17 June 2012
JEDDAH - GCC renewable energy initiatives will be a window of opportunities for the region's private sector companies in both the near and long terms.
Many GCC governments have already announced plans to capitalize on renewable energy. Saudi Arabia, Kuwait, and Oman have each stated plans to produce at least 10 percent of their energy from sustainable sources by 2020. Whereas Dubai and Abu Dhabi each set targets of producing 5 percent and 7 percent respectively of their energy from solar and renewable sources by 2030.
While energy independence is one reason for the shift to renewables, the opportunity costs of burning oil is becoming increasingly difficult to ignore, Deloitte Middle East said in its "Renewable Energy: Seeds of Change" white paper.
Energy experts at Deloitte said Saudi Arabia alone is estimated to be diverting 800,000 barrels of its daily oil production to oil burning power plants. At current market prices of $120 per barrel, this amounts to up to $35 billion in lost oil revenue per annum as a result of not selling oil to foreign markets.
"In the near term, we expect to see several policy announcements and a push towards green energy production being stimulated at the national and governmental levels," said Declan Hayes, Managing Director, Renewable Energy & Cleantech, Deloitte Middle East. "This is because it is the governments and national companies themselves who are currently bearing the impact of the costs and who see the financial incentive to initiate change," he added.
As an oil producing region, the Middle East has long been considered a net emitter of carbon. However, the Deloitte white paper indicates that this perception now appears to be changing as the region takes steps to embrace renewable energy.
Declan Hayes MD of Renewable Energy & Cleantech, Deloitte Middle East, said "in the near term, we expect to see several policy announcements and a push towards green energy production being stimulated at the national and governmental levels."
He said that this is because it is the governments and national companies themselves who are currently bearing the impact of the costs and who see the financial incentive to initiate change.
In light of the ongoing changes in the renewable energy sector, the Deloitte whitepaper outlines several near and medium term topics to appear over and above policy announcements and a push towards green energy production.
The Deloitte white paper finds that given sufficient projects, the additional burst of activity in the Middle East will serve as good incentive for large multinational renewable energy companies and component manufacturers alike to consider establishing presence and production centers in the region.
Over the medium term, the Deloitte whitepaper predicted gradual removal of oil subsidies in favor of a free market mechanism.
While any move that would negatively impact the subsidization of electricity produced from oil is expected to face a potential backlash, a gradual increase in the price of oil to more fairly reflect market values seems to be an inevitable step. A decrease in oil input price subsidies would serve to simultaneously reduce the opportunity costs of lost oil revenues (i.e. oil not already sold to foreign markets), while also reducing the local demand for oil and its derivative products, Deloitte white paper predicted.
The introduction of feed in tariffs to provide a guaranteed stream of income for electricity generated by the private sector would serve to stimulate the private sector into considering renewable energy adoption. For the GCC countries and their most important export good, Gulf Research Center said earlier in a separate report that with the exception of biofuels, renewables are used for electricity and heat generation. "For the foreseeable future, renewables are not in a position either to substitute oil as a transport fuel or replace oil and gas as feedstock for the petrochemical industry on a large scale in the form of bioplastic."
It said renewables are a welcome addition to the energy mix rather than as a competition to oil, which captures about 90 percent of the market for transport energy. "This would only change if in the very long run, alternative fuels or new technologies would be developed (e.g. hydrogen generated from renewable energy or electric cars)."
JEDDAH - GCC renewable energy initiatives will be a window of opportunities for the region's private sector companies in both the near and long terms.
Many GCC governments have already announced plans to capitalize on renewable energy. Saudi Arabia, Kuwait, and Oman have each stated plans to produce at least 10 percent of their energy from sustainable sources by 2020. Whereas Dubai and Abu Dhabi each set targets of producing 5 percent and 7 percent respectively of their energy from solar and renewable sources by 2030.
While energy independence is one reason for the shift to renewables, the opportunity costs of burning oil is becoming increasingly difficult to ignore, Deloitte Middle East said in its "Renewable Energy: Seeds of Change" white paper.
Energy experts at Deloitte said Saudi Arabia alone is estimated to be diverting 800,000 barrels of its daily oil production to oil burning power plants. At current market prices of $120 per barrel, this amounts to up to $35 billion in lost oil revenue per annum as a result of not selling oil to foreign markets.
"In the near term, we expect to see several policy announcements and a push towards green energy production being stimulated at the national and governmental levels," said Declan Hayes, Managing Director, Renewable Energy & Cleantech, Deloitte Middle East. "This is because it is the governments and national companies themselves who are currently bearing the impact of the costs and who see the financial incentive to initiate change," he added.
As an oil producing region, the Middle East has long been considered a net emitter of carbon. However, the Deloitte white paper indicates that this perception now appears to be changing as the region takes steps to embrace renewable energy.
Declan Hayes MD of Renewable Energy & Cleantech, Deloitte Middle East, said "in the near term, we expect to see several policy announcements and a push towards green energy production being stimulated at the national and governmental levels."
He said that this is because it is the governments and national companies themselves who are currently bearing the impact of the costs and who see the financial incentive to initiate change.
In light of the ongoing changes in the renewable energy sector, the Deloitte whitepaper outlines several near and medium term topics to appear over and above policy announcements and a push towards green energy production.
The Deloitte white paper finds that given sufficient projects, the additional burst of activity in the Middle East will serve as good incentive for large multinational renewable energy companies and component manufacturers alike to consider establishing presence and production centers in the region.
Over the medium term, the Deloitte whitepaper predicted gradual removal of oil subsidies in favor of a free market mechanism.
While any move that would negatively impact the subsidization of electricity produced from oil is expected to face a potential backlash, a gradual increase in the price of oil to more fairly reflect market values seems to be an inevitable step. A decrease in oil input price subsidies would serve to simultaneously reduce the opportunity costs of lost oil revenues (i.e. oil not already sold to foreign markets), while also reducing the local demand for oil and its derivative products, Deloitte white paper predicted.
The introduction of feed in tariffs to provide a guaranteed stream of income for electricity generated by the private sector would serve to stimulate the private sector into considering renewable energy adoption. For the GCC countries and their most important export good, Gulf Research Center said earlier in a separate report that with the exception of biofuels, renewables are used for electricity and heat generation. "For the foreseeable future, renewables are not in a position either to substitute oil as a transport fuel or replace oil and gas as feedstock for the petrochemical industry on a large scale in the form of bioplastic."
It said renewables are a welcome addition to the energy mix rather than as a competition to oil, which captures about 90 percent of the market for transport energy. "This would only change if in the very long run, alternative fuels or new technologies would be developed (e.g. hydrogen generated from renewable energy or electric cars)."
© The Saudi Gazette 2012
