Saudi Arabia, the largest oil producer and exporter, and the United Arab Emirates, the fourth largest, are seeking 1,000MW of solar capacity, or enough to electrify 200,000 homes. This push into renewable energy will require financing in the form of loans and export credits of more than $1.5 billion by the end of 2014, according to the Gulf Times.
Bank loans will be the way to go for financing, say some experts. Startup renewables projects would borrow more cheaply using loans and could issue bonds later to refinance their bank debt once the plants are earning steady income necessary to make regular interest payments.
However, some believe traditional lenders like commercial banks may hesitate to fund the massive expansion Saudi Arabia desires, as they seek to limit exposure to renewables projects, said Steve Mercieca, the Dubai-based chief executive officer of the Clean Energy Business Council. He said that governments should encourage the availability of Islamic bonds, or green sukuk, to help finance solar facilities under construction.
Yet renewables investment in the Middle East and North Africa rose 40% last year to $2.9 billion, according to the International Renewable Energy Agency. Spending on more than 100 projects under development, including those for solar, wind and geothermal power could surge to about $13 billion in a few years.
That’s because the Middle East and North Africa consider sun and wind energy to be crucial for meeting the needs of growing populations and economies, and oil rich Saudi Arabia is leading the way. Oil-producers see renewables as a way to conserve more crude oil for export, while countries that rely on imported fuel see local green power as a cheaper and perhaps more consistently priced alternative.
Saudi Arabia plans to invest more than $100 billion to generate about 41,000 MW from solar energy, or a third of its total power output, by 2032. That compares with about 16 MW of solar capacity today, a level that places the kingdom behind Egypt, Morocco, Algeria and the UAE, according to Bloomberg New Energy Finance.
Abu Dhabi’s Solar Association said the first contracts will be awarded next year for a number of projects now being planned, a prospect that makes 2014 “very exciting.” For instance, Abu Dhabi announced plans to build a plant with photovoltaic technology, which uses panels to convert sunlight directly into electricity.
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