Energy transition is among the highest policy priorities for the Middle East’s oil producers. It is also one of the biggest challenges.
Cutting CO2 emissions to net zero, diversifying energy sources away from oil and gas, and reducing consumption to preserve resources requires transformation in all areas of life. At the same time, governments must ensure adequate power and water to meet the needs of growing populations and expanding economies. Undimmed by the impact of Covid-19, electricity demand is rising by about 5 per cent a year across the Mena region, and with a shortage of gas supplies and the need to decarbonise, expanding renewables capacity is at the top of the region’s energy agenda.
There is plenty of room for growth. With about 28GW of renewable energy production capacity installed across the region, of which the biggest component is hydropower with 21GW, renewables represent only 7 per cent of the region’s power generation capacity. But, boosted by falling technology costs, most countries are planning and procuring solar and wind projects. And the world’s biggest and cheapest solar projects are now found in Saudi Arabia, Abu Dhabi and Dubai.
Across the region, governments have set ambitious clean energy targets, with Dubai the most aggressive, aiming for 75 per cent of its energy to come from clean sources by 2050. About 98GW of new renewables capacity is planned across the region, with 39GW due to come on stream by 2025.
One of the region’s objectives is to be a hub for the development of clean technologies. And the desire for a ‘green’ recovery from the Covid-19 pandemic has provided impetus for a wave of ventures and projects to produce hydrogen fuel in the Middle East. In particular, tapping the region’s abundant supply of low-cost solar energy to sustainably produce ‘green’ hydrogen from water is generating huge interest from governments and investors.
Green hydrogen is in a similar place to the one held by solar energy a decade ago. As with solar in 2011, hydrogen fuel in 2021 is expensive to produce compared with fossil fuels, and there is only a limited market for the fuel. But tumbling costs and enabling regulations have reduced the risk of investing in renewables. It is a trend that will support the region’s energy diversification as new technology emerges making clean fuels commercially viable.
Energy Transition in the Middle East provides a comprehensive snapshot on how the shift away from fossil fuels is shaping investment and policy in the Middle East, and also at how the region is investing in reducing carbon dioxide emissions. The report is of extremely high value to anyone investing in the energy in the region, as well as providing value to contractors, consultants and suppliers in the energy supply chain that are selling products and services to Middle East governments.