How Did the UAE Manage Its Renewable Energy Investments During COVID?
- Sep 25, 2020 8:39 pm GMT
Renewable energy is a top priority in the UAE’s National Energy Strategy 2050 goals. Despite the COVID-19 shock, the government’s actions have provided a reasonable amount of investment to continue their projects.
Ahmad Ali Azari, MA International Affairs Candidate, Frederick S. Pardee School of Global Studies
The COVID-19 global pandemic has delivered an unprecedented shock to our healthcare system and economic infrastructure simultaneously. The virus has spread incredibly fast, infecting millions and causing 821,909 deaths worldwide as of August 26th. The economic fallout brought on by COVID-19 has been substantial, leading to a surge of unemployment and instability within markets.
Renewable energy is one of the sectors that is heavily dependent on the inflow of investments to ensure the deployment and development of such technologies. The United Arab Emirates (UAE) have been rapidly increasing their renewable energy capacity over the past four years, reaching over 2 GW out of their 30 GW grid capacity, mainly as a result of the Sweihan project in Abu Dhabi and the Mohammad Bin Rashid Al Maktoum Solar Park in Dubai. The rapid increase in renewable energy capacity was achieved as the government has announced its National Energy Strategy 2050. This strategy ensures that 50% of the electricity generated comes from clean sources (44% renewables and 6% nuclear). Additionally, the strategy has been instrumental in attracting foreign investments. In fact, in 2019, the UAE registered the highest growth in renewable energy investments, realizing a 1223% increase compared to 2018.
Investments due to COVID
However, due to COVID-19, the level of investments in the energy sector has declined. The Arab Petroleum Investments Corporation (APICORP) expects that the energy investments in the MENA region would fall by $73 billion between 2020 and 2024. Given the heavy dependence on foreign direct investments (FDI), the UAE has taken several steps towards mitigating the risk, which is especially important since they have a clean energy target of 21% by 2021.
- First, the UAE has worked through the APICORP to announce a $500 million support package to the MENA region to help companies in the energy sector, including renewable energy companies. This package will be used to fund projects and support sustainable and impact-driven utilities. SirajPower, a UAE based Solar energy provider, was granted $50 million to support solar energy projects within the UAE and the greater region.
- Second, The UAE Cabinet has also approved an economic stimulus package of $34.4 billion as a part of the Federal Government’s support to the Emirati national economy. This measure is to ensure businesses continue to function and reduce the economic burden caused by the pandemic. While this package does not specifically target the renewable energy sector, certain clauses of the package are relevant, such as suspending bid bonds and exempting starts-ups from performance guarantees for projects up to $13.6 million, reducing industrial land leasing fees by 25% on new contracts, and waiving the current commercial and industrial penalties. These clauses increase the ease of doing business within the country and potentially entering the private sector market of renewable energy. However, there is a lack of data to support the effectiveness of this stimulus package of the renewable energy sector.
- Third, the government has successfully deployed another solar park installment project in the Al Dhafra region in Abu Dhabi with a capacity of 2 GW. This project was favorably looked upon due to the UAE registering the world’s lowest electricity generation cost at 1.35 cents/kWh alongside their ambitious National Energy Strategy 2050. The Al Dhafra solar park is approximately twice the size of the biggest solar plant currently existing in Abu Dhabi. This project is a 30-year Power Purchase Agreement signed by the consortium of the Chinese Jinko Power Technology Co., Ltd., and the French EDF with the Emirates Water and Electricity Company, which is the leading company in coordinating, planning, and providing water and electricity across the Emirates.
Figure 1: UAE electricity sources 2010, 2020 and predicted 2050 based on the strategy
Will the UAE be able to reach its next clean energy target?
The three pie charts show the transformation of the electricity sector over the years. The Emirates of Abu Dhabi and Dubai have reached their renewable energy target set by their respective governments of 7% by 2020. Abu Dhabi reached a 7.7% renewable energy capacity, whereas Dubai reached 8.65%. For the UAE to reach its next target, which is 21% clean energy, the Emirates has to ensure the full capacity operation of the Barakah nuclear power plant. Operating the nuclear power plant at full capacity is expected to increase the clean energy output to 5600 MW, which is enough to reach the target. However, due to the delay in the operation of the first reactor, operating at full capacity will be challenging to be achieved by 2021.
The Emirates is coordinating its resources to ensure the deployment of the necessary solar infrastructure to meet its renewable energy targets of 44% by 2050. The UAE government shows resilience and determination towards reaching their goals despite the disruptions caused by COVID-19.
Ahmad Ali Azari is an MA International Affairs Candidate at the Frederick S. Pardee School of Global Studies. He was awarded the Appleton Schneider Fellowship at the Pardee Center for the Study of the Longer-Range Future, where he analyzed the UAE's National Energy Strategy 2050 and studied how Abu Dhabi and Dubai met their renewable energy targets of 2020.
The opinions expressed herein are those of the author and do not necessarily represent the views of the Boston University Institute for Sustainable Energy.
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