Transforming the Renewables Sector in the Gulf: The Evolving Strategies of Qatar, Saudi Arabia and the UAE (1)

In current months, the Ukraine battle has underscored the centrality of the controversy on nationwide and regional vitality methods to international financial and geopolitical safety in addition to the local weather disaster. This paper appears at how three of the most important Gulf vitality actors – Saudi Arabia, Qatar and the United Arab Emirates – have reacted to the pressures of current geopolitical developments in addition to the longer-term pattern of the worldwide shift in the direction of cleaner vitality. There are precedents for state actors, together with Gulf actors, to focus in on the renewable vitality sector as a part of wider vitality efforts in periods of uncertainty and instability throughout the worldwide system. Nevertheless, since mid-2021, all three Gulf actors examined right here have been way more lively throughout your entire vitality sector in comparison with any single 12 months because the breakdown of intra-Gulf relations and the launch of the embargo of Qatar in 2017. (See Determine 1.)

Breaking down these actions additional by sector between July 2021 and November 2022 (see Determine 2), all three vitality actors made important investments in each the fuel and renewable sectors.

Within the years instantly previous this rising exercise, Qatar and Saudi Arabia made some large-scale home investments in renewables. Notably, in November 2018, Saudi Arabia financed its first photo voltaic challenge in Sakaka with a capability of 300MW. (2) In the meantime, in 2019, the primary utility-scale wind farm within the Center East, the Dumat Al-Jandal wind farm, was developed for the dominion with a capability of 400MW by Masdar and EDF Renewables.(3) In October 2019, the CEO of QatarEnergy, Stated al-Kaabi, introduced plans to seize and sequester 5 million tonnes of carbon dioxide from its LNG export amenities by 2025. (4) The next January, Qatar contracted French oil main Complete and Japanese conglomerate Marubeni to construct Qatar’s first utility-scale photo voltaic PV challenge (800MW) which got here on-line in time for the November 2022 FIFA World Cup. (5)

In distinction, apart from the 2013 Shams 1 photo voltaic farm whose capability is 300 MW (6) and the second part of the Mohammed bin Rashid Al Maktoum Photo voltaic Park commissioned in March 2017 with a capability of 200 MW, (7) the vast majority of the UAE’s involvement in renewables within the interval previous to current exercise was abroad quite than domestically. For example, the UAE invested in a single waste-to-energy facility in Australia; one photo voltaic plant in every of Mauritania, Egypt and Jordan; and wind farms in the UK, Montenegro, the US, Serbia and Oman. Nonetheless, despite the fact that the UAE was way more lively abroad on this sector relative to Qatar and Saudi Arabia previous to 2020, Emirati funding in renewables nonetheless solely accounted for roughly 3 p.c of its whole vitality funding on this interval. (See Determine 3.)

Since mid-2021 there was a noticeable improve within the variety of renewable initiatives and the scale of relative funding in all three nations. From a base of solely roughly 3 p.c of its whole vitality expenditure previous to 2020, between July 2021 and November 2022, the UAE launched 8 main photo voltaic plant initiatives, one pure gas-to-methanol challenge, one waste-to-energy challenge, one wind farm, three blue ammonia initiatives, 4 hydrogen initiatives and one decarbonisation initiative. Most just lately, throughout November 2022, the UAE and the US agreed to collaborate on clear vitality initiatives globally with the objective of including 100GW at a price of US $100 billion by 2035. (8)

Saudi Arabia went from a base of almost zero renewable funding earlier than November 2018. Nevertheless, within the interval between April 2021 and November 2022, it invested in eight photo voltaic vegetation, 5 hydrogen initiatives, three sustainable desalination initiatives, one photo voltaic and wind energy plant, two wind farms and hydrogen initiatives. In August 2022, the dominion introduced an extra plan to develop three renewable vitality initiatives at a price of US $10 billion in Uzbekistan. The next November, the dominion agreed to construct a 10GW wind farm in Egypt.

Over this similar time interval, Qatar constructed on its earlier endeavours by launching two extra photo voltaic plant initiatives, two hydrogen initiatives and one challenge in every of the areas of decarbonisation and blue ammonia, as proven in Determine 4.

By way of the worth of those initiatives in relation to the nations’ total investments in all vitality initiatives, evaluating the interval between 2017 and 2019 with the interval between mid-2021 and late 2022, Qatar elevated its funding in renewables from 2% to eight% of total vitality funding. Renewables rose from 0% to 25% of whole Saudi vitality funding, while within the case of the UAE, they rose from 3% to 43% of all vitality funding. (See Determine 3.)

The primary rationalization for this unprecedented transfer into the renewables sector is that these three Gulf vitality actors are merely aligning themselves with international developments which are more and more centered on addressing local weather change priorities by transitioning to renewable vitality. (9) In January 2021, Qatar introduced plans to construct out capability for carbon seize and storage to 7 million tonnes per 12 months by 2030. The next August, QatarEnergy introduced its intention to cut back its Greenhouse fuel (GHG) emissions by 25 p.c by 2030. (10) In March 2022, QatarEnergy additional introduced its plan to attain a discount of 11 million tonnes of carbon dioxide per 12 months by 2035. (11) For its half, within the last months of 2021, Saudi Aramco awarded contracts value US $10 billion for the event of the huge Jafurah discipline as a part of its objective of manufacturing half of its electrical energy from fuel and half from renewables in accordance with its 2060 net-zero goal. The next month in December 2021, the Abu Dhabi Nationwide Oil Firm (ADNOC) introduced its intention to broaden carbon dioxide seize to five million tonnes per 12 months by 2030. (12)

These are among the very public bulletins in current occasions that replicate the objectives set down within the related strategic imaginative and prescient paperwork of all three Gulf states. One of many pillars of Qatar’s Imaginative and prescient 2030, which was printed in 2008, is the “Administration of the atmosphere such that there’s concord between financial development, social improvement and environmental safety.” (13) Since 2015, Qatar has aligned the outcomes and objectives of its Nationwide Improvement Technique with the objectives of the United Nations’ (UN) Sustainable Improvement Agenda. Of the 247 objectives set by the UN, Qatar has managed to align with 199. Qatar’s sustainability targets embrace putting in 2 to 4GW of solar energy vitality and to have 10% of all motor autos electrical by 2030. (14)

For its half, Saudi Imaginative and prescient 2030, which was introduced in 2016, prioritises sustainable social, financial and environmental improvement. It’s dedicated to Saudi funding in at the least 9.5GW of renewable vitality by 2030 as a part of its ongoing transfer out of fossil fuels and in help of wide-ranging financial diversification plans. With a view to offset the environmental influence of those appreciable improvement ambitions, this imaginative and prescient additionally deliberate to launch greater than 35 renewable initiatives throughout the dominion by 2030. UAE Imaginative and prescient 2021 and Dubai’s Imaginative and prescient 2030, printed in 2010 and 2016 respectively, embrace sustainable improvement as a significant pillar. In response to a report by the influential US-UAE Enterprise Council, these visions type a part of a wider Emirati plan to make sure that renewable vitality accounts for a big proportion of the nation’s vitality inventory by 2050. (15)

This in depth re-focusing on renewables can be considered another part of the wide-ranging competitors between Gulf actors throughout many geopolitical and financial fronts. For instance, as indicated in Determine 5, through the first 12 months of the blockade of Qatar between June 2017 and June 2018, each Saudi Arabia and the UAE, the 2 leaders of the embargo, made important will increase of their investments within the pure fuel and LNG sectors. Within the Saudi case, this occurred within the half 12 months between July 2017 and Might 2018; and, within the case of the UAE, it started in November 2017 and continued at excessive ranges over the next two years.

Such heavy spending in these sectors throughout essentially the most intense interval of the embargo of Qatar was born out of want to cut back fuel dependence on Qatari LNG, particularly at a time when Qatar used its ongoing provide of fuel to embargoing states to exhibit its conciliatory and accountable place. But it surely additionally represented a choice, on the time, to problem Qatar’s standing because the main regional actor in pure fuel and LNG.

Curiously, as soon as the embargo “normalised” considerably in its latter phases, funding in LNG by each Saudi Arabia and the UAE declined, solely to rise considerably as soon as once more when the embargo ended following a gathering of Gulf leaders in Saudi Arabia throughout January 2021. It’s potential to elucidate this improvement not solely by way of the tip of the blockade but in addition as a response to the rising emphasis being positioned on the transfer in the direction of cleaner vitality from 2021 onwards.

The tip of the embargo of Qatar in early 2021 and the numerous transfer into renewables subsequently served to accentuate vitality competitors between Saudi Arabia, the UAE and Qatar. All three have regarded to ascertain themselves because the dominant regional participant or problem the dominance of the others in numerous elements of the broader renewable vitality sector. Such intra-regional competitors is simply a secondary driver of the transfer into renewables. Nonetheless, it’s value contemplating within the quickly altering vitality atmosphere.

In June 2021, the CTO of Aramco, Ahmad Al-Khowaiter, introduced his firm’s intention to “have a big share of the marketplace for blue hydrogen.” (16) A bit beneath a 12 months later, in Might 2022, Saudi Arabia additionally introduced that it could construct the most important inexperienced hydrogen plant within the Gulf in its hi-tech metropolis of Neom. (17) The next October, the dominion introduced its additional intention to develop into a hub for inexperienced minerals as a part of its plans to develop into the dominant international hydrogen provider. (18) In June 2022, the Saudis additionally introduced plans for the development of the world’s greatest photo voltaic thermal plant, meant to generate steam to make aluminium quite than produce electrical energy or improve oil restoration. If this challenge involves fruition, it ought to dramatically scale back Saudi Arabia’s carbon footprint and convey it nearer to reaching its internet zero objective by 2060.

Nevertheless, it must be famous that during the last decade, Saudi Arabia has introduced a number of proposals to put money into solar energy that haven’t come to fruition. This features a 2011 plan to take a position $100 billion in increasing energy producing capability together with a nuclear plant and 5GW of photo voltaic vitality capability by 2020. This goal was not reached. In 2015, Saudi Arabia additionally introduced the launch of its first solar-powered desalination plant in Al Khafji, however it solely had a deliberate capability of 15 MW. This was adopted up in 2018 by the Saudi announcement of plans to construct its first large-scale renewable vitality challenge in Sakaka with a capability of 300 MW. Various different photo voltaic initiatives have been proposed by a wide range of private and non-private sector actors within the kingdom over time, underscoring the advert hoc and uncoordinated nature of the Saudi method up till current occasions. It must be famous, nonetheless, that in this similar time interval, development did start on a wind farm challenge at Dumat al-Jandal with a capability of 400 MW. In the meantime, in late October 2022, Saudi Aramco’s CEO launched a US $1.5 billion sustainability fund, one of many largest funds of its sort globally, to put money into secure and inclusive vitality transition expertise. (19)

Qatar, then again, is at the moment trying to set up itself as a dominant actor in photo voltaic vegetation and blue ammonia. In August 2022, Qatar introduced it could construct the world’s largest blue ammonia facility. (20) The next October, the nation’s Emir, Sheikh Tamim bin Hamad Al-Thani, inaugurated the Al Kharsaah Photo voltaic Energy Plant in Al Kharsaah. This plant, which covers 10 sq. kilometres and consists of greater than 1,800,000 photo voltaic panels, is the primary in Qatar and one of many largest by way of dimension and capability within the area with a complete capability of 800 MW. It’s meant to fulfill 10% of the nation’s peak electrical energy calls for.

The UAE has regarded to take a lead throughout a variety of renewables sectors. In August 2021, Dr. Sultan Ahmed Al Jaber, the Emirati Minister of Business and Superior Know-how and ADNOC Group’s CEO, introduced that the UAE’s would develop into “a regional chief within the manufacturing of hydrogen and its service fuels.” This, he continued, can be achieved by way of “the enlargement of our capabilities throughout the blue ammonia worth chain” as a solution to develop a “legacy as one of many world’s least carbon-intensive hydrocarbon producers and help industrial decarbonisation with a aggressive, low-carbon product portfolio.” (21) This assertion specifically is notable for the way in which it sought to claim Emirati management throughout the renewable area. In accordance with these ambitions, lower than three months later, in October 2021, the UAE introduced plans to take a position greater than US $160 billion to develop into the primary Gulf state to attain internet zero carbon emissions by 2050. (22)

This speedy progress in growing the renewable vitality sectors during the last 12 months each by way of the variety of initiatives launched and the general spend has not solely taken place domestically. As proven in Determine 6, all three nations have additionally entered the renewables sector abroad. Qatar has invested in hydrogen initiatives within the UK and bought a big holding in a significant US clear vitality firm. Saudi Arabia has invested in hydrogen manufacturing and carbon seize in China, in addition to one photo voltaic plant in Indonesia, one wind farm and hydrogen challenge in Uzbekistan and one wind farm in Egypt. In the meantime, the UAE’s abroad renewables initiatives now embrace blue ammonia gross sales to Japan and Germany, two hydrogen initiatives, one every within the UK and Egypt, and three wind farms, one every in Poland, Uzbekistan and Egypt. It has additionally signed agreements for photo voltaic initiatives with Armenia, Georgia, Azerbaijan, Indonesia, Iraq, India and Tanzania and wind farm initiatives in Japan and Uzbekistan.

Conclusion

The most important strikes into the renewables sector between mid-2021 and late-2022 haven’t come on the expense of initiatives within the conventional areas of oil and fuel. Throughout September 2022, the President and CEO of Saudi Aramco, Amin bin Hassan Nasser, had a warning for individuals who “disgrace oil and fuel traders, dismantle oil-and coal-fired energy vegetation, fail to diversify vitality provides (particularly fuel), oppose LNG receiving terminals and reject nuclear energy, your transition plan had higher be proper.” (23) QatarEnergy‘s CEO, Al-Kaabi, made the same level in an earlier tv interview in Might 2022: “You may’t obtain this vitality transition with out fossil fuels and the perfect fossil gasoline to mankind is fuel.” (24) Subsequently, he expressed the view that “the perfect for the LNG business is but to come back” and argued that extra shoppers are realising this very important reality. (25) To take one instance in help of his place, in line with the findings of a March 2022 Pew Analysis Heart ballot, whereas a majority of Individuals help a transfer to carbon neutrality by 2050, solely 31% assume it’s a good suggestion or life like to part out fossil fuels fully. (26)

It is usually value noting that current strikes into renewables will not be solely about addressing the local weather disaster, assembly nationwide targets for vitality transition or competing with native rivals in new areas of vitality. They need to even be understood as a transfer that’s pushed by market forces as conventional clients are more and more trying to import renewable vitality alongside extra conventional types of gasoline. Talking on the LNG Producer-Client Convention in Japan in early October 2021, Al-Kaabi defined that “profitable vitality transition can’t be pushed by producers alone. It’s a shared duty that requires the lively collaboration of vitality producers, legislators and governments, and end-consumers.” (27)

In accordance with such arguments, in June 2020, the China Nationwide Offshore Oil Company (CNOOC) signed an settlement with Shell to develop into the primary provider to China of carbon-neutral LNG imports. The next September, Saudi Aramco introduced a zero-carbon gasoline worth chain with Japan, alongside their first blue ammonia cargo to the nation. The Japanese Ministry of Economic system, Commerce and Business performed a central function in backing the 40 tonne cargo of ammonia that adopted. In August 2022, Shell introduced that it could arrange a three way partnership in Shanghai, with the backing of Saudi Arabia, to construct Asia’s first hydrogen distribution community. For its half, in August 2021 the UAE made 3 blue ammonia shipments to Japan. The next November, South Korea’s GS Vitality agreed to import 200,000 tonnes of blue ammonia from the UAE. In September 2022, the UAE additionally accomplished its first cargo of low carbon ammonia to Germany.

Whatever the totally different drivers behind these massive scale strikes into the renewables sector, these actions could effectively lead to these 3 pro-active and impressive Gulf states establishing themselves as hubs for renewable vitality whereas additionally they look to consolidate their positions within the ever-changing oil and fuel markets over the medium and long run. They’ve, in different phrases, not solely elevated their dedication to renewables as a part of the enlargement of their total vitality portfolios. They’ve, arguably way more importantly, set themselves on a path which will in the end find them on the coronary heart of the brand new vitality system in areas comparable to hydrogen and blue ammonia, like they did within the oil and LNG sectors during the last half century.