MIDDLE EAST Trends and Developments Contributed by: Brendan Hundt, Dan Feldman, Sam Anastasiou and Saiesh Kamath, King & Spalding LLP
Solar-Plus-Storage and Rapidly Rising Electricity Demand: Two Forces Reshaping Power The power sectors of states within the Gulf Coopera- tion Council (GCC) and wider Middle East are expe- riencing a rapid growth in the demand for electricity. Grids and generation mixes are being reshaped by the rapid adoption of new renewables as countries strive to meet their emissions reduction and net-zero commitments. All the while, the expansion of existing industrial processes and the construction of new AI and digital infrastructure are creating a huge spike in demand for dispatchable electricity. On the generation side, many countries are deploying solar photovoltaic (PV) generation and battery energy storage systems (BESS) (both as part of new solar PV projects and as standalone capacity for energy grids) at record scale and record-low cost. On the demand side, major energy consumers are continually looking for greener electrons to meet their energy demands as they: • divest or decommission ageing captive power assets to optimise their balance sheets (for exam- ple, EGA has recently entered into agreements to sell the 3.1 GW power generation assets at its Al Taweelah facility to a joint venture made up of TAQA and DUBAL Holdings); and • adapt to meet increasingly stringent emissions reduction/net-zero requirements in their industries as a result of new regulations and state-specific commitments. The existing demand of industrial consumers (eg, ADNOC, EGA and Saudi Aramco) is also being multi- plied by a surge of investment in the construction of AI data centres which have already created an enor- mous additional demand for fully dispatchable power, a need that is forecast to increase further in the com- ing years. Historically, servicing the demand for a reliable base- load would have been provided by thermal generation, predominantly natural gas, and in the short-medium term this solution is continuing to be used out of necessity while renewable capacity increases. How- ever, the development of thermal generation capacity is creating a tension with the ambitious decarboni-
sation and net-zero commitments set by most GCC member states. In order to meet their net-zero commitments, much of the growth in energy demand will need to be ser- viced by renewable and low-carbon energy sources. In a region with abundant sunshine but moderate wind and limited hydro resources, solar PV is proving the technology of choice for many Middle Eastern coun- tries. The UAE has committed to net zero by 2050 and, through its Energy Strategy 2050, to adding a greater share of clean power to its generation mix, while Saudi Arabia’s Vision 2030 framework also targets sourc- ing around half of its electricity from renewables by 2030, an effort spearheaded by its sovereign wealth fund, Public Investment Fund (PIF). The result is a rap- id acceleration in the number of solar PV and BESS projects being procured around the region – a trend that shows no signs of slowing. This analysis draws primarily on trends and examples from the Kingdom of Saudi Arabia (KSA) and United Arab Emirates (UAE) (as the two largest markets in the region); however, these trends are not confined to these markets and are playing out across the Middle East at varying degrees of pace and scale. Solar and storage: from inexpensive electrons to fully dispatchable, round-the-clock power In Dubai, the Mohammed bin Rashid Al Maktoum Solar Park is the world’s largest multi-phase single- site solar park developed on the independent power producer (IPP) model, with a planned capacity of over 7 GW (originally 5 GW) by 2030 and investment totalling more than USD13 billion. Its sixth phase (1.8 GW) achieved a levelised cost of energy of 1.6215 US cents per kWh, the lowest recorded at the park. In Abu Dhabi, the 2 GW Al Dhafra project was contracted at USD0.0132 per kWh and is one of the largest single- site facilities in operation. Abu Dhabi’s single power procurer, Emirates Water and Electricity Company (EWEC), which had set a target of at least 10 GW of solar capacity by 2030 has now revised this target upwards to over 17.5 GW and is currently procuring a series of 1.5 GW plants, including Al Zarraf and Khazna. These projects are structured using the well-established Abu Dhabi
235 CHAMBERS.COM
Powered by FlippingBook