In collaboration with the Middle East Best Select Fund (MEBS), Terra Nex, a Switzerland-based global wealth management company, recently announced plans to invest US$2bn to develop a solar energy value chain project in the sultanate, which includes a solar panel factory, a factory to produce aluminium frames for panels, an educational institution for the renewable energy sector and a series of solar power stations to generate a total of 400MW electricity annually.
In an interview with Muscat Daily, David Heimhofer, chairman of Terra Nex, spoke about the economic implications of the value chain project and the future of the renewable energy sector in Oman.
What is your outlook for the future of renewable energy in Oman?
Oman has a Royal Decree and a vision to produce ten per cent of its total electricity requirement from renewable energy resources by 2020. There is a high level of willingness and commitment from the government, as well as the private sector to develop the renewable energy sector in the sultanate.
Oman is the only country in the region which has a dedicated Ministry for Environment and Climate Affairs. We have spoken to decision makers in other GCC countries also and all of them realised that Oman is taking quite good steps in the renewable energy sector, while other Gulf countries are just discussing it without action.
We believe that with this large solar energy value chain project and the projects to come in future from the government and private sector, Oman can easily take leadership in the renewable energy field in the Middle East. Oman has all the resources required to develop this industry locally.
Why do German investors prefer to invest in solar energy in Oman over other Gulf countries?
In Germany, you will find solar panels on all the roofs all over the country. According to our assessment, we believe that in the next 10-15 years we will see a similar situation in Oman, well before any other country in the Middle East. The intensity of sunlight is quite high in Oman and the same solar panel can produce three times more electricity in Oman than in Hamburg in Germany with similar initial investment. You can produce electricity from solar energy much more cheaply than from oil and gas sources. Our assessment is that the solar energy projects will be very efficient in Oman and will generate three times higher profits for the investors than in Germany.
Oman is at a much more advanced stage than any other country in Middle East in the renewable energy field. So investors would like to come here first. Our project will be the only integrated project in the entire Middle East region where we will produce all the components locally, provide training and generate power.
We launched the MEBS fund two years ago, people have invested in it and we are ready with all the financing and we are waiting for the authorities’ go-ahead to launch the project.
However, there were a lot of questions - especially after the Arab spring last year - over how safe it is to invest in the Middle East. But we and our investors believe that Oman is the most stable country in the Middle East with a very good credit rating, so it is the right time to bring the investment here.
How will this project help Oman’s export industry?
There is an exponential growth in the renewable energy sector, which has increased the demand for solar panels worldwide. With a fantastic geographical location, Oman has all the ingredients to produce the components for solar energy, such as aluminium frames and silicon for solar panels, locally. We can produce solar panels in Oman more cheaply than in Germany and China. We are setting up factories to produce solar panels, aluminium frames and silicon for solar panels in Duqm.
The panels produced here will be used for local purposes and it can also be easily exported to other Middle East countries and even to the US, with whom Oman has a free trade agreement.
Other countries like Saudi Arabia, the UAE and Kuwait are also planning to set up solar panel factories, but on a small scale for local use only; but Oman is capable of developing an export industry in this field.
You have a plan to set up an institution for the renewable energy sector in Oman. How will this help the country in terms of employment?
Setting up a large educational institution in renewable energy field is a major part of our project. We believe that Oman can take a leading role in providing human resources for the renewable energy sector in the Middle East. We have partnered with the University of Zurich and a few large international technology providers to set up this institution in Oman.
We will educate Omanis about the renewable energy field as well as invite people from other Middle Eastern countries for training in Oman. The entire value chain project will generate 2,000 direct and indirect jobs and will accommodate around 85 per cent Omani employees. As of now, people have to go to the US for training in this field. But if we have this institution here we can help the entire Middle East to provide training in a fast-growing industry. This institution will make Oman a leading provider of training in this field.
Apart from solar energy, which other areas in Oman interest European investors?
Our investors are predominantly from Germany and they mostly prefer to invest in sectors in which they have expertise and experience.
German businesses are well advanced in the renewable energy sector and can help to develop this industry in other countries. We foresee an exponential growth in the renewable energy sector in the Middle East and German investors are interested in green building solutions, healthcare and the food sector in this region.