Solar energy is becoming the low-cost solution in the Gulf region

We spoke with Stein Amble Haugan, Director Corporate Customers, who attended The World Future Energy Summit (WFES) in Abu Dhabi in both 2017 and in January 2018. WFES is an influential renewable energy conference that gathers companies, civil society and governments from all over the world. We asked Stein about his views on the development of renewable energy in the region and the trends he observed at this year’s visit to Abu Dhabi and the WFES.

 

What are your initial reflections from the conference and the general state of renewable energy in the Gulf region?

Global corporates are increasingly interested in the region and they are seeking to document their use of renewable energy. Last year a mere 1% of the energy production in the Gulf region was renewable, but we expect to see a rapid growth of renewable energy production in the coming years.

Solar power is the focus area. A lot of people have spoken about developing renewable energy, now the change is happening – and fast. In Europe we are developing 30-40-50 MW solar power plants, while in the Gulf region they are developing plants with capacity of 200-500 MW installed capacity. The change will happen a lot quicker than what we have seen before.

 

 

Who are the new actors in the region?

The Gulf region, traditionally an oil and gas dependent region, is increasingly attracting investments in renewable energy. Large international energy companies, with a history in fossil fuels, are investing large sums in solar power to be a part of this growth. In addition, the national energy entities in these markets like Saudi Aramco and oil and gas companies in Bahrain, Kuwait and Abu Dhabi are joining the shift towards renewable energy, because solar is becoming the most competitive solution for new energy in the region. It makes more sense to export a natural resource and utilize a cheaper one.

 

What factors are important for a shift towards more renewable energy?

The price and experience with solar technology and installation are of two important factors. In addition, access to cheap capital and land are important to realize solar projects. In the Gulf region, the conditions for solar power is excellent, with plenty of land, combined with the reduced cost of technology and access to favourable financing means that the Gulf has many preferential factors when it comes to developing solar power plants at large scale.

RE100 published a report in January “Approaching a tipping point”, where they mapped the key barriers to reaching their 100% renewable energy goal cited by members . Policy barriers were most commonly framed as a challenge to reaching the goal of 100% renewable energy, together with unavailability of suitable contracts or renewable energy certificates and the underdevelopment of a market-based system in some geographies.

 

Last year Philips Lighting, became the first major international company to use I-RECs in the Gulf region – a purchase ECOHZ was a part of making possible. What was the effect of this deal?

Philips Lighting’s purchase of I-RECs last year marked a change for sourcing and documenting renewable energy in the Gulf. Immediately after a corporate goes out and states that they document their energy consumption from renewable sources in a region, other companies follow suit. Many of the world’s most influential companies have committed to using 100% renewable electricity by 2020 under RE100, and they need to document their renewable electricity consumption everywhere they operate. The current RE100 members present in the region alone account for consumption of over 500,000 MWh.

 

 

What is currently happening with I-RECs in the Gulf?

Multinational corporates with operations in the Gulf, are looking for a credible solution to document and report that the energy they use comes from renewable energy sources. I-RECs is that solution. I-RECs is a global standard used in regions where no similar documentation scheme exists. Companies can buy I-RECs to document and report that the energy they consume outside Europe and North America comes from renewable energy sources.

 What we see happening in the Gulf and the rest of the world is that corporates are not just focusing on their own electricity consumption but also their subcontractors and their supply chains consumption – that’s where the real shift will happen. Suddenly, the demand for renewable energy can explode.

 

What is the effect of the drop in prices of production of renewable power from solar energy?

What we see is that the prices are becoming more and more competitive. Last year the price of solar power was around EUR 30 per MWh, now, it’s well below EUR 20. Given that the prices are already low, and keep decreasing, a lot can happen very quickly. The commissioning time for solar power plants is shortening and can be built in 6 months or less. In addition, the low physical power prices mean that the relative role of I-RECs are becoming increasingly important. The percentage gain from tracking instruments are more relevant to the developers.

 

What do you see happening in the coming year?

The closer we get to 2020 we will see a definite increase in the demand for renewables and I-RECs. And, increased consumption of renewable energy, increases the need for grid connections for balancing and storage solutions.

The conference this year focuses more on cooperation, and we also see increased interest in renewables from corporates already present in the region and the ones looking to establish themselves. The Gulf will have a larger presence in the future international energy market, not just by selling technology and export electricity, but also as exporters of competence and investment in renewables.