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World's Cheapest Power Project: A milestone shift to solar electricity generation?

Date : 28/12/2017
Author:  Marmore MENA Intelligence

Saudi Arabia recently registered the cheapest price bid to supply solar electricity ever recorded. Abu Dhabi’s Masdar and Electricite de France SA bid to supply power from a 300-megawatt photovoltaic (PV) plant for as cheap as 1.79 cents a kilowatt hour. If the project is successfully awarded by the Ministry of Renewable Energy Project Development, it would top the leader board beating the previous record for a solar project in Abu Dhabi for 2.42 cents a kilowatt-hour. It is a milestone in Saudi Arabia’s nascent solar program and a landmark start of a USD 50 billion program to diversify domestic energy supplies away from fossil fuels.
Bids for Saudi Arabia’s Sakaka Solar plant

Source: TheNational

Saudi Arabia is among the leading Middle Eastern oil producers looking to renewables to feed growing domestic consumption that’s soaking up crude which it could profitably export to generate higher revenues. The plant in Sakaka will be the first project awarded under the renewables program, which targets 9,500 megawatts of electricity generation capacity using solar and wind by 2030( Bloomberg). The project is set to start producing power by June 2019.  

Record lowest solar power pricing (US cents/kWh)

Source: Electrek

Prices for new solar power projects have fallen so rapidly that the cheapest price of previous year has become the ceiling price for the current year. The prices have reduced by as much as 78% since 2013. A combination of improving and less costly technology, free land earmarked for the plants, connections to the national power grid and favourable financing have helped to significantly reduce the costs. Developers are also expected to benefit from the economies of scale due to the large sized projects. The already-plummeting costs of installing solar power could fall by further 60 percent over the next decade(IRENA).
Current power generation scenario
 Saudi Arabia generated 330.5 billion kilowatt-hours (kWh) of electricity from installed capacity of 66 GW in 2016(EIA). It faces a sharply rising demand driven by population growth, a rapidly expanding industrial sector led by the development of petrochemical cities and high demand for air conditioning during the summer months. Total generating capacity is expected to be over 120 GW by 2032.
Saudi Arabia’ installed electric power capacity by fuel as of Jan 2017


Source: EIA
Saudi Arabia that gets less than 1 percent of its power from renewables currently, is targeting 60 projects in renewable energy program with investments estimated between USD 30 billion and USD 50 billion by 2030(Reuters). The expansion into renewables will substitute the usage of 18 million barrels of oil equivalent for electricity generation by 2020.
Outlook for solar energy in Saudi Arabia
Saudi Arabia’s renewable energy program is part of a broader project to wean the economy from its reliance on oil exports. The kingdom is restructuring its energy sector as part of Vision 2030 and a focus on renewable projects is a pillar of this transformation. Saudi Arabia is an ideal location for both Concentrated Solar Power (CSP) and PV power generation as it has remarkably high solar radiation of around 2,550 kWh/m2 per year, which is almost double the average radiation in European countries. There is also the availability of vast areas of empty desert that can host solar installations. Additionally, Saudi Arabia has huge deposits of the type of clear sand that can potentially be used in the manufacture of silicon PV cells.
However, some barriers may exist such as large reserves of oil with relatively low cost compared to solar energy. Saudi Arabia also currently lack any demand-side policies to stimulate the private sector. These include tax benefits or feed-in tariffs for renewable electricity generation. In addition, the dust effect, which can reduce solar energy by up to 10–20 % can be a major hindrance and will require solar energy technology to be adapted for desert conditions to enable more efficient harnessing of the energy.
Still, the percentage of renewable energy is estimated to reach 10 percent of total installed capacity in Saudi Arabia by 2023. Further, The King Abdullah City for Atomic and Renewable Energy (KACARE) is targeting for 41 GW of solar power, 17.6 GW of nuclear power, and 9 GW of wind power by 2032(KACARE). The fact that Saudi Arabia, an ardent booster of fossil fuels, has found compelling economic reasons to bet on solar is one of the clearest signs yet that solar has become a cost-effective source of power.
This article is published in "Marmore Blog"


Tags:  Arabia, Electricity, Energy, Power, Saudi, Solar

 Current rating: 0 (3 ratings)

Move towards renewables - Where is the problem?

Date : 26/09/2017
Author:  Marmore MENA Intelligence


The renewable energy sector no longer remains at the periphery as an industry for social good alone; but has emerged as a profitable alternative to conventional sources of power generation. The case is even stronger for the GCC which is now at crossroads, as the oil slump extends into its third year. A shift to renewable energy will not only reduce cost of power production and carbon emissions but also free up more oil for exports. Currently, the utilization of renewables as a source of energy remains low in the GCC when compared to the rest of the world. We look at the reasons why and whether a move towards renewables could make a difference.
The total power generated through renewables in the GCC has grown from a meagre 20 GWh in 2010 to 620 GWh in 2015. But looking at the bigger picture, it constitutes to less than 1% of the total power generated in the region while the global figure is at 23.3%. Europe and North America stand at 34.2% and 22% respectively in 2016 with Norway leading the way with 97.87%.

Norway has long been a pioneer in renewables with focus on clean energy despite having oil reserves comparable to countries like Oman. Prudent energy policies over the last few decades have enabled them to adopt renewables at a very early stage thereby allowing their oil resources to be used for exports. This has not only helped their economy grow, but also helped them achieve it without foregoing environmental sustainability.

While there is a huge scope for improvement in the GCC countries, we need to take into consideration the fact that historically, power generation through fossil fuel has been cost-effective for them. As renewables were not a lucrative option for energy production, there was no urge in considering alternatives. But the landscape has been changing lately as rapid urbanization has increased the need for energy. This has in turn led to increase in domestic consumption of resources and rise in air pollution which are forcing the hand of GCC countries to look at renewables.

Cost of Renewable Energy
Globally, there has been a reduction in LCOE(Levelised Cost of Energy) (LCOE is calculated by dividing lifetime cost of project divided by the lifetime Energy production of project. LCOE is used to compare the relative cost of energy produced by different energy-generating sources) ranges of renewable energy sources between 2010 and 2016 with Solar PV’s weighted average LCOE coming down by more than 50% from USD 350/MWh to USD 140/MWh. This brings the cost of power production by solar energy within the range of fossil fuels.

Source: IRENA Rethinking energy report

Cost of production of renewable energy is competitive in the GCC despite the recent fall in the prices of fossil fuels. The LCOEs of the PV projects at utility scale in the GCC region are comparable to the LCOE of electricity generation from oil when oil is priced at USD 20 per barrel. With crude oil priced at around USD 50 per barrel now, the case for greater integration of solar PV in the oil-based power sectors is strong.

What if 5% of total power is produced through renewables?
From an economic standpoint, we look at the savings made if there is a change in the power mix. We take the case of UAE, in 2016, only 0.23% of the total power in UAE was produced through solar energy. If it grows gradually to 5% by 2020, we estimate that it could translate into cumulative savings of around USD 4.1 Bn in the next 5 years through savings from cost of production and the export of saved oil.


Aggressive targets and sizable investments
Globally, renewable power generating capacity saw an increase of 9% in 2016 compared to the previous year. Investment flow towards renewables has been steady with the spending exceeding USD 200 bn every year for the past 7 years. New investments of USD 264.8 bn was seen in 2016 with main focus on solar power closely followed by wind power. In the same year, renewables accounted for an estimated 62% of net additions to global power generating capacity. GCC countries have also made sizeable investments over the past few years and have set their long term targets.

Saudi Arabia, world’s biggest exporters of crude oil is moving towards the construction of its first utility-scale wind-power project at Dumat Al Jandal. It also plans to develop 30 solar and wind projects over the next decade as part of a $50 billion program to increase power generation and reduce its oil consumption.

Kuwait, one of the earliest advocates of renewable energy in the Middle East has set its sight to meet 15% of its energy requirements from renewable resources by 2030. Construction is now in progress for Phase I of the 2GW Shagaya Renewable Energy Park. Al-Abdaliyah Integrated Solar Combined Cycle plant is another power generation project under construction has an overall capacity of 280 MW. Kuwait has also planned to issue a tender to build the estimated USD 1.2 billion Dibdibah solar-power plant in the first quarter of 2018.

The United Arab Emirates is investing USD 163 billion in clean energy projects to ensure that half of the country’s power needs are generated from renewable sources by 2050. Dubai’s 13MW first phase of the Mohammad Bin Rashid Al Maktoum Solar Park received the International Renewable Energy Certificates (I-REC) issued in 2017, making it the first in the region to adopt the I-REC (I-REC is a voluntary system for international trade in renewable-energy certificates.) system.


Source: IRENA (2016b) and Marmore research, *Electricity generation ** As of 2016

The late adoption of renewables in the GCC countries could be attributed to the abundance of fossil fuel and their cost effectiveness in the past decades. With majority of the power being produced by conventional sources it would take time for the shift to materialize. Considering the impact on the Power sector as a whole and the employment opportunities it generates could also be major reasons for this procrastination. Further, policies have generally been revolving around Oil while environmental sustainability has not been considered a priority. However, going forward the reducing cost of solar power generation, advancements in technology, favorable geographic conditions and the increasing need to sell more oil to compensate the lower prices would now make renewables an economical and environmentally viable option for power generation. As it stands, the growing investments in the past few years towards renewables could very well pave way for a paradigm shift towards a balanced energy dependency between fossil fuels and renewables in the years to come.

The article originally appeared in Gulf News.

"Marmore Blog"

Tags:  Economy, Energy, Power, Solar

 Current rating: 5 (3 ratings)

Waste to Energy in the GCC Moving beyond the cost dynamics

Date : 12/09/2017
Author:  Marmore MENA Intelligence

Waste to Energy (WTE) provides an environmentally sustainable route for waste disposal while carrying the added benefit of producing clean energy. It is high time for the GCC countries to wake up and take note of their Solid Waste Management strategy as rapid urbanization has led to an increasing waste pile up year over year. Per capita waste generation in most GCC countries exceed the global average of 1.2 kg per day with Bahrain and Kuwait producing 2.5 and 1.9 kg of waste per day respectively. Despite these growing concerns, Waste to Energy has not taken off in the GCC yet with investments starting to made only during the past few years. We analyze the reasons why the governments have taken so long to unearth WTE.

Globally, the value of WTE market is estimated to be USD 28 Billion and expected to reach USD 37 Billion by 2023. WTE technologies based on thermal energy conversion is widely preferred and accounted for approximately 88.2% of total market revenue. Europe is the largest and most sophisticated market for WTE technologies, accounting for 47.6% of the total market. Despite the increase in industrial waste, strict waste management legislation in the EU have been responsible for the growth in Europe’s WTE market.  In the case of other developing economies the key challenge has remained the large up-front cost for implementation and hence the option of low-cost landfilling is widely preferred.

Source: Enerdata, IRENA
Firstly, from the perspective of power generation, the amount of electricity produced through WTE is miniscule as compared to the solid waste utilized for the purpose. In the case of Qatar, currently, 0.37% of its total electricity is produced by WTE plants. Even when we assume that the total annual solid waste produced domestically is converted to electricity, it is estimated to produce only 735 GWh which accounts for 1.78% of the total electricity produced. The power generation capacity through WTE can’t be increased beyond the threshold value since the raw material required for power generation in this case is solid waste, which is in limited supply. This is one of the key shortcomings of WTE when considered as a source for power generation.
 Secondly, when viewed from a financial angle, the investment required for WTE technology remains on the higher side. Qatar invested USD 1.7 Billion to complete the Domestic Solid Waste Management Centre. This is huge in comparison to other renewable/ environment friendly power generation technologies like solar. Solar PVs is witnessing a downward trend and in comparison the case looks weaker for WTE to be considered as an energy source.
However, a key dynamic which favors WTE is the limited land availability in the GCC. Excluding Saudi Arabia and Oman, the total land area available in the other countries is only 113,756 km2 which is three times lesser than the land area of Norway. But in comparison, Norway produces nearly 5 times lesser waste than the 4 countries combined showing the enormity of waste produced in relation to the land availability. Hence, landfill burial would not be a sustainable technique in the long run, especially when rapid urbanization is taking shape in the region and the city scape continues to grow.
Most of the GCC countries are cognizant of the situation and have taken initial steps towards waste management albeit still at a nascent stage. Only Qatar has thus far produced substantial amount of electricity from waste while other GCC countries continue to procrastinate this problem. Nevertheless, investments are beginning to flow in the past few years.

Waste disposal is a problem that has to be tackled with urgency. Leeching due to the landfill is highly hazardous and in most cases irreversible. Electronic and plastic waste is again a matter of deep and growing concern. Governments should take the initiative and involve private players to manage this issue and push the needle before time runs out. Providing subsidy, easy loans and strict regulations could be the measures taken. Investment in new technology and research should also be promoted by governments as pursued in the case of other non-conventional power generation mechanisms such as solar and wind. Countries should move beyond the cost dynamics of WTE and rather emphasize on the socio economic benefits to build on a better and sustainable future.

This article is published in "Marmore Blog"

Tags:  Electricity, Energy, GCC, Power, to, Waste

 Current rating: 5 (3 ratings)

Kuwait Projects: KWD 10bn Awarded - Where is the trickle-down effect?

Date : 25/04/2016
Author:  Marmore MENA

Kuwait Projects

According to Marmore’s recently published report on Kuwait Projects, in 2015, Kuwait awarded projects worth KWD 10bn, an increase of 20% compared to 2014. The aggregate value of projects awarded during 2014 and 2015 was KWD 18bn. However, this is yet to impact positively on key areas of the economy.

As of Q1 2016, there are 420 ongoing projects in Kuwait, 19 projects valued at KWD 34bn (USD 112.2bn) placed on hold and another 20 projects valued at KWD 7bn (USD 22.1bn) shelved. Some of the key areas that were expected to be positively impacted are the banking (liquidity & credit growth) and capital markets (debt & equity).  However, the awarding of projects is yet to create any impact on capital markets and had a marginal impact on banks’ credit growth. Bank’s credit, which was expected to be significantly impacted, grew with 8% increase in credit growth at the end of 2015 compared to 2014. And, the corporate earnings in Kuwait have contracted at the end of 2015 compared to 2014. All these factors ascertain that the awarding of projects during 2014 and 2015 is yet to stimulate the growth of the Kuwaiti economy as anticipated.
The reasons highlighted in the report for the absence of tangible effects of these projects are:
  1. In the current situation, much of the projects went to contracting and construction companies rather than PPP. A PPP focused project awards can have quick pass through effect benefitting many legs of the economy.
  2. Duration taken for the projects to be completed: Considering some of the largest (in terms of value) projects completed during the 2012 to 2015 periods, the average duration taken for these projects to be completed was 5 years
  3. The contra effect of the low oil price on economy: As the positive effect of the projects awarded is weathered by the negative impact of low oil prices on the economy
  4. Projects awarded are skewed towards oil & gas sector - A majority of the completed projects are from oil & gas sector and since Kuwait is an oil-dependent economy, the economic significance of these projects is high. However, given the lower oil price prevailing since mid-2014, this would not have resulted in expected level of revenue generation
Some of the trends summarized in the report are that projects awarded are showing signs of growth with the increase from KWD 3bn in 2012 to KWD 10bn in 2015 and the decline in oil prices hasn’t significantly impacted the project’s landscape in Kuwait.
A sector wise assessment indicates that the real estate sector is the most dominant segment for projects in Kuwait with the highest number of ongoing projects (154) worth KWD 37bn. However, Oil & gas, power & water sector projects accounted for 74% of projects completed (by value) between 2012 and 2015. As far the new projects are concerned almost 50% of the projects signed in 2015 belong to the oil and gas sector. A majority of the ongoing projects in Kuwait are in the early stages of execution.
The Kuwait Authority of Partnership Projects (KAPP), is expected to award PPP projects worth KWD 2bn (USD 6.6bn) in 2016 and as of Q1 2016, there are 22 ongoing projects from real estate and power & water sectors. The Al Zour IWPP is the largest ongoing PPP project in Kuwait.

Tags:  Infrastructure, Kuwait, Power, PPP

 Current rating: 5 (3 ratings)

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