Swiss-German partnership plans $2bn solar power investment in Oman

A Swiss-German partnership is poised to invest US$2 billion (Dh7.34bn) in solar plants and panel manufacturing in Oman. The Swiss investment fund Terra Nex and its German counterpart Middle East Best Select (Mebs)plans to build solar arrays capable of generating 400 megawatts of electricity in Oman. The investors also have ambitions for facilities to produce solar panels.

The country aims to produce a tenth of its energy needs from renewable sources by 2020, and this target has convinced the partnership to invest.

"Oman’s stable business environment and pro-environmental policies makes the sultanate a natural partner to this project," said David Heimhofer, the chairman of Terra Nex.

The majority of the capital would come from German investors, said Mr Heimhofer. Investment opportunities in Germany have shrunk after Berlin cut back on financial support for the industry by reducing the tariffs received for green energy.

About $600 million will come from direct equity capital, with loans by financial institutions covering the rest.

Oman is not the only Gulf country with ambitious alternative energy targets.

In the UAE, Abu Dhabi plans to generate 7 per cent of its energy from renewables by 2030, and is already building Shams 1, a 100MW solar plant. Dubai launched a 1,000MW solar programme this month that will get under way with a 10MW array.

Saudi Arabia, meanwhile, is expected to launch a 5 gigawatt solar programme this year. Kuwait is also taking its first steps towards adopting solar power.

The country’s electricity and water ministry is in talks with the German panel producer SolarWorld over two pilot projects, a 2MW rooftop array and a 2MWstand-alone plant.

In October a joint venture between SolarWorld and Qatar Foundation awarded a $1bn contract for the construction of a polysilicon production plant.

Polysilicon is used in photovoltaic panels, and the plant is part of efforts by Gulf countries to build an integrated solar industry that combines equipment manufacture with generating electricity, analysts say.

The cost of producing energy from solar is falling fast, making investments more attractive.

Studies released by the Emirates Solar Industry Association and ATKearney both conclude that photovoltaic solar panels are cost-competitive with diesel-fired power plants. Energy consumption in the Middle East is expanding fast, increasing the incentive to reduce the use of fossil fuel in power generation.