Bright prospects for regional players in clean-energy sector

The pathway to the future expansion of the renewables sector can be found in developing and emerging markets, writes Mohamed Jameel Al Ramahi

The UAE was the first country in the Arabian Gulf to establish a national target for the adoption of renewables, which paved the way for the deployment of large-scale projects. Courtesy Masdar

Renewable energy has established itself alongside conventional power sources at the top table of the global energy sector.

This was evident at the Saudi Arabia Renewable Energy Investment Forum, held in Riyadh recently, which brought together leading figures from across the energy community to discuss the next steps in delivering on the kingdom’s ambitious renewable energy targets.

Clean energy was also high on the agenda at the CERAWeek conference in Houston in March – an event more readily associated with the oil and gas industry.

A recurring topic of debate has been the vital role that commercially viable renewable energy will play in meeting the power demand of developing and emerging economies. These countries, mainly in Africa and Asia, account for the estimated 1.2 billion people in the world with little or no access to electricity.

While closing the energy-access gap of poorer nations is an immense challenge, it also represents a large opportunity for an ever more cost-competitive renewable energy sector.

Encouragingly, the policy and economic environment needed to make it happen is improving. 2015 was the first year when developing and emerging countries spent more on renewables than the developed world, excluding large-scale hydroelectric power.

There is much more to do, of course, but Middle East-based renewable energy companies such as Masdar have shown they are willing to be first movers, and take the lead in bringing about successful public-private partnerships. This is crucial in countries where the necessary infrastructure and regulatory frameworks have yet to be fully established.

The UAE was the first country in the Arabian Gulf to establish a national target for the adoption of renewables, which paved the way for the deployment of large-scale projects. Proven “bankable” technologies and reliable off-takers willing to buy electricity over the long term, have also created the market visibility needed to attract investment and reduce costs.

These factors allowed a Masdar-led consortium to quote what was then a record-low price for solar power generation last June, as part of its successful tender to develop the 800-megawatt phase three of Dubai’s Mohammed bin Rashid Al Maktoum Solar Park.

A number of other countries in the region have had notable success in developing progressive clean energy programmes.

The Ouarzazate solar power plant “Noor 1” in Morocco, for example, has received US$1 billion (Dh3.6 billion) from the German investment bank KfW, US$596 million from the European Investment Bank and US$400m from the World Bank. The European Investment Bank and the International Finance Corporation are also investors in the Tafila wind farm in Jordan, the Middle East’s first utility-scale wind power project.

In Mauritania, Masdar is working with the Abu Dhabi Fund for Development to tap into the country’s potential for solar power generation. Two significant projects totalling 31.6MW have been developed so far – the 15MW Sheikh Zayed solar power plant in Nouakchott and eight smaller rural plants with a combined output of 16.6MW.

In my view, the demand to invest in renewable energy projects in developing countries will surge as transparency continues to improve.

Indeed, the International Renewable Energy Agency has observed that the share of renewables in Africa’s energy mix could reach 50 per cent by 2030 with the right enabling policies in place. That would see wind power capacity increasing to 100GW and solar capacity exceeding 90GW, up from approximately 4GW and 3GW, respectively.

One of the ways in which institutions such as the IFC are trying to scale up the adoption of renewables in developing countries is through efforts to unlock private capital. The IFC recently partnered with a leading asset management company to launch the world’s largest green-bond fund dedicated to emerging markets, a $2 billion initiative that hopes to incentivise private investment in climate-related projects.

Bilateral cooperation is also key to extending energy access. Arab states enjoy close ties with many developing countries in Africa and Asia, and the UAE is a hub for global investment into the region.

India, for example, accounts for $60 billion in annual trade with the UAE, a figure that could rise by as much as 60 per cent by 2020. Such close economic links provide a strong foundation for lucrative renewable energy partnerships.

At the same time, the growing commercial appeal of renewable energy projects away from national electricity grids is accelerating the adoption of clean energy faster than expected.

This is true of India and a number of countries, where it is hoped the implementation of renewable energy targets will lessen the reliance on fossil fuels to meet future power demand.

The pathway to the future expansion of the renewables sector will be increasingly found in developing and emerging markets. The global energy industry, ever more attuned to the commercial potential of renewables, is gearing up to compete for the most attractive prospects.

Those Middle East developers who have catalysed the adoption of renewable energy in this region and other markets must seize their chance.

Mohamed Jameel Al Ramahi is chief executive of Masdar