By Maha El Dahan and Daniel Fineren
ABU DHABI/DUBAI (Reuters) - Talk of a Middle Eastern green energy boom is likely to prove no more than a mirage with little hope of the region saving clean technology companies from the shrinking project pools of Europe.
Instead India, China and Latin America offer some hope for green energy companies struggling in a European market drowning in debt and a North American market awash with gas.
"We expect some growth will happen here in the Middle East but it will take time for this to become a robust industry," Juan Araluce from Danish wind energy giant Vestas told Reuters at the World Future Energy Summit in Abu Dhabi.
Vestas estimates renewables accounts for only 0.2 percent of power production in the Middle East and North Africa (MENA), compared to a global average of around 3 percent and many European countries already well into double digits.
"It is not even one tenth of the world average, which is already low, and if we split between the Middle East and North Africa much of the 0.2 percent happens in North Africa," the head of Vestas' Mediterranean operations said. "But it should also be looked at as a huge opportunity."
The world's leading turbine maker has just 600 megawatts (MW) of installed wind capacity from Morocco to the Arabian Peninsula, compared to 3,650 MW of turbines it has supplied to Spain alone.
Vestas, which in early January announced plans to cut over 2,300 jobs in a bid to restore profitability, faces stiff competition from Chinese and Indian turbine makers in Asia but expects much more growth in Brazil and Mexico than in MENA.
Solar power has not fared much better in a region of intense and prolonged sunshine and vast expanses of largely uninhabited land for photovoltaic (PV) panels.
Major oil exporters Saudi Arabia and the United Arab Emirates have built a few small solar plants and have plans to build more. But active solar projects are still rare, with Saudi Arabia building less than 100 MW in the last three years.
Egypt has one of the most ambitious regional goals, having set a target of 20 percent of its electricity from renewables by 2020, but even that target has been passed by the European Union average, with Spain already getting over 30 percent from green sources in 2009 and Italy 23 percent, according to EU figures.
Abu Dhabi green vehicle Masdar has made significant renewable energy investments in countries where political and public support for clean energy brings with it big incentives.
Back home, it has only around 10 MW of solar capacity up and running at the famous but far-from-finished Masdar City, with a 100-MW concentrated solar plant - the world's biggest - under construction and another 150 MW planned nearby.
The UAE's richest emirate is taking the lead in the energy hungry Gulf, targeting 7 percent of electricity from alternative sources by 2020. But that 10-year goal was exceeded by 21 of the 27 EU member states three years ago.
SOLAR vs WIND
The calm summer air of the Gulf may not be suited to large scale wind farm development and the strongest winds typically blow in winter when demand for electricity is at its lowest.
But supporters argue more should be done to encourage large scale projects to harness solar power in a region where electricity demand is tied to the power of the sun through air conditioning.
"Recent falling costs of solar power, excellent fit to demand patterns, and rising regional gas prices, mean that PV is now economically viable or close to it in most MENA countries," according to a new report commissioned by the Emirates Solar Industry Association (ESIA).
The report called on governments to rationalize energy pricing in a region where gas is often sold at well below cost while millions of barrels of oil burnt in power plants are supplied at a fraction of international prices.
"Saudi Aramco and (UAE oil firm) ADNOC have a choice for every new barrel of oil they produce," Daniel Zywietz the managing director of Ambata Capital Middle East, an advisory group for renewable energy projects in the region, said.
"They can give it to an electricity company for five dollars a barrel or give it to Japan for $105 a barrel."
The International Energy Agency estimates that the Middle East accounts for almost half of the $409 billion that the world spends annually on fossil fuel subsidies.
Artificially low fossil fuel prices make renewable energy technologies, which already rely on subsidies in other parts of the world, even more unattractive in the Middle East.
"In the Middle East the leadership is interested but there's no momentum because conventional energy is accessible," Tulsi Tanti, chairman of Indian wind power giant Suzlon, said.
But fuel subsidies have also helped drive excessive demand growth in a region where only Qatar has a lot more gas than it needs while its neighbors increasingly rely on costly gas imports or burn more of their own oil - factors that should help drive green energy growth.
Oman, whose fossil fuel production is unable to keep pace with rapidly rising internal demand and which aims to get 10 percent of its energy from renewables by 2020, has attracted a group of German private investors who plan to build 400 MW of solar power capacity the small non-OPEC oil and gas producer.
The $2-billion project, which includes facilities to manufacture solar panels for export, could help the spread of solar power in the region, eventually. Like so many renewable energy projects, the timeline for building the Omani plants is unclear.
"If you are looking at the speed of things, we always have to keep in mind that yes big projects take time but at the same time if you do them well, the renewable sector can actually accelerate quite quickly," Frank Wouters, director of Masdar Power said.
So too is the completion of the UAE's Masdar City, hailed as the world's first carbon-neutral city when construction began in 2008 and whose early stages of development are already a must-see for visiting heads of state.
But the ambitious project may also have been set back by the financial problems that have weighed on projects around the world over the last few years.
Four years on, only the Masdar Institute Campus and the futuristic pods of its Personal Rapid Transport (PRT) system are operational and completion of the city of 40,000 people and 50,000 commuters is not expected until 2025.
"There's only one building," a Masdar City security guard said on Tuesday, when asked if the computer-controlled pod would give a full tour of the city.
(Additional reporting by Stanley Carvalho, editing by William Hardy)