Saudi Arabia can become the centre for green finance for emerging markets (EMs), which will bring huge economic and commercial benefits to the economy in line with the Vision 2030 program, according to KPMG International.
“The amount of capital required to support the energy transition is vast and it is for this reason that a whole new sector called green finance has emerged in recent years delivering new products such as green bonds and green insurance,” said Michael Hayes, global head of Renewables, KPMG.
“Much of the expenditure in renewables over the next 20 years will be in emerging markets and so Saudi Arabia should concentrate on creating a centre for green finance for emerging markets.”
The Saudi government intends to attract between $30 billion and $50 billion in new investments into renewables by 2030, as it plans to tender around 9.5GW of solar and wind capacities by 2023.
Furthermore, the International Renewable Energy Agency (Irena) predicts that nearly $148 billion will be required each year until 2050 to meet the goals of the Paris agreement and limit global temperature increases to 1.5C above pre-industrial levels.
Given these investment projections, Hayes believes it is an absolute necessity for GCC governments to invest in renewables, which is one of the key goals of governmental visions across the GCC.
The Middle East, like the rest of the world, understands the existentialist threat that climate change poses and therefore the necessary actions to move to a zero-carbon economy are fully recognised throughout the region.
"Climate change is now recognised as the most significant risk on the planet and is likely to dominate the political and economic landscape for many years to come. While there are many different ways to help in the fight against climate change, transitioning from conventional power usage to renewable power is still one of the best and most effective solutions available," Hayes said.
The Middle Eastern countries are well aware of their strong dependence on fossil fuels to drive economic growth. Therefore, in an era when the long term viability of fossil fuels is under question, it is critical that these economies diversify as soon as possible.
"Unlike fossil fuels, the reality is that renewables can be implemented in every single part of the world and therefore there is nowhere near as much reliance on physical location and the security of supply is less of an issue.
“Renewable generation represents an ideal way to do this and over time, I expect to see Saudi Arabia and other GCC countries take a leading role in the growth of renewable energy across the region and even into Sub-Sahara Africa," he commented.
Meanwhile, Hayes said investors; including private equity funds who seek mid-teen returns on equity, are ploughing money into renewable projects since such investments eliminate key risks over a long number of years such as availability of long-term contracted revenues and investors relying on a stable policy environment.
“The successful operation of existing wind farms has also given investors huge confidence in the long term stability of the sector,” he concluded.