Kuwait playing catch-up with ambitious green energy plans

Penny Tweedie/Alamy via Reuters

• Kuwait lags in energy transition
• 22GW renewable energy target
• Financing will be critical

Kuwait, Opec’s fifth-largest oil producer but long a laggard in the energy transition, is taking steps to catch up with its neighbouring Gulf states and ease reliance on falling oil revenues.

State-owned Kuwait Oil Company last week mandated KBR, the US oilfield services company, to develop a master plan to produce 17 gigawatts (GW) of renewables and 25GW of green hydrogen by 2050.

KBR said the phased strategy involves developing “significant wind and solar power, combined with power storage capability” and the development of green hydrogen for internal industrial use and export.

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The plan is ambitious, and Kuwait has a long history of delayed projects. Experts say government support and the ability to attract finance are crucial to making the masterplan a reality.

Analysts say slow decision-making is one of Kuwait’s biggest challenges.

In May, Kuwaiti Emir Meshal Al-Ahmed Al-Jaber Al-Sabah dissolved the opposition-dominated parliament, raising hopes that major projects can move forward.

“The biggest challenge for Kuwait to diversify is the formation of a long-lasting executive branch of government,” says Omar Al-Ubaydli, director of research at the Bahrain Center for Strategic, International and Energy Studies.

Salem Alajmi, a Kuwait-based certified renewables expert, says the targets announced will be challenging.

Kuwait said as long ago as 2012 that it was aiming for 15 percent of energy to come from renewable sources by 2030. However, it has only around 100 megawatts of renewables capacity.

Green energy, produced from entirely sustainable sources, accounts for only around 1 percent of domestic electricity production, while the remainder is generated from oil and gas. 

Notably, the Al-Shagaya solar development has been delayed several times. Only the first phase has been operational, since 2017, while the second and third phases have been merged and are yet to come online, Alajmi says.

Electricity is also heavily subsidised, which has limited the development of Kuwait’s renewables market.

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Kuwait holds about 7 percent of global oil reserves and has one of the lowest crude oil production costs of around $10 per barrel.

But despite the windfall from oil, the country suffers from power outages amid growing electricity demand and lack of infrastructure maintenance, Alajmi said. 

It also ranks as the world’s second-largest CO2 emitter per capita, behind Qatar. However, the government has committed to achieving carbon neutrality in the oil and gas sector by 2050 and in other sectors by 2060.

Laury Haytayan, Middle East and North Africa director at the Natural Resource Governance Institute, says energy diversification by neighbouring Gulf states is acting as a wake-up call. “The awareness of climate change and energy transitions will make Kuwait act now,” she says.

In March, Salem Al Hajraf, the minister of electricity, water and renewable energy, unveiled a new plan to construct 22GW of renewables as part of the 2030-50 renewable energy strategy.

“Building electricity systems that rely in large part on renewables will free a considerable amount of oil for exports, and help reduce emissions,” Haytayan says.

Kuwait anticipates producing green hydrogen at competitive costs, estimated between $3.22 and $4.41 per kilogram, by 2032.

But to succeed, Kuwait will need to convince investors that it has dealt with slow decision-making and demonstrate an ability to move projects forward, analysts say.

“Introducing carbon credits, a carbon market, would facilitate the financing of the projects, " says Alajmi.