And even though the Middle East is awash with sunshine virtually all year around, it has taken a while for solar to start gaining traction.
But you can’t really blame the oil-rich regional governments which have benefited immensely from the abundance oil and gas reserves for decades. With hydrocarbons technology readily available to extract fossil-fuel riches from the ground, it is tough to suggest moving to an unproven technology.
The dynamics, though, are changing. With ‘cheap’ oil a thing of the past, there has been a need even for hydrocarbon-rich states to look for other energy sources that are cheaper and also reduce global footprint of MENA countries.
Qatar, the UAE and Kuwait are the three largest emitters of carbon dioxide per capita in the world, and apart from that embarrassing statistic, it also means less barrels of oil for exports for the OPEC members.
The situation is far worse in OPEC kingpin Saudi Arabia.
"Domestic consumption of oil in Saudi Arabia is growing at an unsustainable pace," notes Standard Chartered Bank in a recent report. "Saudi Arabia currently consumes close to 2.9 million barrels per day (total energy consumption, which includes liquid fuels, brings actual total domestic consumption closer to four million bpd), more than a quarter of its total output."
The bank estimates that Saudi Arabia’s domestic consumption is growing at around 6% year-on-year. If current consumption trends continue, Saudi Arabia’s domestic consumption could reach 8.3 million bpd by 2030 (or more than 66% of current existing capacity).
This corresponds to a Chatham House report earlier in the year which forecast – rather grimly – that Saudi Arabia could become a net importer of oil in the future if current trend persists.
"The country currently consumes over one-quarter of its total oil production – some 2.8 million barrels a day. This means that on a ‘business as usual’ trajectory it would become a net oil importer in 2038," said Chatham House in a report.
While Saudi oil minister Ali Al-Naimi rejected the forecast, Saudi Arabia does need to produce and export more oil to pay for its generous salary hikes, subsidies and grants to Saudi citizens.
Not surprisingly, the Saudi government believes solar energy is a cornerstone of its new energy policy.
"We’re investing in them [renewables] at Saudi Aramco, with a particular emphasis on solar," Khalid A. Al-Falih, President and CEO of Saudi Aramco said in a speech. "We believe that alternatives can and will make a greater contribution to global energy supplies than they do at present, and we welcome that growth. But the expansion of renewables and alternative energy technologies should be rational and gradual, and tied to their economic, environmental and technical performance."
Saudi Aramco is extending its conventional energy relationship with Asia to include renewable energies and has invested in Showa Shell, an Asian pioneer in solar power.
"We are a committed stakeholder in Showa Shell, and are particularly excited to see our partnership expand beyond petroleum through the bold steps we are taking in the area of innovative solar energy technologies through the newly created subsidiary, Solar Frontier," Al Falih told Japanese delegates on May 25. This includes pilot projects on both coasts of the Kingdom of Saudi Arabia undertaken in collaboration between Saudi Aramco and Solar Frontier.
Saudi Arabia has earmarked USD100-billion on nuclear and other renewable energies with the target of supplying 10% of its total power needs by 2020.
King Abdullah City for Atomic and Renewable Energy (KACARE) and the Research Institute at King Abdulaziz City for Science and Technology (KACST) are the centrepiece of alternative initiative.
The state-owned utility will provide the required stability and support to the pioneering renewable energy projects. As part of introducing a new law for renewable energy, the Saudi government is planning to adopt a solar energy feed-in tariff (FIT) similar to what has been seen across Europe.
"The sector is still rather immature as no comprehensive technical or economic feasibility studies have been performed," notes E&Y in a report. "An added deterrent is that the regulatory and permitting process is yet to be fully developed and implemented creating further uncertainty for any immediate investment and development."
However, the country has exceptionally strong solar resources, and has installed its first major PV plant (500kW) in Farasan.
Saudi Arabia is not the only country looking to turn sun rays into a power source.
Middle East states are slowly warming up to the wonders of the sun and are investing more than USD17-billion in 24 solar power projects in the region, according to Zawya Project Monitor. That number is likely on the conservative side and set to rise as global trends indicate more affordable solar technology is on the way.
Although Chinese solar companies are currently outsmarting solar firms in the developed world, the shakeout could also serve as an opportunity for Gulf sovereign wealth funds to invest in some of the promising companies and benefit from technology transfer.
Despite its abundance, solar represents a tiny fraction of the world’s current energy mix.
"This is changing rapidly and is being driven by global action to improve energy access and supply security, and to mitigate climate change," notes the International Energy Agency.
"Around the world, countries and companies are investing in solar generation capacity on an unprecedented scale, and, as a consequence, costs continue to fall and technologies improve.
But there have been numerous setbacks. With austerity measures gripping much of the developed world, investments in solar and other alternative energies have taken a backseat.
"The continued recession is acting as a brake on policy intervention, as ‘renewables-friendly’ stimulus measures are not always renewed and their perceived generosity is challenged," notes E&Y. "Concerns about the impact of rising energy prices on industry costs and fuel poverty are already having an impact on policy-makers. However, the fact that investment today reduces exposure to rising fossil fuel prices tomorrow does still strike a chord."
According to IEA data, delaying action is a false economy: for every USD1 of investment avoided in the [renewable/low carbon] power sector before 2020, an additional USD4.3 would need to be spent after 2020 to compensate for the increased emissions.
It’s no surprise that oil-importing North African countries, rather than their complacent oil-rich peers, are leading the way in solar energy.
The spectre of angry citizens fed up with rising energy prices, among other grievances, that toppled at least three regimes in North Africa, has given renewables a greater impetus.
Indeed, E&Y places Morocco tenth in the world in terms of its solar potential – and for good reason.
The country has no coal and oil reserves, but its rising population means its energy demand will double by 2020. The government has set a target to generate 42% of electricity via the renewables sector.
"Being the only country connected to the European grid, Morocco has a great opportunity to transform itself from a net energy importer to a net energy exporter. Morocco’s excellent solar power and significant wind energy resources support the case for the country to become an energy provider to Europe," notes E&Y.
The country’s Desertec Industrial Initiative is currently developing the first solar Reference Project of 150MW in Morocco, which is expected to include exporting energy to Europe through Spain.
The North African nation also launched a EUR6.4-billion, 2-gigawatt solar project by 2020, across five sites, including a 500MW project by 2015 — the world’s largest.
The country is also part of Medgrid, an EU-Mediterranean solar initiative, focused on supplying 20GW of electricity through solar power to 43 countries across the Mediterranean by 2020.
Since its creation in December 2010, more than 20 French, German, Spanish, Italian, Moroccan, Egyptian, Syrian and Jordanian companies have joined the grid.
Meanwhile, Desertec reportedly kicked-off the WEREEMa project in Morocco, Tunisia and Egypt, funded by the European Union and the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety.
A second project, RE-Generation MENA, is funded by the German Foreign Office, focused on greater involvement of students in Egypt and Tunisia in the EU-MENA renewable energy sector.
Egypt has been distracted lately by a political revolution, but its energy demand will only rise.
The government had earlier set a target of deriving 20% of its energy via alternatives, with 12% through wind power and 8% through solar energy.
"Apart from a 30 MW [concentrated solar power] CSP ‘hybrid’ plant at Kuraymat (coupled with gas), there are no major immediate plans for more CSP. However, there are future indications of at least two 100MW solar plants to exploit Egypt’s vast solar potential," notes E&Y, which ranked Egypt as the 24th most attractive country in the world for solar power generation.
Oman has not built on its pioneering effort in opening the power sector in the 1990s, but the government hasn’t taken up renewable sector with the same zeal.
Solar resource in Oman is one of the highest in the world with the potential to supply all of Oman’s current energy demand, said E&Y. CSP is touted as the technology to take advantage of this resource with demonstration projects currently planned (10-50MW) and larger facilities (c. 200MW) possible in the future.
The UAE is also making a concerted effort to harness the power of the sun. The USD22-billion Masdar City aims to be a carbon-neutral city, focused on all renewables, including solar. While the project has gone through several revisions, its overall mission underlines the government’s importance towards the renewables sector.
Masdar Power is leading renewable energy development and currently constructing a 100 MW CSP facility, Shams 1, in Abu Dhabi, which is set to be completed by the end of the year.
Dubai, which has an urgent need for renewables, already produces 4.5MW of energy through solar plants and is targeting to meet 1% of its energy needs through solar technologies by 2020, and to arrive at 5% by the end of the following decade.
A major initiative includes the Dubai Electricity & Water Authority project to build the Gulf’s largest solar park for USD3.5-billion. The Sheikh Mohammed bin Rashid Al Maktoum Solar Park is expected to be 1,000MW and completed by 2030.
Like most countries, MENA states are looking to switch over to gas-fuelled power stations to meet their energy needs, and that source will likely remain the primary fuel of choice in the future.
But solar is slowly gaining ground due to the availability of cheaper technology and its sheer abundance in the region.
Indeed, North African states can take the lead in solar power due to their close proximity to Europe and a dire need to find diversified power sources. While most North African states were rocked by the Arab Spring last year, they could take advantage of their fresh start to focus on solar energy as a way to create jobs, attract foreign investment and move away from expensive hydrocarbons.
Meanwhile, countries like Saudi Arabia and the UAE know their rising domestic needs are eating into their precious crude exports. That, simply, has to change, if they wish to remain influential in oil markets.
