Bordering the Arabian Sea—the Sultanate of Oman is renowned for its oil-rich resources is now setting its sight on solar energy to develop a sustainable economic future. The Sultanate is at the forefront for carrying out massive solar projects and other related developments as it prides itself on abundant unused land and solar energy. For electricity generation, solar energy is of utmost importance in the Sultanate because of its capabilities to fulfill the emerging needs in energy diversification and non-oil economic diversification.
According to Oman Power and Water Procurement (OPWP), 21 percent of the Sultanate’s total power requirement will be produced by solar energy by 2030. Although developments in solar energy have become an attractive economic trend in most countries—what is it that really differentiates the Sultanate from those countries in the development of solar projects? That question points to an important fact that the Sultanate receives huge amounts of solar radiation throughout the year, even in comparison to the rest of the world.
It was in 2008 when the Sultanate’s potential in solar energy came into limelight following the Authority for Electricity Regulation’s report stating that it has one of the highest solar energy densities in the world—making it an excellent candidate for solar energy projects. Here is a fact: The majority of the places in the Sultanate have a tremendous global average duration of daily sunshine and solar radiation. In support of that fact, the Renewables Readiness Assessment report published by the International Renewable Energy Agency points to the desert areas, in particular, Marmul, Fahud, Sohar and Qaroon Hairiti which have the highest insolation of solar energy—while it is relatively less in the coastal areas.
By numbers, there are 320 sunny days each year and high-intensity sunlight can peak at nearly 6000 watt-hours per sq metre. Such abundance of solar resources has given the Sultanate a competitive advantage in the development of the world’s solar projects. For that reason, the Sultanate has a clear goal to provide a progressively cheaper way in electricity generation and become a hotbed for investors in the coming years. But the policies, fiscal incentives and public financing issued by the government merely determine the progress of its solar output for projects.
The race to solar power
Five years ago, the Sultanate unveiled its national energy strategy 2040 which was backed by IRENA’s Renewables Readiness Assessment. In addition, the Public Authority for Electricity and Water floated a report for the country’s first large-scale solar power project. Last year, the future of its solar energy project development was underpinned by a $2 billion initiative, which foresees the establishment of industrial plants for manufacturing solar panels and aluminium frames at a cheaper cost. The 2019 project is largely supported by the combined efforts of technology and knowledge. Now the government is planning to collaborate with big technology companies and international universities specialising in renewable energy education to assist the Sultanate’s population in servicing the industry on a global scale.
As it stands, the government has expressed interest in the development of clean energy for fulfilling the local energy demand, and its ambition to enhance the use of solar energy is already moving in the right direction. In March, the Authority for Electricity Regulation decided to issue fresh guidelines for the use of clean tech energy in rural areas. Indeed, the Rural Areas Electricity Company will play a prominent role in the development of solar energy projects by including a component of renewable energy technology wherever funding is expected to be floated. Even the International Renewable Energy Agency in support of the Sultanate’s efforts has published a renewables readiness report which was represented by the Public Authority for Electricity and Water (PAEW).
The government seeks to utilise a sizable amount of solar energy in the domestic energy demand including exports. It is currently drafting a national energy policy review which will focus more on cleantech energy use. It is estimated that the Sultanate has the full potential to meet all energy demands exceeding the required capacity by installing concentrated solar power technology sprawling across an area equivalent to one-tenth of its landmass, especially because of its high solar density. That said, the government expects to generate 10 percent of the Sultanate’s electricity this year from solar energy alone. Top-level officials in the industry believe that the review will considerably boost the percentage of solar output to meet the domestic energy demand at a cheaper cost. But everything depends on the government—to what extent it will develop solar projects and be open to foreign direct investments.
The Sultanate’s power infrastructure and hydrocarbon reserves pose a real challenge to its economic growth because of its major cities like Duqm, Sohar and Salalah heavily reliant on fossil fuels on the back of industrialisation and dense population. But it will be convenient for the Sultanate to harness solar energy on both large and small scales, because of its economic importance and strategic geographical location. The enhanced use of solar energy not only reduces those cities’ dependence on fossil fuels but it will create a more sustainable environment for the future. The establishment of solar energy projects backed by robust research and development will help the Sultanate to bring a paradigm shift in the diversification of its economy and create new job opportunities in the region.
The government takes the lead in diversification
The government might have taken many initiatives toward the development and diversification of the solar energy sector, but it should push the private companies to support and inject capital in new projects. The support given by private companies will ensure a smooth diversification of the Sultanate’s oil and natural gas-based economy—which in turn will help it to become one of the world’s largest and wealthiest energy producers in the world.
The Authority for Electricity Regulation Oman who is the regulator for the power sector is allowing citizens to set up solar panels at homes. The surplus electricity is expected to be retrieved by the national grid. Companies such as Knowledge Oasis Muscat (KOM), Majan Electricity Company and Sultan Qaboos University have already embarked on a pilot scheme for the development of solar energy. The production of solar energy has become an attractive option for the process of water desalination because of the slump in cost of photovoltaic (PV) panels, making the solar thermal desalination processes using solar collectors to be commercially available soon because testing in pilot projects have already started.
The Sultanate’s largest solar power project receives $275 million
One of the largest solar energy projects, in Dakhiliyah Governorate, as part of Oman’s National Energy Strategy 2040 will see the use of concentrated solar power and photovoltaic technologies. The project is expected to have a capacity of 200MW. The Sultanate has already started floating Power Purchase Agreements (PPAs) to investors to further support the domestic cleantech sector, andhe government has been pushing oil companies to expand their footing in the Sultanate to remain afloat against the depleting oil resources by providing a stronger and sustainable market.
However, problems may arise if stakeholders show less interest in setting up policies. In fact, lack of regulatory policies in the clean tech space will definitely affect the development of solar projects if they are not dealt with appropriately. The capability of the market will only be determined with the help of particular resource assessments which should also be the key resource areas.
Paddy Padmanathan, Chief Executive Officer of ACWA Power, told the media, “We are pleased to partner with GIC and AEPC on the largest utility scale solar IPP in Oman. Successfully achieving financial closure during these challenging times is a testament to the determination of all the stakeholders in this project to keep doing the best we can within the constraints we all need to work within.”
Oman’s first-ever Solar PV project has secured funding worth $275 million from six banking majors including ACWA Power and Gulf Investment Corporation (GIC) for the 500MW solar photovoltaic independent power project (IPP) in the region of Ibri. The six banks are Kuwait’s Warba Bank, Standard Chartered, Germany’s Siemens Bank, Riyad Bank, Bank Muscat and Asian Infrastructure Investment Bank (AIIB). The funding assisted the Sultanate to establish the largest utility-scale solar PV project on a 16.5-year door-to-door tenor. The financing marks the Sultanate’s first-ever renewable energy financing as well as the GCC region by the China-headquartered AIIB.
Rajit Nanda, chief investment officer for developer partner ACWA Power, told the media, “The project which is the largest utility scale Solar PV project in Oman, will also be the first renewable energy financing for AIIB in the GCC region, paving the way for a stronger partnership with the Beijing based international multilateral bank in the future.”
China is part of SAGC’s landmark solar project
The solar project is developed by Shams Ad-Dhahirah Generating Company SAOC (SAGC), which explained that it is making progress by leaps and bounds in the implementation of the huge scheme in Dhahirah Governorate.The company is working on a 500MW solar photovoltaic based grid-connected utility as part of its Ibri II Independent Power Project amid existing challenges such as mobility restrictions, supply disruptions and other measures imposed by the Sultanate’s government to contain the spread of Covid-19 virus.
How are Chinese companies contributing to the project?
Few Chinese companies specialising in solar technology and related equipment manufacturing are part of the landmark project. The $400 million projects which are backed by top-notch lenders are considered as one of the world’s largest PV plants boasting single-axis trackers and bifacial modules. It is reported that the Chinese company Arctech Solar is believed to have completed production and shipment of major tracker components to the site of Ibri-II in the Sultanate.
Chinese company Sungrow plans to carry out the shipments of inverters to the Ibri-II project. The inverter solution has the potential to boost returns on the project as it is compatible with bi-facial modules and tracking systems. The world’s largest manufacturer of N-type bifacial solar panel modules Jolywood (Taizhou) Solar Technology has started delivering modules for the project. The bifacial solar modules can generate power from both sides of the module, thus, boosting the overall energy generation process. The UV-resistant module is durable in nature.
The Ibri-II Solar IPP is expected to be operational by summer 2021. Oman Power and Water Procurement Company (OPWP) will be the first entities to purchase clean energy from the project with a 15-year contract. According to industry experts, the project once completed will be able to power an estimated 33,000 homes and cut down 340,000 tonnes of CO2 emissions every year.
The project which was unveiled in 2017, had 12 bidders. A consortium led by Marubini was assigned for the Petroleum Development Oman’s 100 MW Al Amin solar PV plant in 2018. According to media reports, a 50 MW wind park at Harweel is set to be commissioned this year.
Furthermore, the 50 MW Dhofar I Wind Power Project is expected to become the first large-scale wind farm in Oman, powering 16 000 homes in the Governorate of Dhofar and reducing CO2 emissions by 110 000 tonnes yearly.
Oil sector is heavily contesting with the solar market
The government is taking necessary steps to establish solar energy projects in the Sultanate. However, the solar industry market faces a tough competition from the heavily dominated oil sector. The government must focus on providing incentives and subsidies in the form of feed in tariffs in an effort to reassure a guaranteed price for electricity sold to the state-owned electricity grid by merging solar power in the power production process. The renewable sector in the Sultanate requires political support to remain afloat in the competition, economically in the highly competitive market. The laws governing power generation regulation should be incentive oriented to attract more stakeholders seamlessly and the laws should be more flexible for renewables.
In this context, Deloitte in its report said that “Given its abundance in the region, oil and gas have been the main source of primary energy; however, their share is expected to be replaced by solar by 2050.” The solar energy sector and future projects will be bolstered by positive initiatives such as low tax regimes, strong property rights and establishing a positive investment environment. In addition, the government should encourage local companies to approach leading international companies to take part in the Sultanate’s power sector. It is especially important for the government to devise a transparent plan of action for the development of solar energy in the future, with its neighbouring countries such as the UAE seeking to become the Middle East’s solar powerhouse, if a favourable regulatory framework is not developed quickly. In short, the Sultanate is in a good position to capitalise on the solar market, and if the government invests in the right developments, it might even become a pioneer in the coming years.