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Middle East will set the pace for renewable energy growth

If you're looking to Europe and the US to set the pace for the growth in renewable energy solar generation you're looking in the wrong place. Try the Middle East instead. Chris Nelder explains why

Don't look to Europe and the US for guidance on the growth of renewable energy - those are yesterday's markets. Tomorrow's markets are in parts of the world that still lack access to reliable electricity, like India and Africa; rapidly growing economies like China and Latin America; and the economies of the Middle East that depend heavily on oil and gas export revenue.

India is struggling to keep up its domestic production of coal and paying a hefty import bill ($18 billion last year) for the rest of its coal supply, so it's now turning to solar as a cheaper and cleaner alternative, according to Associated Press. Three years ago, the nation had almost no solar capacity. Now it has 2.2 gigawatts (GW) - enough to power 20 million Indian homes - with another 2GW planned for this year, and 15GW more planned by 2017. "I've stopped developing coal plants," said Ratul Puri, chairman of Hindustan Power Projects, an integrated power company based in New Delhi. "There's not enough coal, and I'm not going to rely on imported coal. It's too risky," adding, "Solar is the way to go."

At a press conference at the World Future Energy Summit (WFES) in Abu Dhabi in January, the presidents of Senegal, Ethiopia, and Sierra Leone promoted their enormous renewable energy potential and invited project developers to build wind and solar capacity in their countries.

Energy potential

Ethiopia, for example, claims it has 75GW of wind and geothermal potential, and a whopping 1,000GW of solar potential - or about one-fifth of the world power generation capacity today. To date, the country has just 2GW of installed electrical generation capacity, according to the US Energy Information Administration.

China built 12GW of solar capacity last year - more than the entire installed solar capacity of the US (10GW). This year it plans to build a further 14GW of capacity. A recent report by GTM Research projects that solar will grow in Latin America at a compound annual growth rate of 66% through 2017. Large-scale projects, which amounted to just 91 MW in the region at the start of 2013, would grow by a factor of 1,000 to 10GW if the announced projects are completed. A new report from the International Energy Agency (IEA) confirms the view that renewable energy is poised to soar in non-OECD countries. One in three people currently working in the renewable energy sector worldwide are in China, and one in eight are in Brazil, compared to one in 10 in the US.

But the most interesting region is the Middle East. Saudi Arabia has the most aggressive renewable energy program in the region, with ambitions to build 52GW of solar by 2032. Speaking at a WFES session, Paddy Padmanathan, chief executive of Saudi Arabia's ACWA Power, noted that solar photovoltaics (PV) can now produce power for $0.12 per kilowatt hour (kWh) on average, and $0.11/kWh at mid-summer. The cost will soon fall to just $0.09/kWh, he said, at which point the simple cost advantage of solar will drive the transformation of the power market away from fossil fuels.

Miguel Arraras, director of solar business development at Acciona Energia, agrees. "Saudi Arabia is going to start with the renewables programme in the short term, sometime between 12 and 18 months, because the main drivers here are economics," he said at the Desert Solar Conference in December.

In fact, renewables are already competitive across the entire MENA region. A comprehensive 2013 study by a private industry joint venture called Dii GmbH found that 'large-scale [concentrated solar power], wind and PV can all generate electricity at (far) lower cost than oil-fired power plants,' and that solar PV is competitive with simple gas turbines, making it 'competitive, or on the brink of being so, to the costs of peak power' in Morocco, Algeria, Tunisia, Libya, Egypt, Saudi Arabia, Jordan and Syria. The study finds that wind and solar could supply 98% of the power to the Mena region by 2050.

The United Arab Emirates (UAE) has long sought to drive renewable energy in the Middle East through various initiatives sponsored by Masdar, a renewable energy developer, investor and clean tech cluster based in Abu Dhabi funded by a $15bn grant from the Abu Dhabi Government-owned Mubadala Development Company. Its marquee project in Abu Dhabi, Masdar City, aims to be "one of the most sustainable cities in the world," primarily by employing a variety of passive building design techniques and advanced building management technologies.

The country hosts the International Renewable Energy Agency (IRENA), which publishes research on renewable energy potential and stages an annual conference in conjunction with WFES. Its investment in solar power has been modest so far, with 200 MW of capacity, but it continues to push toward diversifying its economy and investing in sustainability on multiple fronts, including a planned 20 MW solar-powered desalination plant that would be the world's largest. Investments in various renewable energy projects in developing countries are also being funded through IRENA's Abu Dhabi Fund for Development, which plans to put $350m to work over seven investment cycles as equity stakes in eligible projects.

While it may seem unlikely that some of the world's top oil exporters would deem it a priority to invest in solar, it makes perfect sense. Bader Al Lamki, the director of clean energy at Masdar, explained the rationale. "It's totally energy related," he said, "hydrocarbons are going to diminish with time. [The UAE] wants to position itself now, knowing that renewables are the form of energy that will grow with time - this is about expanding the legacy of being environmentally sensitive, concern about sustainability, and also being responsible in balancing out the entire portfolio of energy that this country has been blessed with."

He added: "There is clear recognition here that [climate change] is not a mirage. Politicians may debate it somewhere else, but in this part of the world, in this country in particular, they believe climate change is happening and we need to contribute and be responsible and to act."

It's also a strategic imperative. Burning oil that fetches over $100 a barrel on world markets to generate electricity is like turning gold into lead. For economies that depend almost exclusively on oil and gas export revenues, where soaring domestic consumption of those products is cutting into the volumes available for export, it's in the best interest of long-term economic and social stability to generate power from abundant, free sunshine instead.

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