Support grows in the UAE for green subsidies

Calls are growing for the UAE to support renewables through subsidies that have helped push the solar and wind industries forward in Europe and elsewhere

The 'Beam Down' tower is reflected on solar panels in Masdar City, approximately 17 km from Abu Dhabi. Support for green energy appears to be growing. Reuters/Jumana El-Heloueh

Calls are growing for the Government to support the fledgling clean energy sector through subsidies that have spurred the growth of renewables in other parts of the world.

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Solar and wind farms have been set up in China, the US and Europe with government payments and loans in a bid to allow renewables to compete with cheaper fossil fuels. Governments in the Gulf region, however, have yet to offer similar support despite ambitious renewables targets.

Last week Sultan Al Mansouri, the Minister of Economy, became the highest-ranking government official to come out in favour of a green subsidy.

"If this is an objective that we want to achieve, we need also to give the incentives to hopefully achieve these objectives," Mr Al Mansouri said on the sidelines of a conference in Dubai.

He said the Ministry of Economy could examine, in tandem with other government bodies, a subsidy in which the Government covers a quarter of the cost of installing renewable projects, similar to models deployed in some EU nations. "It could work - why not? I'm sure the Europeans did not really propose something like that and implement it unless they had done their homework."

Mr Al Mansouri joins a host of other advocates of green subsidies for the UAE, many of whom come from within the industry.

"I'm very happy that this is also being discussed on a federal level, so that is something that gives hope," said Frank Wouters, the director of Masdar Power, a unit of the clean energy company owned by the Abu Dhabi Government.

Abu Dhabi and Dubai are studying feed-in tariffs, which pay utilities for the difference between the cost of renewable and conventional power. That gap is particularly large in the Gulf because fossil fuels are already generously subsidised.

The Dubai Electricity and Water Authority, the emirate's utility, is hiring consultants to study how to deploy a feed-in tariff, and Nejib Zaafrani, the chief executive of the policy-setting Dubai Supreme Council of Energy, has said a subsidy could arrive within the next two years.

Meanwhile, Abu Dhabi's Executive Council has been weighing up strategies for reaching its target of drawing 7 per cent of its electricity from renewables by 2020 - a goal industry executives estimate will require a new 100-megawatt plant every year.

One option is for Abu Dhabi to follow the same practice as it did with Shams 1. Masdar's US$600 million (Dh2.2 billion) thermal solar plant in Al Gharbia was able to go ahead once the Government granted it a "green payment" - essentially, a one-time subsidy.

That could be a good model for supporting future large-scale installations, including a planned 100MW photovoltaic plant called Nour 1 and a smaller wind turbine array on Sir Bani Yas Island that have yet to go before the Executive Council for approval, Mr Wouters said.

Rather than setting a long-term feed-in tariff that would need adjustment over time because of the changing costs of renewable and conventional energy, the Government could tailor a subsidy to each project at the time of installation.

"In terms of the type of subsidy, you have to be smart about it," Mr Wouters said. "It's never good to have a one-size-fits-all approach."

Solar companies in Spain, Germany and the Czech Republic stumbled when subsidies were rolled back to take into account the decreasing cost of solar technology and budget concerns. Small installations, such as rooftop solar panels that measure their output in kilowatts rather than megawatts, would need a feed-in tariff to be practical, Mr Wouters added. Abu Dhabi institutions have installed 2.3MW of solar panels across the capital as a test run for the roll-out of a rooftop solar programme of up to 500MW.

A solar subsidy would also help to increase the number of jobs in the solar industry, said Vahid Fotuhi, the chairman of the Emirates Solar Industry Association.

"We would see a 10-fold increase in the number of jobs created if a feed-in tariff is adopted and we start seeing demand," Mr Fotuhi said.

"These are technicians, these are electricians, these are installers, these are engineers - all these are jobs. There will be thousands of them."

Industries that have experienced rising electricity costs could also benefit from increased power generation, Mr Al Mansouri said.

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"It is taking quite a sizeable chunk of their operational costs, and at the same time because of the current economic situation in the world, it also becomes a challenge for them to be able to compete," he said, adding Abu Dhabi's planned nuclear plant, set to begin generating power in 2017, could provide some relief.

"The future is bright for us, definitely. But we need to address these issues and bridge it between now and then."

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