May. 26, 2019
Kuwait may be rich in oil resources, but the country's decision-makers are farsighted enough to take renewable energy seriously. Indeed, Kuwait has been keen on sustainable energy since as early as the 1970s, when the concept meant little in the Middle East. Kuwait has not lost interest in renewable energy over the years, and the country's Ministry of Electricity and Water has set itself an ambitious target: by 2030, renewable sources should account for at least 15% of the nation's overall power generation.
Although there is still a long way to go, discussions about renewable energy are coming to the forefront, raising awareness in the society. Kuwait has realized the climactic and economic threats posed by fossil fuels and is diversifying its energy resources. Given Kuwait's geography, solar will be the most viable option as the country receives its fair share of sunlight throughout the year.
The inauguration of the Shagaya Renewable Energy Park, which hosts the country's first concentrated solar power plant (CSP), was certainly a milestone in this regard. The country's first CSP project, with the capacity of 50MW, was developed by Kuwait Institute for Scientific Research (KISR) and carried out by a Kuwaiti-Spanish consortium. However, this initial phase will be only a starting point, as much as USD8 billion of investment is needed if Kuwait is to achieve its lofty goals for 2030.
The financing of green energy projects has always been an issue as the returns may not be as immediate as the private sector is used to. The public sector, on the other hand, already has enough on its plate, especially in the Gulf region where public sectors are traditionally oversized and involve a number of ongoing affairs.
The public-private partnership model, which has been employed in other countries with promising results, can come to the rescue. PPPs have proven to be particularly fruitful in the infrastructure and energy sectors. According to AIG, an American finance corporation, “The US is poised to become the largest public-private partnership market in the world for infrastructure projects."
Kuwait can benefit from PPPs, too; the country has already launched the Kuwait Authority for Partnership Projects (KAPP) to “promotes collaboration between the public and private sectors to develop quality infrastructure and services for Kuwaiti citizens." KAPP's focus on the infrastructure sector is well placed, as traditionally it benefits the least from the private sector's participation in the Middle East.
PPPs can incentivize the country's prosperous private sector to take a more active role, while giving the government a say in the management of the country's critical infrastructure projects. Regardless of the capital that can be injected into Kuwait's energy projects by the private sector, the private sector has a reputation for cost-effectiveness, efficiency, and competitiveness everywhere in the world.
Kuwait's Public Private Partnership Law came into effect in 2008, paving the way for success stories such as Al-Zour North One Power Plant, which in 2018 celebrated its second year of service. As the nation's first PPP power plant, Al-Zour North One is capable of satisfying over 27% of Kuwait's demands for electricity when running at maximum capacity.
In light of this success, KAPP is preparing itself for more similar enterprises in the field of energy by inviting bidders to hand in their proposals for two more projects under the PPP model. KAPP has invited Kuwaiti and foreign companies to bid for the construction of the first phase of Al-Khiran Water and Power Plant as well as the second and third phases of Az-Zour North.
One of the biggest tenders in the history of Kuwait, however, was announced in 2018 for a renewable energy project worth USD1.2 billion. The Al Dibdibah solar power plant's 1.5GW output is expected to replace over 5 million barrels of oil each year. Interestingly enough, this project is launched by none other than the Kuwait National Petroleum Company (KNPC). The project's full capacity will be reached in 25 years and in 300-MW blocks. The future of Al Dibdibah solar plant and the Shagaya Renewable Energy Park, which houses it, will also determine the future of public-private initiatives in Kuwait.