Another month brings yet another report warning that policy uncertainty risks stalling investment in a particular power generation sector.
In August the report came from the esteemed analysts at the International Energy Agency and the market in question was renewables.
Power generation from renewables grew by 240 TWh last year to hit 5070 TWh, accounting for almost 22 per cent of global generation. This was driven by global investment in the sector of around $250bn.
Money of this magnitude isn’t invested lightly and the IEA warned that policy tinkering – or even wholesale overhauling – risks seeing this financial backing coming to a standstill.
IEA executive director Maria van der Hoeven said that just as renewables are “becoming a cost-competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets. This stems from concerns about the costs of deploying renewables,”
She stressed that policy decisions must be predictable and retroactive changes must be avoided. “Governments must distinguish more clearly between the past, present and future, as costs are falling over time. Many renewables no longer need high incentive levels. Rather, they require a market that assures a reasonable and predictable return for investors. This calls for a serious reflection on market design.”
So far, so obvious, yet the IEA is predicting a drop in renewables investment of $20bn a year to 2020. It lowered its growth forecast for all renewables except solar PV and said Europe and the US could expect to see a slowdown in capacity growth.
The renewables industry is acutely aware of this investment threat which it has little or no control over, yet is also working on those challenges to its future that it can influence.
One such challenge is to bring down the cost of electricity generated from offshore wind farms to ensure that the sector can grow and compete with other forms of generation without subsidy.
Benj Sykes, UK wind country manager for Dong Energy and co-chair of the Offshore Wind Industry Council, says “the industry cannot rely on subsidies indefinitely – we need to make rapid progress towards the goal of being competitive with other energy sources”, and outlines on p28 how he believes this can be done.
One region showing little sign of renewables dithering is the Middle East. It may currently boast few ‘green’ power plants, but that is on track to change by the end of the decade.
Its flagship solar farm – Shams 1 in Abu Dhabi – is set to be joined by other solar schemes in Dubai, Jordan, Oman, Saudi… the list goes on, as many Gulf states look to take advantage of their climate and in turn save more of their oil and gas for export rather than their own power generation.
Which is not to say that the region is not keeping pace with the latest technology in other forms of power generation: far from it. In our Special Focus on p6 we examine several new state-of-the-art plants that are helping to reshape the energy mix of the Gulf. From the world’s largest internal combustion engine plant, which is poised to come online in Jordan, to two gas-fired combined cycle plants in Oman that are at the cutting edge of clean and efficient power technology, Middle East countries are pushing ahead with energy strategies, backed up with the know-how of European companies attracted by the region’s get-on-with-it attitude.
Meanwhile the Gulf’s first nuclear plant is making progress in the UAE supported by enviable policy certainty. The country decided it wanted nuclear power, drew up a policy framework, picked a site, chose contractors… and Barakah power plant is underway, on time and budget and winning plaudits from the International Atomic Energy Agency. And all in the time that plans for Hinkley Point C in the UK are pushed across desks in Westminster and Brussels while equipment at the so-called ‘shovel-ready’ site gather dust.
We can expect more details of how the countries of the Middle East are pushing ahead with their power blueprints at POWER-GEN Middle East (12-14 October: www.power-gen-middleeast.com), when the major players in the power industry will meet in Abu Dhabi. I hope to see you there.
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