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It’s got a dry, sunny climate, an addiction to fossil fuels, and it’s set to become a hot spot for renewable energy development, especially solar. That would be the Middle East, where countries such as Saudi Arabia subsidize electricity generation by using their own oil and where natural gas is the main source of power for the United Arab Emirates.
The Middle East has generated a lot of media attention in recent weeks when it comes to clean power, particularly since the Saudi government announced a plan to install 41 GW of solar systems by 2032. The country also wants to add wind, geothermal, nuclear and other sources into its mix. Saudi Arabia relies heavily on its own oil and gas for power generation. But with a rising domestic demand for power, the government doesn’t want to use fossil fuels from its wells when it could sell them at far higher prices to the rest of the world.
“If Saudi Arabia continues with its business-as-usual scenario, they will have no more oil to export to the world by 2030,” said Shihab Kuran, founder and CEO of Petra Solar in New Jersey.
The region has been considered a new frontier for solar power development for some time. For over a year, First Solar (s FSLR) executives have talked about opportunities in the Middle East, and the company recently told Bloomberg that it would open an office in the United Arab Emirates this year – and possibly a solar panel factory somewhere in the Middle East – to meet local demand. In April, First Solar said it would close its German factory and lay off 30 percent of its workforce worldwide to deal with a glut of solar panels in the global market and to look for project development opportunities in parts of the world where solar electricity could be competitive without heavy government subsidies.
A 2012 Pricewaterhouse Coopers report found that solar electricity, which can be produced at $0.15 per kilowatt-hour, is an economical choice for the Middle East because many countries in the region rely on expensive oil and natural gas to produce electricity.
Beyond the Saudis
Saudi Arabia isn’t alone with renewable energy plans in place. Iran plans to build a 5MW pilot geothermal energy project and wants to add 12,000 megawatts of renewable energy, reported Iran’s government-owned TV station recently. Qatar Solar Technologies plans to build a $1 billion silicon plant in Qatar to supply the material to manufactures of solar panels. The idea is to use the plant to feed the market growth in the region. Qatar Electricity and Water Co. wants to get 10 percent of its electricity from solar by 2018.
Petra Solar has been courting Arab leaders and power companies for a few years now. The company announced a 5 MW solar and smart grid project in several locations in Bahrain last week. The startup also is working on a similar project in Jordan, where Kuran grew up. Last year, the company bought Jordan-based EnergyFlow Consulting to help it expand its Middle East presence. Earlier this year, Petra Solar agreed to partner with Enviromena Power Systems, a solar project developer in United Arab Emirates, to develop solar and smart grid projects in the Middle East and North Africa together.
Petra Solar pairs solar panels with smart meters, sensors and communication technology to monitor and report the performance of solar panels and other important equipment. It also offers software for controlling street lighting and equipment to control the voltage, current and other aspects of the distribution grid. The company made headlines in 2009 when it won a contract from the Public Service Electric and Gas Co. to put 40MW of solar panels on utility poles in New Jersey. The project is 80 percent complete, Kuran said.
The company has lined up $54 million in private equity, is pitching its package of hardware and software as a more complete way to not only generate clean power but also manage the solar power generation and the health of the electric grid more intelligently.
Kuran said the upfront cost of a Petra Solar project may be higher than a traditional solar power plant project, but buyers or investors of the project will get lower cost of solar electricity over time than a stand-alone solar project.
Although Saudi Arabia has announced a solar installation goal, it has yet to figure out what incentives should be in place to help create that 41 GW. The government is looking at whether the government should buy and own solar power plants or to buy power from producers who could get a premium price for solar electricity, Kuran said.
The idea of creating a flourishing, local solar energy market isn’t new. Abu Dhabi, the capital of the United Arab Emirates, is building a giant city from scratch in the desert that is supposed to be using lots of renewable energy and featuring energy efficiency measures and driverless, electric public transportation systems to reduce wasteful energy consumption. The city project, called Masdar City, has progressed at a slower pace than the government initially anticipated, however. Abu Dhabi also has installed demonstration projects to put solar panels or use solar mirrors to produce electricity for local consumption.
Photos of Abu Dhabi’s clean power projects, courtesy of Ucilia Wang