Renewables still feasible in the GCC

12 January 2015

Long-term questions over cheap oil

The renewable energy industry has spent years convincing Gulf governments that alternative sources of power are feasible and can help cut down on soaring domestic fuel consumption for electricity generation. Lower oil prices in the medium term do not change the strategic calculation that investing in renewables can help the GCC maximise oil exports.

However, the GCC has never pursued renewables with urgency. Ambitious programmes in Saudi Arabia and Qatar have not materialised, although Doha is still set on installing solar panels on its World Cup stadiums. It is only the UAE that has made any significant progress, launching both utility-scale solar projects and developing regulatory frameworks for rooftop solar schemes.

The problem is that despite huge falls in the cost of solar photovoltaic technology over the last decade, and its lower start-up and operating costs, it is still impossible for renewables to compete with heavily subsidised fossil fuel feedstock supplied to power plants. The industry therefore continues to lobby to develop regulatory frameworks such as feed-in tariffs or net metering, and to be subsidised on a par with the conventional power sector.

As GCC countries draw up their budgets for 2015 and look to maintain project spending in 2015, renewables projects already in the pipeline must go ahead. If renewables programmes are scrapped, the sector will be set back further, by years. This will mean that governments will miss their targets for their diversifying energy mixes, and in the face rapidly rising electricity demand, will mean more barrels of oil being consumed domestically, at the expense of exports.

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