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China-Mideast Gulf: Greener Energy Future?

Copyright © 2021 Energy Intelligence Group

It's not a secret that energy sits at the heart of the China-Mideast Gulf relationship. As a rapidly growing oil consumer, China has long had an interest in developing close ties with the hydrocarbon-rich Mideast Gulf states to ensure energy security. In response, Chinese national oil companies (NOCs) have stepped up their investments and expanded their footprint in the region over the past 10 years. China National Petroleum Corp. and China National Offshore Oil Corp., for example, produce equity barrels in Iraq and Abu Dhabi that help meet energy demand at home. The question now is whether the traditional fossil fuel-based relationship might shift as the world, including China, moves to a lower-carbon future. Decision-makers in Beijing may seek to reset the world's second-biggest economy along greener lines as it emerges from the coronavirus pandemic, and place a greater focus on cleaner energy projects under the umbrella of its signature Belt and Road Initiative (BRI) (EC Jun.19'20). Gulf states have meanwhile drawn up ambitious long-term renewable energy targets in recent years as the region looks to diversify and add cleaner generation to its energy mix against the backdrop of sustained demand growth. With a full-fledged economic recovery still far off, China's Communist Party has to find ways to revive an already debt-laden economy. A greater role in the Mideast Gulf's growing renewables sector could provide some opportunities for Chinese companies -- particularly private-sector firms -- at a critical time. Saudi Arabia plans to install 9.5 gigawatts of renewable generation capacity by 2023, with 30% of overall power generation capacity to come from renewables and nuclear by 2030. Similarly, the United Arab Emirates aims to have a 27% clean energy contribution by 2021 and for 44% of installed capacity to be carbon-free by 2050. Kuwait meanwhile is targeting 15% of its power generation and 30% of consumption to be fossil fuel-free by 2030, but has yet to sanction any projects. Bahrain and Oman have also set renewable generation goals. As the number of renewable projects led by photovoltaic (PV) plants in Abu Dhabi and Dubai has grown, a mix of technology advancements and increased scale has helped reduce generation costs to record lows. In late April, state Abu Dhabi Power Corp. announced that it had received technical and commercial bids for its 2,000 megawatt solar PV independent power plant project at a tariff of $1.35 per kilowatt hour on a levelized electricity cost basis -- almost 44% lower than tariffs set three years ago on the Noor Abu Dhabi Project. Chinese solar technology exports have been a key part of this process. Companies such as Jinko Solar Holding have a footprint on the ground. And in a high-profile move last year, China's Silk Road Fund, which invests on behalf of Beijing under the BRI, purchased a 49% stake in newly established joint-venture company Acwa Power Renewable Energy, in which Saudi power developer Acwa Power retained a 51% stake. The venture owns Acwa Power's concentrated solar power, PV and wind assets across the UAE, Jordan, Egypt, Morocco and South Africa, holding an aggregate power capacity of 1,668 MW. The Saudi-based company has become the largest power and water developer in the Gulf region since taking on its first project in Saudi Arabia in 2004. Mideast Outlet

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