GCC renewable spend set to increase to $16 bln in 2020

Investment in Gulf Cooperation Council (GCC) renewable energy sector is likely to reach $16 billion in 2020 with a cumulative total of $ 40 billion between 2016 and 2020, provided the correct decisions and policies are adopted by governments, according to Strategy.

“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," said Dr Raed Kombargi, partner with Strategy& Middle East.

"With the right policies and decisions an increasing number of utilities in the GCC could add renewables to their energy supply mix,” he added.

Investment in renewables totaled less than $1 billion in the GCC in 2016, the report said.

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.  The region also has the independent power plant (IPP) model, a commercial credit mechanism that makes cheap long-term financing affordable and available through private and foreign investors.

According to Strategy&, GCC governments need to adopt six critical actions for the success of renewables which include setting up of ambitious and realistic targets; define institutional roles and accountabilities; reform fossil fuel and energy subsidies and reallocate financial resources; broaden the range of financing instruments available; unify regional standards and build policymaking and regulatory capabilities.

“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,” noted Dr Shihab Elborai, principal with Strategy& Middle East.

Renewable energy still attracts a growing share of investment in new electricity generation capacity with nearly $370 billion is forecast worldwide in 2020, up 50 percent on 2016, the report added.

In the GCC, Saudi Arabia is increasingly focusing on renewable energy sources as it looks to diversify its energy mix and economy. Its National Renewable Energy Program (NREP) is targeting 9.5 gigawatts of renewable energy by 2023 in support of the Vision 2030, with an interim target of 3.45 GW of renewable energy capacity by 2020.

The Kingdom is building a 200 gigawatts solar plant, the world’s largest, at the cost of $200 billion through 2030 in collaboration with Japan's Softbank.