Middle East Energy update – the sun continues to shine even in the midst of adversity

By Rachael Petersen

05-2020

In a region where the sun almost always shines and sustainability is embraced, it is no surprise that the renewables sector has bolstered its growth and continues on a strong path, even in times of adversity.

The UAE Energy Strategy 2050 has undoubtedly provided the renewables sector with a platform for growth, setting out the intention to achieve a 44 per cent renewables energy mix by 2050. Saudi Arabia has similarly bold ambitions to achieve a 30 per cent renewables energy mix by 2030. The regional impetus is there but how are things progressing?

We know that times have been tough in the energy sector in 2020. Oil prices hit their all-time low, even moving into the negative. Demand has also dissipated to its lowest point in modern history. Lockdown froze the world’s mobility with national and international transportation coming to a near standstill. Coupled with over production, it has been a tough period for the energy sector, and for the oil and gas industry in particular. But hope is in sight with OPEC and its coalition partners agreeing to reduce production. The UAE scaled back production earlier in May and major regional players such as Saudi Arabia intend to follow suit.

Against this back drop, although times are tough and low oil prices could diminish the region’s drive to focus on alternative energy sources, it appears that the region’s renewables sector may be managing to weather the storm. And hope is on the horizon that governments across the region will emphasise national renewable energy policies in any fiscal stimulus package introduced in the wake of COVID-19.

Major renewable energy projects are still underway and on track in the UAE including the major Al Dhafra Solar Plant in Abu Dhabi and the Mohammed bin Rashid Al Maktoum Solar Park in Dubai. Saudi Arabia is said to have 60 renewables projects in the pipeline, which are intended to generate 9.5 GW of electricity from renewable sources a year by 2023. This will represent approximately 10 per cent of Saudi Arabia’s national power generation. Albeit with occasional delays, the UAE and Saudi Arabia have continued throughout the COVID-19 crisis to award some major projects and issue tenders.

In this region of abundant sun, solar power is heavily contributing to national clean energy initiatives. Its popularity continues to gain traction due to the relatively low project operational costs, technological enhancements and the cheaper cost of power that it generates. Abu Dhabi has just laid claim to the world’s lowest tariff for solar power at just USD 1.35 cents/kWh. The future for solar energy looks bright across the region.

At Bird & Bird, we have a team of over 100 lawyers globally focussed on advising on energy and utilities matters. A key focus area for us, including in the UAE and across the region, is renewable energy, covering solar, wind, biomass, anaerobic digestion, energy from waste and energy efficiency.