A protracted slump in upstream oil and gas investment may result in the undesirable return of price volatility and market imbalance.
Climate change and increasing energy demand have prompted a global search for ways of producing less pollution-generating energy. The oil- and gas-rich Gulf Arab states are highly impacted by climate change and are also challenged by increasing domestic energy demand. The surge in energy demand of 5% per year on average for the Gulf Arab states has been mainly met by fossil fuel resources, namely oil and gas, which comprise nearly 99% of the total energy mix; this has been associated with regional growth in greenhouse gas emissions. Increasing energy demand has already triggered some of the Gulf Arab states, such as Oman, the United Arab Emirates, and Kuwait, to import natural gas to meet domestic energy needs. This growing demand has also affected the ability of these hydrocarbon-dependent states’ economies to maintain oil and gas exports, the major sources of income.
Furthermore, deficits in states’ budgets due to the 2014 drop in oil prices have prompted Gulf Arab governments to seek alternative sources of income to hydrocarbon revenue. However, the Gulf states have pursued economic diversification largely through the expansion of oil downstream industries and petrochemicals, which necessitate reallocation of oil and gas feedstocks for their operation. Reallocation of oil and gas feedstocks to petrochemical industries, however, is challenging because oil and gas supplies are also needed to meet increasing demands for electricity, water desalination, and, in some cases, enhanced oil recovery.
The Gulf Arab states are therefore searching for alternative energy resources, such as renewable energy. Renewables could contribute to reducing greenhouse gas emissions while also supporting the Gulf states in their economic goals of meeting increasing domestic energy demand and creating jobs. However, renewable energy remains extremely underutilized in the Gulf Arab states: By the end of 2018 renewables accounted for a mere 0.6 percent of total electricity capacity. In Oman, for instance, the share of renewables in total electricity capacity was around 0.5 percent in 2018 despite ambitious plans of sourcing 10 percent of electricity from renewable energy sources by 2025. Natural gas is the main fuel used for electricity generation, constituting nearly 96.7 percent of the country’s energy mix.
Aware of the economic, social, and environmental challenges associated with 100% reliance on hydrocarbons, the Omani government has started focusing on developing alternative energy resources, such as renewables. In 2008, Oman’s Authority for Electricity Regulation launched a study to assess the potential renewable energy resources in the country. It found significant available resources, especially wind and solar. The study indicated that 50% of houses in Oman, with 20 square meters of available roof area, are suitable for solar photovoltaic installation; utilizing the total available area would provide space for an installation capacity at around 420 megawatts. Also, the study indicated that around 100 square miles of desert area (0.1% of the country’s land area) could be utilized to build concentrated solar power plants, providing around 2,800 megawatts of solar energy capacity. Additionally, the installation of 375 wind turbines, each with 2 megawatts of capacity, would have the generation potential of at least 750 megawatts; this would require a wind farm land area of nearly 40 square miles. If all available solar and wind resources are harnessed, a total 3,970 megawatts of electricity could be generated from renewables – around 48.2% of total installed electricity capacity in 2018.
The release of the 2008 study sparked interest among investors, researchers, and other governmental entities in Oman in renewable energy research and development. In 2017, Oman launched two policy initiatives and the Oman Power and Procurement Company signed a power purchase agreement for the first utility-scale 50 megawatt wind-based renewable project in southern Oman. The first policy initiative, Sahim, allows entities such as homeowners and commercial buildings to install rooftop solar photovoltaic systems to produce solar electricity for their own use and to sell surplus energy to electricity distribution companies. Secondly, Oman announced a national renewable energy target, which aims to source 10% of total electricity generation capacity from renewables by 2025. Oman’s installed renewable energy capacity increased from 1 megawatt in 2014 to 8 megawatts by the end of 2018. Oman’s progress toward incorporating renewables is in line with its commitments to the Paris Agreement, which it signed in April 2019, and its target of reducing greenhouse gas emissions by 2% set in its nationally determined contribution.
In considering increasing renewable energy adoption in hydrocarbon-rich states, it is important to explore the interactions between renewable energy and economic, social, and environmental domains. This can help to measure the role of renewables in addressing the challenges of energy security, job creation, and reducing carbon emissions.
In the case of Oman, considering four scenarios with different degrees of integration of renewable energy sources in the sultanate’s energy mix (including solar photovoltaic, concentrated solar, and wind power) shows varying impacts on levels of hydrocarbon consumption, carbon dioxide emissions, and job creation. These scenarios include a business-as-usual situation in which there is no additional incorporation of renewables as well as moderate, advanced, and ambitious scenarios, with 10%, 30%, and 50%, respectively, of electricity generation sourced from renewables through 2040. The ambitious scenario is estimated at 50% renewable energy integration in line with the 2008 Authority for Electricity Regulation’s findings projecting that, if harnessed fully, renewables could meet 48.2% of Oman’s total electricity installed capacity. Also, solar photovoltaic remains at 10% in the advanced and ambitious scenarios due to its potential to meet only 10% of Oman’s total electricity installed capacity.
By 2040, in the business-as-usual scenario, the use of natural gas for electricity generation could increase by 28% compared with 2010. In comparison to the business-as-usual scenario, in the moderate, advanced, and ambitious scenarios, there could be 27%, 46%, and more than 64% less natural gas consumption, respectively. Furthermore, if no renewables are included in the future energy mix, carbon dioxide emissions are expected to significantly rise. Under the current growth rate of natural gas consumption for power generation, in the business-as-usual scenario, total carbon dioxide emissions are expected to rise by 400% from 2010 to 2040. The integration of renewables, however, could reduce carbon dioxide emissions in comparison to the business-as-usual scenario by more than 20%, 40%, and 58% in the moderate, advanced, and ambitious scenarios, respectively. In terms of job creation, given the increase in the renewable energy share in Oman’s energy mix in the moderate, advanced, and ambitious scenarios, the employment in installation, operation, and maintenance of renewable energy technology would increase correspondingly. Concentrated solar power provides the largest number of jobs over time compared with other renewable technologies, such as solar photovoltaic and wind power.
Yet, a number of barriers continue to constrain large-scale adoption of renewable energy in Oman. These include a fragmented energy policy, the lack of a comprehensive renewable energy regulatory framework, and a highly controlled energy market. To better integrate renewables into the country’s energy mix, Oman needs to make institutional changes to harmonize the efforts of different energy sector entities and define accurate roles and responsibilities; develop a comprehensive renewable energy regulatory framework to promote the integration of renewables in different energy sectors, such as electricity, transportation, and industry; and gradually liberalize the energy market, which could improve decision-making processes and attract renewable energy investors.
Overcoming barriers that hinder the integration of renewables would unlock many socioeconomic and environmental advantages. However, solar and wind energy alone cannot meet all of Oman’s energy needs, especially given their nature of intermittency and low technical efficiency due to high temperatures, humidity, and dust in the country. Therefore, the enhancement of a mixed clean energy profile, including off-shore wind, waste-to-energy, hydrogen, thermal, and hydropower energy sources, as well as developing smart grids and enhancing regional cooperation on renewables are promising options that need further investigation.
This post is based on the chapter “Socio-economic and Environmental Implications of Renewable Energy Integrity in Oman: Scenario Modelling Using System Dynamics Approach” in “Climate Change and Energy Dynamics in the Middle East” (Springer, 2019).
is a non-resident fellow at the Arab Gulf States Institute in Washington. Her areas of research interest include political economy of environmental sustainability, energy policy, renewables, and climate policies, with a focus on the Arab region.
is a doctoral researcher at Imperial College London.
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