any excess fed back into the grid.
- Kuwait has set a target of having renewable energy contribute 15% of the total energy mix by 2030.
- Renewables provide an opportunity to reduce water used in power generation by up to 15%, whilst clean energy sources offer a more cost-effective option in water desalination projects.
At the end of 2018, the region had 146 GW of installed power capacity, of which renewable energy accounted for less than 1%.3 Despite the large capacity, significant investment will be needed in additional generation and for transmission and distribution over the coming years.4 In the next five years, for example, the region is expected to invest US$55b for an additional 43 GW of generating capacity and US$34b for transmission and distribution to meet rising demand.5 From which, renewable energy deployment is expected to accelerate, and nearly 7 GW of renewable capacity is expected online by the early 2020s. Our analysis suggests renewables could contribute one-third of the region’s energy mix by 2050, with solar PV and solar CSP making up 20% of this figure, if investment and regulatory commitment continue.