The Makings Of A Solar Superpower?

Published June 30th, 2013 - 06:46 GMT
Solar panels
Solar panels

ByRyan Harrison

There are some basic truths that give the countries in the Middle East a powerful edge in the race to the top in the world of solar energy.

The most obvious is that arid climatic conditions mean there’s a great deal of sunlight throughout the year, with clear skies on average for 80 per cent of the year.

For decades, governments and businesses in other regions have been working to overcome the challenges associated with harnessing their weather systems to generate energy. The key obstacle is the intermittent nature of these natural resources.

To generate electricity from the sun, photovoltaic solar panels capture light energy, or photons. Various weather conditions can substantially impact the effectiveness of solar, for example when the air is humid or is of poor quality or when the skies are cloudy, making solar electricity generation intermittent.

The intermittency and variability of solar generation often limit their practical ability to meet electricity demand. Energy firms argue that the need to have additional generation to ensure a reliable electricity supply increases their cost relative to alternatives like gas and nuclear.

That’s why, according to Exxon Mobil, even though by 2040 the world will witness a 20-fold increase in solar power, it will only account for about two per cent of electricity supply.

The Middle East’s natural climate advantage has seen leaders in the region pushing for a central role in expanding this space.

Some bet the region will emerge as one of the top renewable energy markets in future, with solar at its heart. The current renewable energy targets, policy maker commitments, ongoing project developments and above all urgent need to trim down the domestic consumptions of hydrocarbon leaves the region with good odds.

Most likely, Saudi Arabia and UAE will dominate the renewable energy initiatives in the Middle East, as they have done in the last ten years.

According to analysts at Kuick Research, these two countries will account for more than 75 per cent of the region’s renewable energy capacity in the future.

However, there is some way to go until the Middle East’s solar achievements mean it can carve itself as a world leader, according to Tamsin Carlisle, senior editor at energy intelligence firm Platts in Dubai. She’s argued for a change in strategy: “The region’s renewable energy efforts are currently narrowly focused on supplying burgeoning domestic energy needs rather than developing excess power capacity for export. While certain states, notably Abu Dhabi, a few years ago voiced ambitions to become global leaders in renewable energy technology and equipment manufacturing, in practice that goal has been elusive.

“It is possible that, over time, government-supported technology transfer initiatives, including those championed by Abu Dhabi’s Masdar and Saudi’s King Abdullah University of Science and Technology, will enable the region to achieve its alternative energy world leadership aspirations, but that is likely to take decades.”

Carlisle said in the meantime, the rationale for developing extensive domestic and regional alternative power infrastructure is becoming ever more compelling.

Saudi and the UAE’s large-scale solar-power build-outs expected in the coming years will require extensive international investment and equity partnership in projects.

“Oman won’t be far behind, despite being more financially constrained than its neighbours, and is already establishing itself as an international leader in the application of solar power to heavy oil extraction – a specialised niche, to be sure, but an increasingly important one both regionally and worldwide,” added Carlisle.

Energy-poor North African and Levant countries, including Morocco, Jordan and to some extent Egypt, will continue from necessity to pursue previously established renewable energy initiatives as a means of reducing oil and gas imports, but budgetary constraints and Arab Spring political turmoil may compromise the momentum of such programs, said Carlisle.

“In my view, they are likely to be overshadowed in the medium term by alternative energy development in richer, more politically stable Arabian Peninsula states.”

Carlisle’s views are shared by other industry commentators. Logan Goldie-Scot, an analyst at Bloomberg New Energy Finance, said: “The number of projects in the region is increasing steadily but the region is unlikely to become an alternative energy leader in the foreseeable future. The project pipeline remains small, and the limited state of policy in the region is a major barrier to investment and deployment in the sector.”

Saudi Arabia has the potential to be the exception to the rule here as it aims to commission 54GW of renewable energy by 2032. 500-800MW of capacity is due to be awarded as part of the introductory round by the end of 2013, with capacity allocations increasing in subsequent rounds, involving up to 7GW of capacity in a two-to-three year timeframe. The program is in the early stages however and has suffered considerable delays to date.

Overall, Saudi is seeking about $100 billion in investments to generate about 41,000 megawatts, or a third of its power, from solar by 2032. That compares with about three megawatts now, which puts it behind Egypt, Morocco, Tunisia, Algeria and the UAE in capacity, according to Bloomberg New Energy Finance figures.

The market entry options for companies is different from country to country, but in the case of Masdar’s Shams 1 project, 20 per cent is owned by Total and 20 per cent is owned by Abengoa, both European energy producers. The remainder of the project is owned by Masdar itself.

In March, at the inauguration of the new $750 million concentrated-solar plant, the head of Abengoa’s solar unit Santiago Seage said the execution of solar programs in the Middle East would bring “thousands of megawatts and billions of dollars in investment,” and that the unit plans to bid on more projects in the region.

Adding clean-power generators like this may help oil producing nations in the Gulf to conserve more crude and gas for export, reducing their use of the fuels to generate power that’s sold at subsidised prices.

Also, it’s worth noting that overall, electricity production is the most energy intensive industry in the Middle East and is produced mostly from fossil fuels. The climatic conditions of the region make air conditioning a must resulting in more than average power consumption as compared to the rest of the world.

About 99 per cent of water comes from desalination, another energy consuming process, working mainly on gas feeds. Water and electricity together are the most energy consuming sectors in the region and some of these countries are the highest per capita consumers of power and water.

Masdar chief executive Sultan Ahmed Al Jaber called Shams 1 “a major breakthrough for renewable energy in the Middle East,” noting that the company now generates nearly 10 per cent of the world’s solar thermal electricity. Shams 1 will power about 20,000 homes in Abu Dhabi.

The new plant will produce 100 megawatts of power by harnessing the sun to heat liquids and create steam to turn turbines. That differentiates the facility, called Shams 1, from a photovoltaic plant, which uses panels to convert sunlight directly into electricity.

In a report from Bloomberg news, Philippe Boisseau, president of new energies at Total, said he will study concentrated-solar power, or CSP, and photovoltaic projects in Saudi and Qatar.

While PV is “probably the most economical technology for solar generation,” CSP allows energy to be stored because operators can stockpile heated liquids for use when the sun isn’t shining, said Boisseau.

The new Abu Dhabi plant uses so-called solar troughs, which contain 20-foot mirrors, to reflect the sun’s heat onto tubes holding oil. The tubes could span the 120-kilometre (75-mile) distance to central Abu Dhabi. The facility, which doesn’t yet have storage facilities, can still run 24 hours a day using natural gas to drive turbines when there’s no sun.

The fact that Paris-based Total and others are planning to increase investments in Middle Eastern renewable energy underpins the region’s potential as a global leader.

Solar PV’s stark price reductions since 2008 mean the Middle East can exploit this today in an economically attractive manner, and, according to many, should – for the benefits of energy security, sustainability and associated economic diversification that brings jobs and new enterprise.

This will need to be approached in a structured manner to ensure that this technology is rolled out in a comprehensive and economically effective manner, according to PwC, the world’s largest accounting firm.

This does not mean any of the other technologies won’t become the priority in the future, but as for now the focus should be solar PV, one of its consultants said.

By way of example, PwC’s figures suggest it is possible now to buy almost three times the solar capacity in 2013 for every dirham, riyal or dinar spent compared to 2008.

Once the necessary regulatory framework is in place, it is much more certain for the Middle East to realise its ambitions as a hub for Solar PV. Add to this that the region produces most of the elements to manufacture cells and panels and enjoys a very competitive cost of energy.

In terms of investments, most of the international players, like Total, are already entering into discussions with local companies for the establishment of joint ventures. Any new investor will require local know how and, especially for solar thermal and local construction capacity.

For local players, they will require international development know-how such as solar resource measurement experience, plant design, technology selection and procurement experience.

Kuwait is often regarded as one of the countries with the hardest task ahead to develop solar and indeed renewable energy in general. This is largely due to its heavy reliance on oil and the fact that it has no projects registered under the Clean Development Mechanism, an accreditation for project developers seeking carbon credits, according to the International Renewable Energy Agency (Irena).

At the end of 2012, the country tried to redress this balance, with Emir Sabah al-Ahmad Al-Sabah announcing he was seeking to produce 15 per cent of its energy from renewables such as solar and wind by 2030.

Speaking at United Nations climate talks in Doha, the emir said it was important for all nations to work on the “pressing issue” of global warming. But he said developing nations such as his should not be forced to take on binding targets for reducing greenhouse gas emissions.

The lack of action and this seeming ambivalence on the subject has seen many criticise Kuwait for paying lip service to the renewable cause.

Oil and gas still dominate the local economy. Kuwait is the third-biggest producer in the Organisation of Petroleum Exporting Countries and has the capacity to generate about 10.9 gigawatts of electricity. Oil accounted for two-thirds of Kuwait’s primary energy supply in 2009, up from about 58 per cent at the beginning of the decade, according to Irena. Natural gas makes up almost all the rest.

The emir said that by 2015 Kuwait will produce about one per cent of its electricity from renewables. Irena estimates the nation has 70 megawatts of renewable projects, including 10 megawatts of photovoltaics, 50 megawatts of concentrated solar power and 10 megawatts of wind.

According to Standard Chartered, Kuwait will continue to rely on high oil prices to post strong fiscal and external surpluses in 2013. Oil revenue is well-placed to support investment and the start of the year has seen official announcements on planned spending amounts, the bank said in its Mena ‘A region in flux’ report. However, ongoing tensions between parliament and the cabinet may detract from this.

“Kuwait looks unlikely to reduce its dependence on oil in the short to medium term and will see lower levels of foreign direct investment than its peers, as a result,” the report said.

It is clear than that a lot of work still needs to be done to exploit the Middle East’s natural climate advantages. The region has talked about it, and in light of rising energy demand, it will become more important to integrate solar into the mix. There are some that still argue that for all the talk, the actual investment and number of projects has been very limited. Saudi and Abu Dhabi are currently the front- runners to hoist the region on their shoulders in front of the world. But it will take more research, planning and investment before industry leadership becomes a reality.

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