GCC must make the right decisions to harness the potential of renewable energy
- Renewable energy continues to attract an increasing share of global investment, with annual investments expected to grow by $130 billion, compared to 2016 figures, reaching around $370 billion in 2020.
- Developing countries now account for almost half of all renewables investment, although to date there has been modest investment in the GCC
- Investment in GCC renewable energy could reach $16 billion in 2020 with a cumulative total of $40 billion between 2016 and 2020, provided the correct decisions and policies are adopted
- The GCC countries have considerable potential for renewable energy deployment
- Strategy& outlines six part framework for GCC to catch up
- generous fuel subsidies
- a mindset that prefers building very large conventional plants to meet rapidly growing demand rather than many smaller renewables projects
- the danger that existing capacity will be underutilized if renewables enter the energy mix in the wrong way
- concerns over transmission and distribution networks
- and, most significantly, unclear regulatory and policy frameworks that discourage the development of renewables.
- Set ambitious and realistic targets: These provide critical signals to private developers and investors, allowing them to plan for the long-term and arrange the necessary financing well in advance.
- Define institutional roles and accountabilities: There must be a clear separation between the government’s functions as an asset owner, policymaker, and regulator. This will make decision-making processes transparent, participatory, and accountable.
- Reform fossil fuel and energy subsidies and reallocate financial resources: Fossil-fuel subsidies cost the GCC around $30 billion in 2016, matching Germany’s renewable energy subsidies in the same year. Reallocating merely a fraction of that subsidy to support private-sector-led developments of renewable energy with the grid could create tremendous value for governments, investors and electricity consumers.
- Broaden the range of financing instruments available: Credit product innovations can help meet the requirements of the renewables market and increase the liquidity and competitive financing available for new projects. Public utilities and private developers need improved access to corporate bond and sukuk markets (Islamic law compliant bonds).
- Unify regional standards: The lack of unified renewables creates unnecessary trade and investment barriers. Establishing clear standards for wind and, to a lesser degree, solar would reduce these barriers among GCC countries and the broader Middle East region.
- Build policymaking and regulatory capabilities: The large-scale deployment of renewable energy through privately led initiatives requires capabilities that are beyond those currently possessed by most ministries. To work together effectively, policymakers, regulators, owners, and operators can upgrade their capabilities in areas like technical and economic analysis, forecasting, simulations, communication, and management.
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