In 2009, Abu Dhabi announced its plans to use renewable energy sources for at least 7% of its electricity generation capacity by 2020. This will be a challenging undertaking, requiring an installation of around 1.5 gigawatts of generation capacity. Since wind energy does not appear viable, solar generation technology will cover most of this capacity, which is of similar size to the current solar installation in the United States.
Solar-generated electricity carries costs running four to six times as high as the Emirate’s current natural gas-dominated power supply. And a closer scrutiny of local conditions has led to the discovery that, despite the desert geography, environmental conditions impede the effectiveness of both of the two main solar technologies, raising costs further. Therefore, the renewable energy venture cannot be justified on a competitive cost basis, but more as a speculative bet on future benefits of mastering an emerging technology.
However, the Abu Dhabi regime is already reaping political benefits from its embrace of renewable energy which has increased its international prestige as a developing world leader in low-carbon energy. This increased prestige translates into enhanced domestic legitimacy, a valuable resource for governments of so-called "rentier states."
The renewables venture comes amid a paradoxical natural gas crunch that is unfolding in the Gulf, including in the United Arab Emirates, of which Abu Dhabi is a member. Despite its ownership of some the world’s largest gas reserves, Abu Dhabi’s available production and supply of inexpensive natural gas appears to be nearing its ceiling. The Emirate faces a huge challenge in meeting rising demand amid some of the world’s highest per capita electricity consumption and ongoing increases in its population and industrial base. Taken together, these trends signal a need to double electricity generation by 2020, while diversifying away from gas as a feedstock.
This energy crunch – and Abu Dhabi’s response – appears partly driven by political factors: the "survival institutions" of the distributive state. Chief among these are deep subsidies on electricity and water tariffs that will be politically difficult to withdraw. In this environment, renewable energy offers helpful political benefits for the government but will be of marginal importance in covering Abu Dhabi’s forthcoming electricity demand.