This is the main reason it is amongst the world’s most inhospitable places. Before airconditioning and desalinated water, most of the peninsula was uninhabitable. Only hardy Bedouin and town dwellers inured to summer temperatures of more than 40 degrees centigrade could survive.
Yet, today, about 40 million people live in the GCC. That’s more than 10 times the figure before oil was first discovered in Arabia in 1932. It’s been made possible by cheap and abundant power and water.
The region’s success in mastering the natural environment is double-edged. The GCC’s population could double to 80 million people in less than a generation. Power and water demand is soaring.
MEED’s annual Arabian Power & Water Summit (APWS) at the end of March was told that peak electricity consumption in Abu Dhabi rose by 11 per cent in the summer of 2009 compared with the figure at the same time one year earlier. A similar pattern is being repeated across the region. MEED Insight’s annual GCC power and water report forecasts that the six GCC states will have to build about 100 gigawatts of new power capacity and more than 2.5 billion gallons a day (g/d) of desalination by 2020. That’s more in the next 10 years than the region’s built in the previous 50.
With confidence growing that the demand will be there, minds are turning to other challenges. Will existing GCC privatization models deliver sufficient private investment for the massive required increases in capacity? Does the construction industry have the capacity to deliver a growing number of huge and complex projects? And is there enough skilled labour to keep GCC power stations and desalination plants working?
The answer to all three questions this spring was probably not. But there are encouraging developments. The GCC interconnection, fully operational in 2009, will eventually allow demand and supply to be balanced on a regional rather than national basis. The UAE’s nuclear power programme is designed decisively to diversify the emirates’ energy supply profile.
It is unsurprising that people are talking about renewable energy, but progress so far has been limited. Arabia’s winds are too gentle to justify large scale wind turbine investment. The Gulf’s too even-tempered to generate sufficient wave power.
But why hasn’t the GCC done more with its sunshine? The largest functioning GCC solar power plant is the 10-MW Masdar City unit which opened in 2009. Abu Dhabi has plans for the 100-MW Shams project. Speaking at the APWS, deputy chief executive of Bahrain’s Electricity & Water Authority (EWA) Khalid Burashid said that a pilot solar-hybrid plant could start operating in 2012, but it will produce no more than 5 MW.
Gulf sceptics cite three reasons why solar’s so small in the GCC. It takes a lot of land, though this is not an issue for the Oman, Saudi Arabia and Oman. Dust rapidly reduces the effectiveness of solar power units. But this objection is being countered. The operators of the Masdar City solar plant say removing dust manually costs no more than 1 per cent of the project’s capital value each year.
The main obstacle is the high cost of producing solar power compared to conventional. Experts say solar power per kilowatt costs up to 10 times more than electricity produced by gas.
But these figures are being challenged.
Paddy Padmanathan, chief executive of Acwapower — Saudi Arabia’s leading private power and water developer — said at the APWS that you can only make a proper cost comparison if gas and fuel oil used in the kingdom’s power and desalination plants is priced at a level that properly reflects opportunity cost. That should be $60 a barrel for fuel oil instead of little more than the $4 a barrel price used at present.
This reduces solar power cost premium gap. It’s cut further by the fact that solar power production rises and falls with the sun. There is no need to build generation capacity for peak demand during the day and in high summer. Solar production automatically varies with demand.
No one can yet prove, however, that solar power costs no more than conventional. Its champions argue instead that saving oil and gas and cutting carbon emissions justifies the technology and government policy should help make investing in solar plants compelling.
There is another way of dealing with the GCC power challenge. It could halt soaring power and water demand by raising consumer tariffs. But this is a step that no GCC government can yet contemplate.
Investing in solar, therefore, is an attractive way of achieving many of the objectives higher prices might deliver. The Middle East could even start exporting solar-power fueled electricity to Europe.
The case for solar power always becomes more obvious as spring gives way to summer in the Gulf and the airconditioner is turned up. There are signs this season that Gulf governments are at last beginning to recognise that Arabia’s sunshine, rather than being a problem, could generate more wealth for the region long-term than oil and gas will ever do.