Doing business in Oman: Alternative Energy

A study on renewable energy sources commissioned by the Authority for Electricity Regulation (AER) has found that the level of solar energy density spread throughout Oman is among the highest in the world, capable of generating more than enough electricity to meet domestic requirements and allowing for the export of any surplus. It also identified wind energy potential in coastal and mountainous areas of Salalah comparable to inland Europe where large numbers of wind turbines are operational.

The study has recommended the creation of a national authority to administer clean development mechanisms to assist renewable energy investment and policies. The international consultant conducting the study also assessed the potential of biogas, geothermal and wave energy.

Many private sector entities have shown interest in supporting solar and wind energy initiatives. Rural Areas Electricity Company SAOC, responsible for power generation and distribution in remote parts of Oman and the largest consumer of diesel in Oman, will identify locations for solar/wind energy pilot projects possibly as hybrid systems. Solar power, because it is an intermittent energy source, requires a backup supply, which can partially be complemented with wind power. Oman Power and Water Procurement Company SAOC will also conduct competitions for large-scale renewable energy projects.

The price of electricity generated using domestically produced gas is highly subsidized. Despite technological advancement and increased efficiency, renewable energy generation continues to be highly capital-intensive. Consequently, private sector initiatives will also need government support in terms of subsidizing the electricity price for domestic consumption; land concessions for installation and operation of generation plants; and tax and customs exemptions. Given the long-term benefits of using renewable energy and the dire need to reduce the reliance on depleting hydrocarbon resources, going solar may prove to be the most cost effective solution for averting an energy crisis and for reducing Oman’s carbon footprint.