Following the fall in oil prices and as oil-rich Gulf countries take advantage of the falling cost of solar power to diversify their energy supplies, Rome-based utility owner Enel SpA is targeting renewables projects in Saudi Arabia and the United Arab Emirates.
“We will wait for the first tenders in Saudi Arabia,” Francesco Starace, Enel chief executive officer, said in an interview in Abu Dhabi, the biggest of the U.A.E.’s seven emirates. A renewable program has also been initiated by Dubai, the country’s second-largest emirate, and “so we will try and participate” in that, he said.
With the aim of focusing on producing and distributing greener sources of energy, under Starace, Enel is scaling back on large power stations. The company plans to cut its generating capacity for power from fossil fuels by 39 percent in the five years ending 2019 and the utility reintegrated its renewable-energy spinoff Enel Green Power last year.
Their reliance on oil is attempted to be reduced and attempts are being made to generate more power from the sun, among other sources by both Saudi Arabia, the world’s biggest oil exporter, and the U.A.E., the fourth-largest producer in OPEC.
After reaching an accord to help in the upgrading of the local power grid, with Saudi Electric Co. on Jan. 11, an agreement of similar nature was very recently made with the Dubai Electricity and Water Authority, known as DEWA, and the company. The agreement was put in writing and signed off very recently between the two entities.
Energy Minister of Saudi Arabia, Khalid Al-Falih, said last month, that within the next five years, the kingdom aims to generate 10 gigawatts from solar, wind and other forms of renewable energy. And by the year 2050, attempts are being made to reach a figure of at least 75 percent of its power from renewable by DEWA and for this purpose, it is aggressively seeking to set up renewable sources of power.
Starace said that the countries of Saudi Arabia and the U.A.E., as well as Oman, have “stability that is perceived as better than the North African area,” and added that these countries and oil producers also save natural potential with their plentiful sunshine. “They are less risky, and therefore, I see no problem with looking at these countries as a great investment.”
He said that even as the profit margins of generating companies may narrow in the low-price environment, cheaper production costs are creating new growth opportunities for solar power in the region. To produce what could be the world’s cheapest power generated from the sun, bidding to build an 800-megawatt solar plant in Dubai was won in June by a group led by Masdar, Abu Dhabi’s renewable energy company.
According to a report that month by the Abu Dhabi-based International Renewable Energy Agency, there can be a reduction of as much as 59 percent by 2025 in the average cost of electricity from a photovoltaic system.
Starace said that the downward trend in solar costs isn’t finished, Starace said. “It will continue to go down.”
(Adapted from Bloomberg)