The Middle East, long a bastion of fossil fuel riches, appears to be making a determined foray into renewable energy sources—perhaps in a sign of things to come.
Bloomberg reports that both Saudi Arabia and the United Arab Emirates are set to collectively invest about $1.5 billion into solar power financing by 2015. It’s worth noting that the former is the leading member of OPEC (the Organization of Petroleum Exporting Countries), while the UAE comes in at number four. The projects should add around 1,000 megawatts of solar capacity altogether; that’s enough to keep about 200,000 households going.
This move is part of a larger—and ongoing—shift in the Middle East and in North Africa, wherein governments are increasingly exploring renewable options that take advantage of the exposure to ample sunlight and wind that many of these regions enjoy.
But there are other motives, too. By expanding their renewable infrastructure, these oil-producing nations can afford to conserve more crude for export purposes instead of consuming nearly as much.
This is especially important as concerns rise over the impending dominance of U.S.-produced crude on a worldwide basis. Shale operations haven’t exactly taken off in the Middle East the way they have here. Moreover, there is extensive state support for domestic utilities amidst a rise in regional power demand to the tune of about 5 percent annually. That means companies like Abu Dhabi National Energy Co. could actually end up borrowing at rates up to 1 percentage point less than what Spain’s Abengoa Solar SA could offer.
The International Renewable Energy Agency notes that over the past year, investment in renewables in the Middle East and North Africa regions increased by 40 percent to hit $2.9 billion. More than a hundred projects related to renewable infrastructure development are presently under construction, covering solar, wind, and geothermal power.
Within the next few years, it’s easy to imagine this emergent sector will bloom into a market worth over $13 billion. Take Saudi Arabia, for example. The nation’s set to pour in more than $100 billion to come up with about 41,000 megawatts from solar energy by 2032. That constitutes about a third the power Saudi Arabia produces altogether.
OPEC Eyes U.S. Shale Developments
It looks like these initiatives are emerging at a key point in time, considering that Saudi billionaire Prince Alwaleed bin Talal just recently came out with a warning that the nation seriously needs to consider lowering its overt reliance on crude oil production, according to Reuters.
As I mentioned, U.S. shale production has been rising fast that it was only a matter of time before OPEC nations sat up and took note. And Alwaleed is hardly alone in his declarations that Saudi Arabia needs to rapidly diversify its energy infrastructure. The long term implications for the success experienced by the U.S. and Canada in harvesting shale oil are clear; Saudi oil (not to mention international oil prices) may soon face a long downward slide, perhaps over the coming ten years or so.
To put matters in perspective, Alwaleed pointed out that 92 percent of the present year’s Saudi budget rested entirely on oil. The nation’s present capacity is roughly 12.5 million barrels per day; this was supposed to rise to 15 million bpd, but the worldwide financial problems caused those plans to be shelved for the time being.
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Just earlier this month, OPEC announced that demand for its oil in the coming year (2014) would be revised downward by 250,000 barrels per day from 2013 levels. A key factor in this revision is the rising attraction offered by shale oil produced in North America.
It seems clear that solar energy could find a completely new market in the Middle East if what’s happening in the UAE and Saudi Arabia is any indication. Gulfsol 2013’s organizers went on record stating that collectively, the Gulf nations have garnered about 103 billion pounds of solar installation projects.
Green Investment Bank, which is state-owned in the U.K., appears to be in on the action, with an investment of about 1 billion pounds made alongside the energy company Masdar, according to a report. Gulfsol is expected to attract major international attention when it is held later this September, in Dubai.
What’s more, Abu Dhabi has set a target of generating 7 percent of its power from renewables by 2020. Dubai’s aiming for 5 percent by 2030. If you needed further convincing, Ernst & Young’s Country Attractiveness Index included both regions in its list of the world’s most “happening” places for renewable investment last year.
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