As the oil rally continues to gain momentum, with prices expected to reach $100, renewable energy could profit from the trend, even in oil producing countries.
Since last year, energy demand has outstripped supply, driven by high economic growth, a harsh winter and geopolitical tensions.
Yet experts who spoke to Arab News believe that rising oil prices will not curb Gulf countries’ appetite for renewables.
“Higher oil prices will provide incentives for Gulf countries to spend more on renewable energy investments, thanks to more profits, resulting in national budget surpluses,” says Dr Youssef Al-Shammari CEO of CMarkits and research fellow at Imperial College in London.
“Renewables are part of Gulf countries' plans to make their economies more sustainable,” he adds.
The Gulf countries’ strategy to roll out their renewables assets was further strengthened from 2019 onward to 2021.
In 2019, solar targets for both 2023 and 2030 were revised substantially upwards, with a targeted share of 20 Gigawatts (GW) and 40 GW, respectively for solar photovoltaics (PV) , according to a Middle East Institute report.
In April 2021, Saudi Arabia inaugurated Sakaka, its first-ever utility-scale renewable energy project under the National Renewable Energy Program.
Seven independent power producer schemes for approximately 2,970 MW of PV projects were announced to have signed power purchase agreements, still according to the MEI report .
Additionally, in December Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman announced the Kingdom will invest SR380bn ($101bn) into renewable energy production by 2030.
Saudi Arabia expects renewable energy to provide 50 percent of electricity generation by 2030.
“Vision 2030 aims to reach 60 GW from renewables,” explains Dr Al-Shammari.
Last October the UAE pledged to invest AED600 billion ($163 billion) in clean and renewable energy by 2050. The investment is part of the UAE’s efforts to achieve net zero by 2050.
A few weeks before a 300 MW first stage of the Mohammed bin Rashid Al Maktoum Solar park was inaugurated. The solar park plans to reach a total capacity of 5 GW by 2030.
Unlike regional neighbors the United Arab Emirates and Saudi Arabia, Kuwait has not set a net zero carbon emissions goal, according to a recent Bloomberg article.
The Kuwaiti Investment Authority, which manages $700 billion, says, however, that environmental, social and governance principles have become central to its outlook.
“Renewables are a good strategy for Gulf countries to diversify their economies,” says Al-Shammari.
Sovereign investors across the board invested around $23 billion in renewable energy in 2021 - more than oil and gas, according to Global SWF, which tracks all the world’s sovereign wealth funds, Bloomberg reported.
Jessica Obeid, senior advisor at Azur Strategy, dampens slightly the optimistic outlook. Renewable energy and infrastructure projects are interlinked with government spending, she points out. “High revenues would enable investments in low carbon energy, provided the political will remains in Gulf countries,” she adds.
Contrary to countries where oil is not subsidized, incentives to consumers and companies — that rely heavily on diesel — should be put in place at the regional level, to reduce hydrocarbon use, she adds.
