Solar Impulse is back in the Middle East, where their bold attempt to circumnavigate the world using only solar power started. It's not a coincidence that they chose this region as the initial and final points in their journey. An analogy could be drawn – Solar Impulse symbolizes the potential of renewable energies; and solar energy holds the key to the future in the sun-drenched Middle East.
But there seems to be something counterintuitive here - renewable energy taking a central role in the region that holds the largest oil reserves in the world? Oil and gas are the Middle East's strong cards in the global geopolitical game.However, renewable energy is gaining momentum in the region (even if it's not generating many headlines).
The United Arab Emirates are serious about solar energy. Shams Power will build in Abu Dhabi the 100-MW Shams 1 concentrated solar power (CSP) station. ACWA Power, a Saudi company, is planning a 260-MW solar photovoltaic plant in Dubai, which will produce electricity at USD5.84 cents per kWh, making it more cost-competitive vis-à-vis conventional energy such as natural gas. Saudi Arabia plans to spend US$109 billion to install 54 gigawatts of renewable energy by 2040. Morocco's Noor-Ouarzazate power complexis expected to achieve 500 MW of capacity, which could represent a reduction of 17.5 million tons of carbon emissions over 25 years.
The role of insurance
The investments required are enormous. To reassure investors, robust risk management needs to be an integral part of the projects. Risk-transfer products help manage risks associated with the development and operation of renewable energy projects. By mitigating the risk in the construction phase and reducing revenue volatility during operation, insurance can help improve the return on investment for renewable energy projects.
Swiss Re Corporate Solutions has taken an active role in developing such solutions. For example, we joined forces with Marsh & McLennan and the World Energy Council to produce a series of reports on how to make our energy sources fit for the future.
We've also completed pioneering transactions that de-risk renewable energy projects, guaranteeing stable returns and making the projects economically viable for private investors.
The insurance market for renewable energy projects in the Middle East remains small. But there's no denying that the potential is there. As low oil prices continue to hinder economic growth, countries in the region need to diversify their economies. If Middle East & Northern Africa countries develop ways to promote public-private partnerships that attract investors, the opportunities for insurance to become an enabler of renewable energy projects will bloom.
In his book 'The winning of the carbon war', Jeremy Leggett gives a vivid account of how things are changing in the Middle East. He attended the World Future Energy Summit in Abu Dhabi on January 2016. "The video played to the thousand-plus attendees at the opening ceremony surprises me, " he wrote. "The origins of all the wealth in this nation of glittering desert towers is passed over almost apologetically, to be followed by an impressive catalogue of renewable-energy projects: bankrolled and executed, budgeted and planned, both domestic and international. Welcome to the future, is the message, a renewable-powered future which the oil-rich nation of Abu Dhabi is going to play a lead role in shaping."
Does this all sounds like a long shot, something too good to be true? Well, the same was said about Solar Impulse's adventure. But we at Swiss Re Corporate
Solutions believed in them, not lastly because the causes they hold dear are the same ones we embrace: sustainability, entrepreneurship and pioneering spirit.
Category: Sustainable energy: Solar
Location: Middle East