NCB Capital, Saudi Arabia's largest investment bank, believes that the various moves to boost renewable energy in the GCC region are largely irreversible and likely to gather momentum in the years ahead.
Speaking at the first Gulf Renewable Energy Finance conference in Abu Dhabi on 8 June, Dr Jarmo Kotilaine, Chief Economist of NCB Capital, said, "Long-term trends in the region have fostered new thinking that has resulted in growing interest in renewables. Even if the economic challenges still remain numerous, the long lifetime of energy projects means that the volume of investments into renewables is increasing and is likely to continue to do so."
The bank believes that regional governments will play a critical role as rapid demographic and economic growth means that conventional approaches to energy provision are not keeping up with demand. This is creating an increasingly sharp trade-off between hydrocarbons exports and domestic use.
Dr Kotilaine commented, "In the near term, the adoption of mainstream renewables will necessitate either fiscal incentives or disincentives on the continued use of hydrocarbons. This can take the form of a shift of subsidies from oil to renewables or government grants to the development of renewables." There are promising signs that subsidies, which have led to high levels of energy intensity in the region are being reviewed and becoming increasingly based on need and ability to pay.
However, the costs of developing sources such as wind and wave power will continue to be an issue, leading to growing attention being paid to nuclear energy as a low-cost alternative. Nevertheless, opportunities exist for the near-term adoption of renewable solutions for very localized use.
While government action is needed to incentivise the transition to renewable energy sources, public education is an important element of fostering sustainable behaviour and the awareness of the need for energy diversification. Action in schools and universities especially can hope to mould attitudes and increase the support for important initiatives that in some ways challenge the regional tradition of heavily subsidized energy.
Dr Kotilaine, concluded, "Current large scale regional infrastructure projects offer an attractive and logical opportunity to embed new, more environmentally friendly technology and energy in the region's housing and transportation. While Abu Dhabi's Masdar City stands out as particularly ambitious progress, considerable gains can be made by way of more gradual and less costly steps."
