GCC can take centre stage in global energy transition

Shutterstock/Wanwajee Weeraphukdee

A new global energy map is emerging as sovereign nations navigate post-Covid recovery paths in the midst of disruption from the Russia-Ukraine war.  

On the demand side, climate change is forcing nations to hasten low-carbon energy transition plans, resulting in policy and consumer behavioural shifts away from fossil fuels. 

In 2022, global investment in low-carbon energy transition topped $1 trillion for the first time – on a par with fossil fuels.

On the supply side, rapid technical change and innovation has hammered down production costs, thereby increasing the competitiveness of renewable energy. 

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The costs of producing solar, wind and battery declined by 90 percent over the past decade. Already, solar power is the cheapest form of electricity production. 

Geopolitical forces are also reconfiguring the global energy map. The Russia-Ukraine war, along with US and the EU policies to decouple or “‘de-risk” from China, are driving market fragmentation and instigating energy supply chain disruptions. 

Sanctions on Russia have heightened national energy security concerns, resulting in a restructuring of energy trade patterns. 

India and China accounted for almost 80 percent of Russian crude oil exports in May 2023, while other nations – including the GCC – are notably shifting away from Russian oil and gas towards alternative sources. 

Global energy consumption remains skewed towards fossil fuels, but the share of renewables is rapidly rising. These new realities are accelerating the quest for long-term competitive, sustainable, clean and secure energy.

While global dependence on oil and gas could persist into 2050, the GCC boasts considerable comparative advantages that will set it on course to win out in the emerging energy paradigm shift.

Emerging power player

The GCC is aiming to increase its share of renewables dramatically.

Saudi Arabia, for example, is seeking to hike its clean energy share to 50 percent by 2030 and achieve net zero by 2060, and the UAE to 30 percent by 2031 and net zero by 2050. 

The Middle East commissioned a whopping 3.2GW of new capacity in 2022. What is more, the UAE alone plans to invest $165 billion in clean and renewable energy initiatives over the next 30 years.

By leveraging its advantageous location at the heart of the global sunbelt and supplementing this natural advantage with modern technologies, the GCC has secured pole position as lowest cost producer of solar power. 

Solar-based electric power can be exported from the GCC and North Africa to the rest of the Middle East, and into Europe, East Africa, India and Pakistan through integrated power grids. This requires the development of an integrated electricity market allowing trading in energy. 

The GCC’s experience with developing and using climate tech could help the region to export technologies such as desalination, district cooling – piping chilled water to buildings that require cooling – and desert agriculture.

Take the example of desalination: the GCC boasts 45 percent of global desalination capacity, while Saudi Arabia’s Saline Water Conversion Corporation is the world’s largest producer of desalinated water.  

Desalination plants powered by renewable energy can be used to ameliorate global water supply problems. The UN estimates that about one in 10 people lacks access to clean water and 1 in 4 does not have access to safe drinking water. 

Similarly, district cooling is five to 10 times more energy efficient than conventional cooling. The GCC is a pioneer in the development and deployment of the method.

With 30.5% of global oil reserves and 29.5% of exports, the GCC has a long history in energy finance, and is on course to become a finance hub for climate and renewable energy. 

The region’s financial centres have the resources and expertise to become international centres for climate, green and blue finance – investment with positive impacts on the oceans.

They can accelerate issuance of green/blue bonds and Sukuk, attract venture capital investment into climate tech in the region and support listings of clean energy firms. 

Clean energy finance has the power to fuel climate change policies, generate jobs and attract FDI into the renewable energy and climate tech sectors, thereby accelerating GCC energy transition and economic diversification plans. 

In summary, the Gulf’s massive investment in renewable energy and related finance experience, coupled with its comparative advantage in producing and exporting green energy, will accelerate its course to the centre of the emerging new global energy map. 

Dr Nasser Saidi is the president of Nasser Saidi and Associates. He was formerly chief economist and head of external relations at the DIFC Authority, Lebanon’s economy minister and a vice governor of the Central Bank of Lebanon