Gulf states show great promise for renewable energy deployment and investment in the region could reach $16 billion in 2020, according to a new study by management consultancy Strategy& Middle East.
The report also said a cumulative total of $40 billion could be invested in the GCC between 2016 and 2020, provided the correct decisions and policies are adopted.
To unlock this potential, GCC governments must develop a carefully planned framework and make careful decisions, it added.
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.
The report said 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 generous fuel subsidies, a mindset that prefers building very large conventional plants to meet rapidly growing demand, concerns over transmission and distribution networks and unclear regulatory and policy frameworks that discourage the development of renewables.
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.
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.”
Dr Yahya Anouti, principal with Strategy& Middle East, added: “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 minimize costs while helping achieve their national economic development objectives with the correct policies and decisions.”
