Sunny long-term outlook for solar power in the Gulf

There is an old Arab proverb that says, "All sunshine makes a desert." As summer approaches in the Gulf, we are reminded again of the irony of the local climate. The hot, dry, sunny weather that makes it challenging to sustain large cities in this region also holds the promise of limitless clean energy for the future. I wrote last week about the need for a radical change in Gulf energy efficiency. Even with improvements in efficiency, though, increased electricity and water supplies are needed for growing populations and a booming economy. New energy sources are a key part of the solution but the path to future energy is not as simple as it may appear.

It is increasingly apparent that a "business as usual" approach to Gulf electricity, based on oil and gas, is unsustainable, polluting and increasingly expensive. Nuclear power is potentially low-cost and large-scale but requires a huge effort in building technical and institutional capability, and allaying fears of nuclear weapons proliferation. With limited wind and negligible hydroelectric potential, renewable energy in the Gulf essentially means solar power. Government support has ensured that cloudy, northerly Germany, with sunshine hours on par with Alaska, has become the world's largest installer of solar panels. Meanwhile, despite great promise, solar power in the Middle East is minimal.

But progress is being made. Abu Dhabi has led the way with its Masdar initiative; Saudi Arabia plans solar-powered desalination; while Oman, Qatar, Kuwait, Egypt, Syria, Jordan, Iran and Iraq all have schemes at various stages. In addition to photovoltaic panels, which make electricity directly, Masdar is working on solar thermal power, which uses the sun's rays to heat a fluid to generate power. It is less flexible but potentially cheaper and of a larger scale.

As good as solar potential is in the region, it is not without problems. The gains from intense sunlight are partly offset by the lower efficiency of solar cells at high temperatures. Dust storms can cut output sharply. Solar power also suffers from a lack of scale. Abu Dhabi and Kuwait's plans to reach 7 per cent and 5 per cent renewable energy respectively by 2020 amount to less than a year's demand growth. New solar plants, enormous by world standards, will therefore delay a power crisis by no more than a year.

The main issue for renewable energy, though, is cost. Solar thermal electricity costs some 65 fils per kilowatt-hour (kwh), compared with official selling prices of 15 fils per kwh in Abu Dhabi, and Dubai tariffs ranging up to 33 fils for heavy consumers. Yet the situation is not so simple. Solar power can be competitive in the Gulf if used in the right way. Official prices are deceptively low due to subsidies.

When air-conditioners are running at midday in August, many UAE, Kuwaiti and Saudi power stations will be burning costly fuel oil, diesel and liquefied natural gas. If Gulf power prices varied by season and time, the true cost of electricity would be apparent. European solar power suffers because it is not matched to peak demand, on cold winter evenings. In the Gulf, though, maximum solar output coincides perfectly with the need. Any excess power could be used to make ice for cooling, or desalinated water, which can be easily stored.

Instead of generating electricity, direct use of the sun's rays to heat water is a simple, robust technology, which is used at the Burj Khalifa. Solar air-conditioning is developing and could be ideal for the region. So solar power has to be integrated into the Gulf energy system in an intelligent way. Building only large, centralised solar plants along the same model as the oil and gas-fired units of the past is not the best way.

Carefully targeted government support, combined with a reduction in subsidies for conventional energy, is needed to overcome cost disadvantages. Solar power should be fitted into demand patterns. Metering electricity use by time of day, and charging appropriately, is a first step. The large, state-owned utilities have to allow residents and businesses to generate their own power and possibly sell excess amounts back to the grid. Building standards should encourage the use of solar heating and cooling.

Finally, the Gulf countries need to co-operate on renewable energy. The sharing of technology and experience avoids re-inventing the wheel. As with Masdar, research should aim to generate intellectual capital as well as electricity. Too much of the oil windfall went overseas because Middle East societies were not able to develop their own skills and industries. Further development of the GCC grid, and links to neighbouring countries in the Levant, ensures that when a dust storm strikes Oman the country can buy from Qatar, and vice versa. For Middle East countries to fulfil ambitious plans of exporting solar power to Europe, they first need to show they can share it among themselves.

In the short-term, solar power's promise should not be exaggerated. It does not fit easily into the current Gulf model of centralised, subsidised electricity. Eventually, though, sunshine can not only power industries and buildings, but also turn the desert green. Robin M Mills is a Dubai-based energy economist and author of The Myth of the Oil Crisis