Sun rises on a bold new era for energy in the Middle East

Solar power, which is regarded as a "green" source of energy, can be tapped to generate cheap electricity.

Sunrise in the desert - the dramatic advance of solar power in the Middle East - offers new hope for meeting energy demand in an environmentally and economically sustainable way.

The study I have authored with the Emirates Solar Industry Association, to be unveiled at Abu Dhabi's World Future Energy Summit today, spotlights this striking shift.

Solar power has for some time been regarded as a "green" source of energy but far too expensive for the Gulf, which is accustomed to cheap, abundant oil and gas. But in just the past year, a confluence of factors has elevated solar to being commercially competitive.

The region's advantages in solar power have long been known: its sunny climate; and the close match between peak demand (midday in summer, driven by air conditioning) and the maximum energy available from the sun.

Over the past decade, rising domestic energy demand has coincided with increasing global oil and gas prices. Cheap supplies of "legacy gas" are no longer sufficient to meet demand.

Now, Dubai and Kuwait, rely on expensive imports of liquefied natural gas (LNG). Saudi Arabia loses US$50 billion (Dh183.66bn) each year by burning crude oil for electricity. And Middle East and North Africa regions such as the UAE's Northern Emirates, Jordan, Lebanon and Morocco, with minimal hydrocarbons of their own, face both high fuel bills and insecure supplies.

In the past year, the price of solar photovoltaic panels has dropped steeply, partly thanks to technological improvements, partly to oversupply. At least some of this cost improvement is sustainable, and several technologies are emerging that could lead to further reductions, such as enabling the panels to follow the sun, or concentrating rays on them with lenses and mirrors.

The political landscape is also favourable, with Saudi Arabia, Kuwait and Dubai last year joining Abu Dhabi in announcing bold plans to meet 7 to 10 per cent of electricity demand from solar power.

Solar power begins to become competitive with conventional generation when oil or LNG prices exceed US$80 per barrel - they are currently well above this at about $100. With further cost reductions, optimal levels of solar power could be as high as 10 to 20 per cent of total generating capacity.

This cost-competitiveness does not require subsidies or tax breaks, as in Europe, and is achieved without including any of the ancillary benefits of solar power - lower carbon dioxide emissions, reduced local air pollution, improved energy security, and creation of local industries.

This change has major implications for the region and the world. At a time when Spain and Germany are cutting subsidies, the focus of solar suppliers could shift to the Middle East as the next big growth market.

More use of solar power can reduce the threat of power cuts by meeting peak demand. Combining solar with nuclear power to provide reliable, continuous electricity points the way to a more diversified and lower-carbon generating system. And it alleviates fears that growing domestic consumption of oil and gas might leave insufficient supplies for export.

To make the most of their new advantage, Middle East countries must introduce policies and regulations for adding solar power to conventional generation, and reform their power sectors to make fuel and electricity pricing transparent. If energy subsidies are retained, they should be designed so they do not discriminate against solar and other renewable energies.

Specific research is called for. What kinds of solar technology are most appropriate in different areas, how do they perform under conditions of dust, haze and high temperatures, and how can they best be cleaned and maintained?

And, crucially for regional economic diversification, policymakers and private businesses need to turn their attention to creating local companies that contribute to appropriate parts of the solar value-chain, whether it be manufacturing, installation, maintenance, financing or other areas. Rather than environmental aspirations alone, it is the hard-headed pursuit of economic self-interest that offers the Middle East major, durable advances in future energy.

Robin Mills is the head of consulting at Manaar Energy, and the author of The Myth of the Oil Crisis and Capturing Carbon