GRM 2010 GRM 2011

Abstract Details

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Successful integration of renewable electricity generation in the Gulf region
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Keywords: Renewable electricity generation, economics, natural gas exports, Gulf region

Nowadays two topics are on top of the agenda of global energy policy discussions. On the one hand, climate change issues and security of supply on the other hand, is addressed in detail. Therefore, strong emphases are put to diversified as well as sustainable energy supply portfolios. However, in this context significant differences exist in different regions worldwide. Additionally, the integration of renewable energy technologies faces different challenges depending on the energy sector. So far, much more experience exists in the integration of renewable energy sources in the electricity sector whereas the transport sector will still rely on fossil energy sources for a longer time period. Consequently, this opens new markets for large-scale fossil energy exporters, especially located in the Gulf region. Producing their domestic electricity demand by renewable energy sources and therefore selling the displaced natural gas resource to other countries in order to cope with their fossil energy demand enables to create additional incomes for GCC countries. This paper analyzes potential additional incomes of GCC countries when replacing there fossil fuel fired power plants by solar thermal plants. In particular, the additional investment expenditures are compared to additional incomes of selling the displace natural gas resources.

Method of approach
A pre-assessment of the electricity wholesale market in the GCC region – Saudia Arabia and Qatar in particular identifies the status quo of the electricity price structure. Taking into account standard investment costs of concentrated solar power plants and the associated capacity factor delivers their levelized electricity production costs. Additionally, considering storage facilities for managing the produced heat allows generating renewable electricity also during nights and, therefore, comparing the fluctuating renewable electricity generation to ordinary gas power plants. Redirecting financial subsidies of gas-fired power plants towards CSP plants quantifies the economics of solar electricity generation in the GCC region. Finally, the additional income due to an increased gas export to other world regions is addressed. Future scenarios as well as sensitivity cases highlight the dynamic development of the economics of solar power plants in the GCC region

Firstly, the electricity sector of selected GCC countries is dominated by natural gas fired power plants. Although large natural gas reserves are indentified in Saudia Arabia and especially Qatar significant gas reserves are allocated to not-associated reserves . Consequently, no fundamental reason exists to use the domestic natural gas resources for electric power production. Moreover, natural gas and also electricity production is heavily subsidized by the national governments in this region. In contrast, no solar thermal power plant exists in these countries so far. Taking into account the higher investment costs of CSP plants but also redirecting the national subsidies of gas-fired power plants allows, under specific circumstances, an economical feasible electricity production. These circumstances refer to an equity share of at least 60 percent. Additional incomes can be acquired by exporting the displaced natural gas reserves to other world regions. Depending on the exporting regions strong economic benefits for the GCC countries are identified. In contrast, transporting renewable electricity to Europe, under certain EU promotion schemes, is not economically feasible due to the additional investments in electrical transmission systems.
Consequently, global environmental benefits are achieved without additional expenditures. Additionally, taking into account that Qatar, holding largest not-associated gas reserves in this region, exports their gas mainly exclusively via LNG tankers, security of supply for several world regions is expected to increase while security of electricity supply in Qatar continuously given.
Ummel, K.; Wheeler, D. (2008). Desert Power: The economics of solar thermal electricity for Europe, North Africa and the Middle East. Center for Global Development, working paper number 156, 2008

1 These reserves can be produced without the production of oil reserves which are regulated by the OPEC quota.