World Bank says Gulf using oil wealth to become solar power

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• ‘The region is starting to harness the sun,’ says World Bank director
• UAE is home to three of the world’s largest solar power projects
• Saudi Arabia’s solar power capacity is expected to grow rapidly

Gulf hydrocarbon producers could turn into the world’s leading solar energy exporters.

GCC members, particularly the UAE and Saudi Arabia – the first and third largest energy producers in Opec – have started to lay the ground for this goal with the launch of clean energy megaprojects.

They aim to increase their renewable energy capacity in order to diversify their economies away from oil.

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“This region is starting to harness the sun – and they are going to export that sun,” Issam Abousleiman, regional director for the GCC at the World Bank, told a panel at Abu Dhabi Finance Week on Thursday. 

“We’ve already seen feasibility studies going from North Africa to Europe, Saudi Arabia to Ethiopia, and the UAE to India.”

The UAE is home to three of the world’s largest solar power projects, including Al Dhafra in Abu Dhabi, which set the world record for low-cost solar energy in 2020, at a cost of 1.35 cents per kilowatt-hour (kw/hr).

In Dubai, the Mohammed bin Rashid Al Maktoum Solar Park is the largest single-site solar park in the world based on the Independent Power Producer model. 

It has a planned production capacity of 5,000 megawatts by 2030, with investments totalling AED50 billion ($13.61 billion). When completed, it will save over 6.5 million tons of carbon emissions per year.

Saudi Arabia’s solar power capacity is expected to grow to just over 5.1 gigawatts between 2022 and 2031 as part of the kingdom’s long-term power sector plans, a Fitch Solutions report said in June.

The report said the country has one of the largest solar power potential capacities in the world, with high solar irradiation rates, vast amounts of available and suitable land, and strong electricity demand growth forecast for the next decade.

Higher oil prices, which are moving GCC government budgets into surplus and strengthening sovereign balance sheets, can be maximised to fuel the region’s “green growth” strategy.

A different perspective

The World Bank’s Abousleiman said Gulf states, which may previously have “feared” the decline of their oil industry, were now looking at the energy transition from a different perspective.

“They are adjusting their policies and regulation to encourage exporting things other than oil and gas,” he said.

“It’s in all their national visions that they want to diversify their economies. To a certain extent, they have been successful in the GCC. Where they have been less successful is diversifying of their exports, and that’s where a green growth agenda could help this part of the world diversify their exports.

“By the time oil and gas is not needed as energy as it is today, they will have actually diversified exports.”

The World Bank said in its latest Gulf Economic Update that higher oil receipts supplemented with a gradual non-oil recovery in the UAE would bolster fiscal revenue, resulting in a fiscal surplus hovering around 4.4 percent of GDP in 2022.

Reuters/Faisal Al Nasser

According to the update, the economies of the GCC are projected to expand by 6.9 percent in 2022 before moderating to 3.7 percent and 2.4 percent in 2023 and 2024.

Supported by higher hydrocarbon prices, the GCC region is “expected to register strong twin surpluses in 2022 and continue over the medium term”, the report said.

The regional fiscal balance is projected to register a surplus of 5.3 percent of GDP in 2022 – the first surplus since 2014 – while the external balance surplus is expected to reach 17.2 percent of GDP.

“There is an excellent and timely opportunity to diversify the economy further using a green growth strategy and playing a leading role in the global transition to low-carbon economies,” Abousleiman said. 

“The region could use the green growth transition to focus policies on developing green technologies and associated skilled labour that would reverse trends in productivity and enable the region to grow faster.”

He said, according to World Bank analysis, the total GDP of GCC nations is projected to be close to $2 trillion in 2022. 

“If the GCC continued business as usual, their combined GDP would grow to an expected $6 trillion by 2050,” he said. 

“However, if the GCC countries implemented a green growth strategy that would help and accelerate their economic diversification, GDP could grow to over $13 trillion by 2050.”

The UAE aims to increase the share of clean energy projects to 50 percent of its overall energy mix by 2050, energy minister Suhail Al Mazrouei said last month.

He said the UAE, which will host the Cop28 climate summit, would also start revising its energy strategy at the beginning of 2023 to align it with the goal of achieving climate neutrality by 2050.