ADVOCACY: Solving the energy versus climate conundrum
G20 Issue

ADVOCACY: Solving the energy versus climate conundrum

Generating an adequate, reliable, green supply of energy to expand affordable access is a collective challenge, but a solution exists in leveraging public-private partnerships to drive sustainable energy systems

Increasing rates of urbanisation, industrialisation and population growth across the globe are driving increasing demand for energy. Our collective challenge is to ensure that we generate an adequate, reliable supply of energy to expand affordable access, sustain economic growth and achieve inclusive social prosperity for all.

Equally, there is an imperative to take immediate action to protect our climate. It is the responsibility of governments, international agencies and businesses to find more sustainable solutions to meet increasing energy demand and to reduce consumption by increasing efficiency.

Our experience as a leading Saudi Arabian developer, investor and operator of power generation and desalinated water plants across several markets demonstrates that collaborative relationships between governments and private entities through public–private partnerships accelerate the delivery of sustainable energy systems.

In my view there are three important factors that positively impact the production of reliable and sustainable energy.

First, the role of governments is critical in establishing policies and national energy transition targets to facilitate the adjustment to cleaner energy solutions, which will ultimately help attract wider private sector participation and increase competitive tension to bring costs down without compromising on demand being met, thus enabling the faster deployment of clean energy solutions.

Second, incorporating the private sector is key to driving investment and innovation and bringing the technical expertise needed to accelerate the development of renewable energy capacity while also delivering socio-economic impact in line with the needs of society from an environmental, social and governance perspective and, at the same time, meeting each stakeholder’s commercial objectives.

Finally, progressive and rapid technological innovations, as a result of competitive procurement and the PPP model, have led to a virtuous cycle where renewables are becoming a cost-comparable alternative to fossil fuel generation for our electricity consumption, accelerating decarbonisation and contributing to meeting climate
change goals.

Championing the energy transition

Transitioning to a cleaner national energy mix is now an imperative for all nations. To do so governments must make a commitment to providing safe, reliable, sustainable and low-cost power by setting national policies, accurately forecasting future energy demand, and putting in place an energy roadmap complete with incentivisation schemes to scale quickly and transition towards meeting an objective set of clean energy targets.

Although many governments have already taken steps to set ambitious renewables targets (notably Saudi Arabia and some of our regional neighbours have taken strong affirmative action), there are still concerns about the rate of deployment and scalability worldwide.

Therefore, a comprehensive legal and regulatory framework for investment is an essential precondition to attract the right partners for governments to realise their future energy ambitions. In addition, long-term bankable power purchase agreements, sovereign/quasi-sovereign support and a government procurement framework that encourages deployment of new technologies at scale will give the private sector the confidence to work with governments and participate actively in the procurement process.

This model also delivers the added benefits of attracting and increasing foreign direct investment both in the PPPs and in upstream localisation, as well as expansion of industrial activity in-country, and in even furthering technology innovations and optimisation.

Public-private partnerships as a way forward

PPPs are by no means a new concept, having emerged over the past two decades as an attractive method to finance power projects. In the Middle East and North Africa region especially, national utilities have adopted at pace the independent power producer model to install efficient generation capacity at pre-agreed delivery specifications, at competitive cost.

In our home market of Saudi Arabia for example, ACWA Power’s Sakaka solar energy facility is the first utility-scale renewable energy project developed under the King Salman Renewable Energy Initiative, which aims to produce 58.7GW of renewable energy capacity by 2030. This first project established a new tariff benchmark for unsubsidised photovoltaic power.

Similarly, we have set world record low tariffs for each of the successive three phases of the Mohammed bin Rashid Solar Park in Dubai, a critical component of the Dubai Clean Energy Strategy 2050. Using innovative solar thermal heat storage technology on one of the phases that we are implementing, we will effectively deliver ‘dispatchable’ solar energy to the grid during the day and throughout the night, at tariffs comparable to traditional fossil fuel base load generation alternatives.

There are several aspects of the IPP model that have set us up for this success. IPPs help share the burden of financing complex infrastructure projects under long-term agreements, significantly reducing capital and operational costs through build-own-operate or build-own-transfer models. This shift has reassured the private sector regarding the scope and scale of the market, attracting more participants and increasing competition.

Technology as an accelerator

The PPP approach squarely places the responsibility on the private sector to adopt and innovate new technologies to capture efficiencies. This includes utilising innovations around energy efficiency, battery storage and hybrid plants using a mix of technologies including solar photovoltaic and concentrating solar power, as well as investing in and developing other green fuels with high heating values such as green hydrogen.

With more advanced technology and growing expertise we are able to further drive down prices to make sure energy is sustainable and affordable for all, while overcoming challenges such as intermittency, the ability to store energy and large land requirements.

In conclusion, the sustainable practices we adopt today, through the guidance and collaboration between public and private sectors, investing in new technologies and innovation, will drive the energy transition to supply the clean energy needs of our future generations and help resolve the energy versus climate conundrum.