The Arab Gulf’s counter-intuitive shift to renewable energy is well under way

In mid-January, some 50 business executives and local dignitaries gathered at an arid, sand-swept construction site near the northern Saudi Arabian town of Turaif to celebrate the commissioning of the kingdom’s first wind energy turbine.

The 85-metre-tall GE turbine will generate electricity for a local plant operated by Saudi Aramco, the state-owned oil company.

It may appear counter-intuitive that a country which produced more crude oil than any other in 2016, and has reserves that will last it 80 years, should be investing in green energy, particularly to power an oil facility. The reality, however, is that Saudi Arabia and its oil-rich partners in the six-nation Gulf Cooperation Council are heavily committed to investing in alternative energy sources. Some 40 major wind, solar and waste-to-energy projects have been completed, are planned or are currently under way across the region.

The regional GCC pact comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. On the face of it, these fossil-fuel producers stand to lose out in the global transition towards renewable energy. The terms of the Paris Agreement on climate change, signed by 197 states that included all the GCC partners by the time it came into force in November 2016, imply a steady trend towards softer oil and gas prices.

But the Arab Gulf’s embrace of international targets to reduce greenhouse gases is a pragmatic acknowledgement of an irreversible global move away from fossil fuels. Recognising that they cannot beat the trend, these major regional producers have decided to join it.

Moreover, there are specific local advantages for the Gulf economies in reducing domestic dependency on their own fossil resources.

As the costs of solar power generation continue to tumble, it is now actually cheaper for these producers to harness the power of the sun than to rely on traditional fuels. A solar power tender in Dubai in 2015 produced a record-low electricity price of $0.06 per kilowatt hour, cheaper than the gas-fired alternative, according to IRENA, the International Renewable Energy Agency.

With solar panel prices down by 80 per cent since 2009, Dubai has launched an initiative eventually to have a solar panel on every rooftop in the emirate.

The Abu Dhabi-headquartered IRENA estimates that the GCC could save 400 million barrels of oil and create more than 200,000 additional jobs by 2030 if it meets its renewable energy targets.

In a region where Saudi Arabia ranks as the world’s 15th biggest polluter, these targets also promise an 8 per cent reduction in the GCC’s carbon footprint by the same year.

The biggest win, however, would be in conservation of water, which is as scarce in the Gulf region as fossil fuels are abundant. Decades of economic development have fueled a dramatic rise in demand for water, which has mainly been met by desalinisation projects.

Within the GCC, desalination now provides a high of 87 per cent of total water demand in Qatar to a low of 27 per cent in Oman. Saudi Arabia alone is estimated to use some 300,000 barrels of oil a day to keep its thermal desalination plants running. Some other GCC partners have become net energy importers to meet the demand.

Water is therefore a crucial sector in which the falling costs of alternative sources of power are making a switch to green energy increasingly attractive, although progress remains at the development stage.

At Masdar City in the UAE, launched in 2008 with the aim of becoming the world’s most sustainable eco-city, pilot programmes are under way to create commercial solar-powered desalination plants that could cut costs by up to a quarter.

Reports on the progress of projects undertaken by four companies – Abengoa, Degrémont, Veolia and Trevi Systems – are expected by mid-2017.

Although much of the shift to renewables has so far been reliant on imported hardware and expertise, local companies are now entering the wind and solar sectors as part of consortia with foreign developers.

Some GCC investors are also looking at the prospects of alternative power projects outside the region. The UAE-based investment firm Abraaj Group has just taken a majority stake in a wind power project in Pakistan.

The solitary turbine at Turaif may look like a modest start but it is just a small facet of a larger green revolution spreading through a region once regarded as synonymous with oil.