UK expertise and investment can help drive the GCC’s transition to renewable energy, experts said, as the region diversifies its economy from a reliance on hydrocarbons.
Tim Callen, assistant director, Middle East and Centre Asia at the International Monetary Fund, said many of the regional reforms taking place are exactly what is needed to diversify the economy, with renewable energy set to be a key growth area along with tourism and Islamic finance.
“Renewable energy is clearly one area of growth, which in some sense when you’re blessed with oil resources seems a little odd. But clearly the region is blessed also with a lot of sun and wind in certain areas,” Mr Callen told delegates attending the GCC-UK Trade Circle Summit on Tuesday.
While the GCC is already actively leveraging its abundant renewable energy resources to slash its carbon footprint, Britain could become a key global collaborator due to its GreenTech expertise.
Meanwhile, energy transition and the journey to net zero is equally important for investment from the GCC to the UK.
In the year of the UK’s twin presidency of the G7 and the Cop26 environment summit, Britain has set the world’s most ambitious climate change target: to reduce emissions by 68 per cent by 2030 compared with 1990 levels, by 78 per cent by 2035, and to be net zero by 2050.
This falls in line with the Paris Agreement temperature goal to limit global warming to well below 2°C and pursue efforts towards 1.5°C.
Matthew Hurn, executive director and chief financial officer for disruptive investments at Abu Dhabi’s Mubadala Investment Company, said Britain’s climate change goals offer opportunities for GCC investors
“Obviously, the UK will host Cop26 later this year. They are starting already at the G7 to talk about advances and commitments to get to net zero,” he told delegates at the trade summit.
“And if they are looking at things around energy storage, electric vehicles. There are so many opportunities there.”
In turn, the GCC offers lucrative investment opportunities for British firms with expertise in the renewable sectors to invest in the region.
The GCC is already its third-largest export market outside the EU after the US and China, with total trade in goods and services between the UK and the bloc £44.5 billion ($61.58bn) in 2019. Green projects could boost that.
The UAE, for instance, has pledged to cut greenhouse gas emissions by 23.5 per cent by 2030, while the country’s National Energy and Climate Plan 2020 calls for clean energy to represent half of the nation’s total energy mix by 2050.
This will reduce the carbon footprint of power generation by 70 per cent, bringing with it cost savings of up to $190bn, which includes the two largest single-site solar projects being developed in Abu Dhabi and Dubai.
Meanwhile, Saudi Arabia’s Green Initiative goals include planting 10 billion trees and generating half of the country’s electricity from renewables by 2030.
To reach that goal, the kingdom plans to spend up to $50bn on new infrastructure by 2023.
Julian Lynn, regional head, Middle East and Asia Pacific for UK Export Finance, Britain’s export credit agency, said the region’s transition to renewable energy will be “a wild ride” with “limitless” opportunities for UK investors.
“It’s not just the move from hydrocarbons and reconfiguring their economies, it’s also the investment in the infrastructure, water, transport and energy and health as well, as these economies are repositioned for the first time almost since being created. So they are completely transitioning,” he said.
The UK “is keen to play its part” in helping with that transition, Mr Lynn said, with the country already at the forefront of emerging technologies such as renewable energy, carbon capture and storage, as well as hydrogen and electric vehicles.
UKEF has a direct lending facility of £2bn designed specifically for clean growth activities because transition strategies are at the heart of UK government policy, he said.
The GCC is “particularly focused on the collaboration with the UK and joint ventures and partnerships in all sectors will develop that need further”, Mr Lynn said.
“They will want to attract UK expertise; they want to build their own supply chain so that they are also experts in, for example, solar energy and they can design, operate and build solar plants.”
The UAE is the UK’s sixth-largest trading partner outside the EU and the largest in the GCC, with trade between the two countries totalling £18.4bn in 2019, a 6.3 per cent rise from a year earlier.
While that figure declined last year owing to a drop in energy-linked exports from the UAE to the UK amid the pandemic, Britain expects to sign multi-billion-pound investment deals with the UAE in clean energy and infrastructure as it looks to deepen trade and investment ties, Simon Penney, UK trade commissioner for the Middle East, told The National in April.
James Hygate, the chief executive of Green Fuels, a tech-led company that explores sustainable fuels, said the UK is one of the leading innovators in renewable energy, such as its development of the biofuels industry over the past few decades.
Mr Hygate said there is a huge opportunity for UK businesses to commercialise and deploy this expertise, with Green Fuels itself considering manufacturing its own technology in the Middle East in the coming years.
“The UK is a relatively small market to be supplying into as a whole and with a lot of these clean technology solutions, they are very well suited to other countries and regions, such as the GCC,” he said.
“As a company, most of our growth over the next few years will be through operations we’re establishing outside of the UK and we also see the GCC as an opportunity for manufacturing our technology in the future.”
While Green Fuels will retain the intellectual property in the UK and source the parts from there, Mr Hygate said he could see manufacturing moving into the region in the coming years.
The company already has a facility in Oman, which Mr Hygate said acts as a showcase, with one of the reasons for its location because it is easy for different parts of the world to access.
“We are planning to expand in the region and over the next five years we will hopefully have operations in all the GCC countries,” Mr Hygate said.
“For us, it’s a very exciting place to be doing business as a UK business, but also adding value both to the UK and the GCC for the technologies that we’re providing.”