A sunny outlook for renewable energies in the GCC, says Strategy&

25 June 2018 Authored by Consultancy-me.com

Although the GCC member-states currently lag developing economies in terms of renewable energy investment, there is still huge potential in the region according to a recent report from Strategy&.

The GCC renewables outlook compiled by strategy firm Strategy& (formerly Booz & Co. and now a part of the PwC network), subtitled, ‘Mostly sunny with a chance of rain’, outlines the current state of play within the Gulf Cooperation Council – Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait – in respect to renewables investment and potential.

As it stands, the combined GCC states had invested less than $1 billion into renewable energy sources up until 2016, with developing economies in South America, Asia and Africa – such as Chile, Mexico, Morocco, and South Africa - accounting for nearly one half of all investments in the sector. This share of investment from non-GCC developing nations is expected to grow to practically two thirds globally by 2020.Developing countries now account for most investment in renewablesAltogether, the consulting firm projects global annual investments into renewable energy to grow to nearly $370 billion by 2020 – up 50 percent from the ~$240 billion on 2016 figures, with a worldwide cumulative total of $1.5 trillion invested between 2016 and 2020. Investments into renewables in the GCC are forecast to reach $16 billion by 2020; which, at $40 billion invested in total from 2016 to 2020, and 4.4% growth, is still well short of investments in other regions.

The comparatively slow progress on renewables in the GCC, according to Strategy&, is due to several structural and institutional factors – namely; heavily subsidised fuels and a lack of transparent accounting; rapidly growing power demand in the region and a focus on mega-capacity generating projects; a lock in of the current base-load; weak and fragmented transmission and distribution networks, and, ultimately; the lack of a predictable and stable regulatory and policy environment.

Raed Kombargi, a partner with Strategy& in the Middle East, says; "With the right policies and decisions an increasing number of utilities in the GCC could add renewables to their energy supply mix.” Developing economies in other regions have already moved forward, with, for example, geothermal, wind, solar, hydro, and waste-to-energy supplies already a feature of China’s energy production matrix alongside traditional sources such as oil, coal and gas.Renewables in the energy mix per countryIn contrast, the UAE has introduced just solar to its mix, with only waste-to-energy and nuclear power generation in the pipeline to buttress gas and oil sources. Qatar has only solar and waste-to-energy planned, and Saudi Arabia, a regional leader in terms of the pursuit of energy diversity, has a suite of sources in the planning but still lags MENA neighbours such as Turkey and Egypt. Other big international oil & gas producers such as Russia and Venezuela have also already made greater inroads than the GCC states into diversifying their fuel mix.

Yet, great potential in the GCC remains. Kombargi says; “The case for rapid deployment of renewable energy in the GCC is compelling. The GCC has ample solar and wind resources, a regional gas shortage along with growing domestic demand for hydrocarbons as fuel and feedstock, and an affordable means of financing renewable energy.” For Strategy& though, sector developments will need to be led from the top.

Yahya Anouti, a principal with the firm in the Middle East, contends that: “The GCC states are in favourable positions to introduce more renewable energy. GCC governments can influence the timing and trajectory of this change, and can quickly get on the path to optimal renewable energy infrastructure development to minimise costs while helping achieve their national economic development objectives with the correct policies and decisions.”