Renewables such as wind and solar power will gain market share against fossil fuels everywhere including in the Middle East even after the oil-price plunge, an official from Abu Dhabi’s clean energy developer said.
The long-term costs of renewables have declined so rapidly that they’re beginning to rival oil-fueled generation even after the cost of crude fell more than 50 percent, said Ahmad Belhoul, chief executive officer of Masdar, which develops clean energy plants in the United Arab Emirates.
His remarks, which jive with assessments by Citigroup Inc. and Goldman Sachs Group Inc., are unusual from coming from an oil-focused region that has been a laggard in installing renewables.
“To me the real story is not to be too fixated on how low oil prices will go,” Belhoul said in an interview Monday at a conference hosted by Bloomberg New Energy Finance in New York. “The real story is the reduction in energy costs” for renewable energy.
Oil is used to generate 5 percent of the world’s electricity and has a bigger share of the power generation mix in the Middle East than in regions with less of the resource. Some nations such as the U.A.E. and Saudi Arabia have expressed interest in developing more renewables in order to save more oil for export. Masdar’s estimates suggest oil is an inefficient fuel for making electricity and can compete with solar only when the price of a barrel is below $30.
Citi expects the price of Brent crude, the global benchmark, to average $54 a barrel this year. West Texas Intermediate, the benchmark in the U.S., will average $46 in 2015, down from a high of more than $107 in June.
“Renewable energy has reached a point where it can weather any changes in oil prices,” Belhoul said. “Being in the Middle East, it makes sense for us to look in the region. We’ve seen targets being set, so there is appetite for renewables.”
The executive sees opportunity for developers unfolding in the U.A.E., Egypt, Morocco, Jordan and Oman.