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Private sector to gain as GCC eyes green energy

Beirut, June 12, 2012

Recent changes in regional policies towards renewable energy will create an abundance of opportunities for private sector companies in the GCC, in the near and long term, a report said.

Saudi Arabia, Kuwait, and Oman have each stated plans to produce at least 10 per cent of their energy from sustainable sources by 2020, added the ‘Renewable Energy: Seeds of Change’, a whitepaper by Deloitte Middle East, a leading professional services firm.

Dubai and Abu Dhabi each set targets of producing 5 per cent and 7 per cent respectively of their energy from solar and renewable sources by 2030, it said.

As an oil producing region, the Middle East has long been considered a net emitter of carbon. However, the Deloitte Whitepaper indicates that this perception now appears to be changing as the region takes steps to embrace renewable energy.

While energy independence is one reason for the shift to renewables, the opportunity costs of burning oil is becoming increasingly difficult to ignore, energy experts at Deloitte said.

They cite that Saudi Arabia alone is estimated to be diverting 800,000 barrels of its daily oil production to oil burning power plants.  At 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.

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 whitepaper 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.

While any move that would negatively impact the subsidization of electricity produced from oil is expected to face a potential social backlash, a gradual increase in the price of oil to more fairly reflect market values seems to be an inevitable step, said the whitepaper.

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, the Deloitte whitepaper predicts.

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.

By developing technology that is able to better withstand the dust, sand, wind, high temperatures and low water levels that characterize the desert environment in most of the Middle East, companies may realize a first mover’s advantage to mass adoption.

Market forces and a changing competitive landscape are providing compelling reasons to consider alternative sources of energy. As such, many short term and medium term opportunities will continue to surface and impact the GCC region, the whitepaper said. – TradeArabia News Service




Tags: GCC | solar | Private sector | Deloitte | Renewables | Green energy |

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