Significance
Energy subsidies are a major blockage to wider adoption of renewable energy in the Gulf Cooperation Council (GCC), where pricing bids have recently broken world records. The low bid for Saudi Arabia’s first solar project in early October was just 1.79 cents per kilowatt hour (kWh) -- down from the previous best offer on a United Arab Emirates (UAE) solar project in 2015.
Impacts
Local renewables companies could begin to grow their businesses in the GCC.
The lack of suitably trained Gulf nationals will limit the impact on private sector activity and employment.
The rising cost of debt could increase the price and terms of bids for renewables projects, making them relatively less attractive.
If maintenance costs in desert environments turn out to be higher than expected, projects could flounder.
Renewable Energy Subsidies: Second-Best Policy or Fatal Aberration for Mitigation?