UAE and Mena invest in green energy, but face a long road ahead

February 23, 2012 11:48 am

The green energy boom has peppered the media with a string of announcements and claims of sustainable solutions for a largely oil rich region, with oil and non-oil-based economies making moves to deploy renewable energy into their power mix.

Matthew Taiwo of Carter Croft, a renewable energy consultancy, spoke to about the rapid expansion of the Middle East renewable energy sector in recent years:
“From the ground up, companies have been hiring key members of the renewable energy industry to head up projects, especially in the Solar and Wind energy sectors. I have read a lot about a ‘mirage of spending’ in the Middle East but the reality is that the money really is being spent, hence the physical presence of some of the leading businesses and individuals from within the renewables industry.”

What some Middle East nations do have in abundance is capital, but spending alone is not a sure-fire guarantee of success. Taiwo points to talent, among other issues, as a holdback for new regional projects: “This doesn’t mean that the Middle East is the golden egg for international renewables businesses – it offers a multitude of challenges such as ROI, Staffing issues, grid connectivity etc. There has been a shortage of key leadership talent in the region, hence sourcing leading UK and European C and D-level individuals and relocating them to the area.”
A second resource, aside from wealth, is the vast expanse of land to develop large-scale renewable projects, in comparison with more crowded Western countries.

“Most Western countries are so far down the renewables line that barriers to entry are huge coupled with significant shortage of usable land – not so in the Middle East. Secondly, many oil companies have backed renewables projects currently in progress as part of their corporate social responsibility programmes. It makes sense to put money back into the countries that you produce oil from,” adds Taiwo.

Is green energy a reliable alternative to fossil fuels?

BP’s latest figures, running until the end of 2010, show the Middle East as having 54% of the world’s oil reserves and 40.5% of all natural gas. However, the region’s renewable energy supplies are currently listed as 0.05% of the world’s share, despite available space and capital for solar projects and other such initiatives.

India, China and Latin America are ahead of the pack, offering the lion’s share of opportunity for green energy companies. And, prior to the global economic downturn, European governments had eagerly ploughed investment into renewable energy projects, to find viable alternatives to fossil fuels and appease emission targets. Projects have since slowed as prolific spending becomes harder to justify.

The current output from Middle East renewable energy sources will hardly make a dent in the rising demand seen in the region, so while technologies improve and investments take effect, reliance will remain on the region’s oil. Resource figures for Middle East oil have been debated for some time and speculation as to the real size of reserves has begun ‘in earnest’ the Carter Croft senior partner says, stating:
“It would seem prudent that, should reserve sizes have been incorrectly awarded, a renewable energy program 15-20 years ahead of being needed would make sense.”

Aside from the problem of sustainability, where the debate surrounds how many more years we can extract limited resources from often hard to reach places, logistics is an enduring issue. The infrastructure for oil and gas, though long established, is currently overshadowed by geo-political tensions surrounding Iran.

UAE strives to get ahead with renewable energy

Just over one month ago, Dubai ruler HH Sheikh Mohammed bin Rashid Al Maktoum launched the UAE’s green economy strategy, pitching to be a world leader for sustainable energy, agriculture, investment and transport, in addition to environmental policies. This initiative arrived simultaneously with the launch of a new Dubai solar park. However, Edward Bell, Middle East and North Africa Analyst for the Economist Intelligence Unit, gave an alternative perspective, expressing a view that Gulf countries are not expressing ‘strong interest’ in renewables:

“The Middle East renewables market is one of two halves. There still doesn’t appear to be much strong interest in developing renewable energy in the energy resource rich countries in the Gulf as they maintain investment in oil and gas and fuel intensive infrastructure projects,” says Bell, who also points to more pressing energy issues in the wider Arab world.

“However, for countries in North Africa, real leg work has been done to make a dent in some countries’ energy deficits. Morocco is committed to spending up to $9bn on renewable energy. Algeria too has expressed some interest in developing renewables to allow more hydrocarbons for export.”

Since oil replaced gold as the real must-have commodity, there has been a marked distinction between the haves and have-nots, but renewable resources could be an increasingly significant factor in redressing that balance. Non oil-rich states have the opportunity to exploit space and sunshine for solar energy projects, though as current trends indicate, those with the available capital are steaming ahead.

Gulf countries respond to growing power demands

The GCC will require an additional 100GW of power over the next decade, according to the World Energy Council, who estimate that $50bn worth of investment will be required to counter the demand, though energy investments surpass that figure. Overall energy spending in the region is set to tip $180bn over the next few years.

Saudi Arabia alone is investing $100bn into the King Abdullah City of Atomic and Renewable Energy, due to begin construction in 2013, with another 15 projects in the works totalling $9bn. The UAE is also expanding investing in 20 energy projects to the tune of $34.2bn, investing heavily into their solar park project, though $20bn out of that total sum is dedicated to Abu Dhabi’s nuclear power plant, in construction since last year.