4 THE RISE OF RENEWABLES IN THE GULF STATES …
111
What Explains the Differences
The picture painted thus far of renewables development in the GCC
states shows that, despite what may be considered a ‘rentier handicap’—
inhibiting large-scale early adoption of renewable energy—the last five
years have seen a noticeable divergence in achievements and ambition in
this space.
Rents Are not the Reason for the Divergence
As a group of states, compared to neighbors such as Jordan, it is clear that
the availability of low-cost fossil fuel resources inhibited large-scale early
adoption of renewable energy at the utility scale. Particularly when rents
were increasing and budgets were in surplus—as was the case between
2009 and 2014 when an early adoption strategy might have been implemented—the political economies of the GCC states were not sufficiently
sensitive to the opportunity costs associated with burning fossil fuels
domestically for power instead of exporting them at international market
prices. 40 It is worth mentioning that the opportunity cost calculation is
more complex on the ground for policy makers in states like Saudi Arabia,
who have millions of barrels of excess daily oil production capacity, and
are generally limited by quotas agreed by OPEC or OPEC+. Pierru and
Fatih modeled the costs under different scenarios in their informative
2020 paper. 41
At the distributed scale, where solar PV must compete with subsidized
electricity prices, it is the distributive expectations placed on the state by
the rentier social contract which has led to persistently low electricity
prices and the slow proliferation of the technology on rooftops across
Gulf cities.
Within the group of states, however, high rents do not seem to explain
either extremes of adoption. The divergence in approaches within the
‘Super Rentiers’ of Kuwait, Qatar, and the UAE makes this abundantly
clear. UAE, on the one hand, has led the region in recent years in renewables development, while Qatar has been a noteworthy laggard. So what
does explain the divergence? 42
111
What Explains the Differences
The picture painted thus far of renewables development in the GCC
states shows that, despite what may be considered a ‘rentier handicap’—
inhibiting large-scale early adoption of renewable energy—the last five
years have seen a noticeable divergence in achievements and ambition in
this space.
Rents Are not the Reason for the Divergence
As a group of states, compared to neighbors such as Jordan, it is clear that
the availability of low-cost fossil fuel resources inhibited large-scale early
adoption of renewable energy at the utility scale. Particularly when rents
were increasing and budgets were in surplus—as was the case between
2009 and 2014 when an early adoption strategy might have been implemented—the political economies of the GCC states were not sufficiently
sensitive to the opportunity costs associated with burning fossil fuels
domestically for power instead of exporting them at international market
prices. 40 It is worth mentioning that the opportunity cost calculation is
more complex on the ground for policy makers in states like Saudi Arabia,
who have millions of barrels of excess daily oil production capacity, and
are generally limited by quotas agreed by OPEC or OPEC+. Pierru and
Fatih modeled the costs under different scenarios in their informative
2020 paper. 41
At the distributed scale, where solar PV must compete with subsidized
electricity prices, it is the distributive expectations placed on the state by
the rentier social contract which has led to persistently low electricity
prices and the slow proliferation of the technology on rooftops across
Gulf cities.
Within the group of states, however, high rents do not seem to explain
either extremes of adoption. The divergence in approaches within the
‘Super Rentiers’ of Kuwait, Qatar, and the UAE makes this abundantly
clear. UAE, on the one hand, has led the region in recent years in renewables development, while Qatar has been a noteworthy laggard. So what
does explain the divergence? 42