All the energy stakeholders are preparing to incorporate the latest technologies into their long-term investments practices since the UAE government announced that it will be launching a series of large-scale renewable energy projects. The Northern Emirates residents will benefit from the multi-billion solar and wind power projects that are ongoing in the region. However, past experiences indicate that several technical and financial constraints often characterize such projects. Risks such as unfavourable changes in the climatic patterns, high transmission costs and intense rivalry for resources with mature energy sectors have always reduced the projects potential to yield the scheduled benefits. Therefore, developing successful solar and wind power plants require long-term studies.
On the other hand, although UAE government developed interests in the renewable in the 1990s, there is a huge information gap that will undermine the individual consumers ability to keep up with the technological changes. Private developers, as well as individual households, require timely information so as to make appropriate decisions. However, the existing literature focuses on the challenges developers encounter in generating and distributing the energy. In contrast, there is limited information on the critical factors that are likely to affect the seamless transition from the old electricity systems to the ultra-modern solar and wind energy infrastructures.
This research proposal examines such technical and financial barriers the end-users will experience. The study will identify the potential risks the Northern Emirates consumers should prepare to face while undertaking these new projects. The papers findings will play leading roles in improving the stakeholders investment decisions. It will encourage the developers to establish strategic partnerships with other associates such as financiers and clients. At the same time, the research will provide the residential and commercial energy users with best technical and financial implementation plans.
Petroleum industry contributes the highest revenues to UAEs economy. However, the nation has embarked on a massive economic diversification program to boost its income generation sources. The government implemented open economic policies to foster international trade with other countries throughout the world. As a result, UAE ranks among the world fastest growing economies with the high per capita income and significant annual trade surplus (International Renewable Energy Agency/IRENA, 2015. In the past, oil and natural gas products dominate the foreign exchange earnings. However, UAE is rapidly shifting to the alternative energy sources especially solar and wind power. The Northern Emirates require new power infrastructures to ensure sustainable economic growth.
UAEs Federal Electricity and Water Authority (FEWA) announced that it will establish solar PV projects across the Northern Emirates (Ajman, Sharjah, Umm Al Qaiwain, Fujairah, and Khaimah). The initiative is part of the states vision 2021 of generating 24% of its energy consumption from the renewable energy sources (Jamil, Ahmad, and Jeon, 2016). The other emirates such as Dubai are pursuing a $ 344 million solar power project that is expected to lower the energy costs. The 200 MW power plants will be the largest non-renewable project in the Middle East (IRENA, 2015). However, the country is not certain about the renewable energy development path. Like any other long-term project, the investments are likely to experience barriers that may adversely affect UAEs successful transition to renewable energy futures. This research will focus on the wind and solar energy infrastructures in the Northern Emirates.
The United Arab Emirates (UAE) government has been launching several renewable energy projects since 2010. The incentives targets to increase the renewable energy share to more than 7% (Asif, 2016). Notably, the investments in wind, solar, hydroelectric and geothermal power will enable the country to make $ 1.9 billion savings annually. Investments in these environmentally friendly energy sources will reduce fossil fuel consumption thereby translating to improved health and air quality. While the natural gas benefits are decreasing due to the constantly fluctuating economic and political factors, the renewable energy is becoming more cost-efficient. This is evident from the recent increase in the marginal import prices of the natural gas from $ 2 per million British thermal units (MBtu) in 2010 to over $ 10 in 2015 (Jayaraman et al., 2015). However, it costs about $ 8 to manufacture 1 MBtu. Given that UAE incurs additional expenses in exporting the oil such as foreign exchange costs, the non-renewable energy source profitability is increasingly declining.
On the other hand, wind and solar energy prices have been falling by approximately 75% since 2008 (Juaidi et al., 2016). The country has increased researches and developments in renewable energy technologies that have been yielding promising results. According to International Renewable Energy Agency, studies indicate that solar power is one of the cheapest sources of the power supplies. The experts further projects that the wind energy investments will deliver significant economic benefits such as diversification, job creation and infrastructural developments (IRENA, 2015).
Statement of the Problem
It is perceived that UAE is an oil dependent country that may not maintain high gross domestic product growth by exploring alternative energy sources. Such a misconception adds to the technical and economic challenges that undermine the countrys returns in solar and wind power investments such as identifying the commercially viable locations. Past studies indicate that lack of confidence in the alternative energys reliability the greatest challenge to promoting renewable energy consumption among UAEs citizens. Khondaker et al., (2016) argue that UAE ranks among the worlds highest per capita carbon footprint. This is because the increased greenhouse gasses emissions resulting from burning fossil fuels. The Northern Emirates have shown interests in tackling this critical environmental problem by financing research and development in renewable energy.
However, the rapidly expanding economy is increasing the power consumption rates. Recent surveys revealed that most consumers opt for hydroelectricity than other renewable sources (Price and Zwickel, 2015). Besides electricity being readily available it is more reliable than the wind and solar energy that depends on the prevailing weather conditions. That is, there are successful hydroelectric power plants that allow the government to supply the end users with electricity at subsidized prices.
In contrast, low wind speed and temperatures during particular periods of the year can interrupt the solar and wind energy productions thereby forcing the consumers to incur additional costs in purchasing alternative fuel such as generators. There are also chances that the plants may produce less than their maximum capacity. Phylip-Jones and Fischer (2015) argue that wind farms reach their full potential a third of the time. However, renewable energy projects are capital intensive investments that require high initial costs. Moreover, barriers such as bureaucratic energy policy and financial regulation may slow down the investment growth. For example, some western countries require the suppliers to pay penalties if the power delivered varies by more than 5% from the scheduled amounts. This means that the Northern Emirates institutions planning to invest in the renewable are likely to encounter hidden technicalities such as massive transmission costs.
Despite the technical and financial constraints, demand for the solar and wind is critical for the achievements of the 2030s strategic objectives. This research will examine the technical and financial aspects involved in developing and delivering the solar and wind energy sources to the consumers. It will focus on the economic benefits the Northern Emirates households will attain. The research will cross match the technical requirements with the financial gains and derive the value the Northern Emirates families will gain from building more solar and wind power plants.
Given that the project will supply the individual residential and commercial buildings through photovoltaic, solar panel or wind turbines, the targeted consumers must implement several new changes. For example, the landlords should install new electricity systems and equipment. Nevertheless, the project planning accounted for the costs involved in generating and distributing the power. The more the technicalities, the higher the risks that the project might not yield the expected returns thereby resulting in high financing costs and lack of adequate access to affordable credit. On the other hand, solar and wind energy plants are capital intensive projects requiring the acquisition of expensive hardware and software components and sometimes imported labor. As such, it is essential for both the renewable energy producing firms as well as the individual consumers to design technical and financial plans for implementing the new technologies.
Rationale of the Study
The technical aspects determine whether the renewable energy projects are viable or not. UAE is not only pursuing several pilot alternative energy programs but also plans to launch several solar, wind and geothermal power projects. All these are long-term incentives that require partnerships between the public agencies, financial institutions, the private sector and the consumer. However, the technical risks associated with the renewable are threatening these relationships (IRENA, 2015). Recent surveys have revealed that constraints such as systems breakdowns, process dysfunctions, technology fluctuations and unfavorable weather patterns have resulted in the failure of several solar and wind energy projects worldwide. As a result, since the Northern Emirates projects are still in trial stage, many financial institutions, private agencies, and consumers are reluctant to invest in this promising field.
Management theorists believe that every project must fulfil fundamental principles such as motivation and supportive environment for it to achieve targeted goals (Kerzner 2013; Lock 2014; Vanhoucke, 2012). The essential motivation areas include economics, technology, and consensus. The renewable energy benefits (reduced pollution, increased savings and energy security) attract var...
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