05/06/18
The Gulf Cooperation Council (GCC) states show great promise for renewable energy deployment, according to a recent study by management consultancy Strategy& Middle East (formerly Booz & Company), part of the PwC network. To unlock this potential, GCC governments must develop a carefully planned framework and make careful decisions. The transition to a modern, renewables-based energy system is fraught with risk if governments take an ad hoc approach. Instead, they must act quickly and deliberately.
The Gulf Cooperation Council (GCC) states show great promise for renewable energy deployment, according to a recent study by management consultancy Strategy& Middle East (formerly Booz & Company), part of the PwC network. To unlock this potential, GCC governments must develop a carefully planned framework and make careful decisions. The transition to a modern, renewables-based energy system is fraught with risk if governments take an ad hoc approach. Instead, they must act quickly and deliberately.
The study shows that renewable energy continues to attract an increasing share of global investment, with annual investments expected to grow by $130 billion, compared to 2016 figures, reaching around $370 billion in 2020. The global investment cumulative total is estimated at $1.5 trillion between 2016 and 2020. GCC countries thus far have made little investment in renewables technology – less than $1 billion in 2016 – and are at risk of falling further behind other countries if they do not create a supportive, coherent policy framework to facilitate renewables investment. While several factors in the GCC make rapid deployment of renewables attractive, there are major structural and institutional factors behind current underinvestment in renewable energy. These include:
Dr. Raed Kombargi, partner with Strategy& Middle East, said: “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. With the right policies and decisions an increasing number of utilities in the GCC could add renewables to their energy supply mix.”
Located in the heart of the global sunbelt, the GCC countries have some of the highest solar exposures in the world; solar power plants in the region can expect 1,750 to 1,930 hours of full-load operation a year, compared to 940 hours in Germany. The region also has the independent power plant (IPP) model, a commercial credit mechanism that makes cheap long-term financing affordable and available through private and foreign investors.
Dr. Shihab Elborai, principal with Strategy& Middle East, said: “The speed of transition to a new energy mix across the GCC is accelerating, with international investors showing considerable interest in renewables. To further take advantage of the renewables opportunities will require considerable funds and commitment, along with a careful approach that minimizes risk.”
In the report, Strategy& has outlined six critical actions for GCC governments to take. Together these actions create a supportive policy framework and can be adapted to the specific circumstances of each of the GCC states. These six steps are:
Commenting on the policy framework, Dr. Yahya Anouti, principal with Strategy& Middle East, said: “The GCC states are in favorable 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 minimize costs while helping achieve their national economic development objectives with the correct policies and decisions.
Menu