Low oil prices and the cost competitiveness are encouraging the Middle Eastern governments not only to turn to renewables as a hedge against fossil fuel price volatility, but also in view of $48tn investments required over the next 20 years to bridge the gap between demand and supply in the global energy market, according to NBAD.
“The (Middle East) governments’ long-term ambitions for greater energy independence by decarbonising their economies will be the key drivers for the transition to a clean energy world,” NBAD said in its report ‘Financing the Future of Energy’.
The past year has seen a number of factors converging to promote renewable energy and  financial institutions have an important role to play in promoting the growth of this sector through engagement with public and private sector stakeholders to create a more energy efficient economy, the report said.
By 2020, Middle East and North Africa (Mena) will see annual renewable energy investment of $35bn, according to the International Renewable Energy Authority.
The investment grade credit ratings of many GCC (Gulf Cooperation Council) nations, which remain in the top 14 per-capita emitters of carbon dioxide globally, will help them access wider pools of international capital that may not be so readily available to some North African jurisdictions, the report said.
Asserting that the present low oil prices are not expected to stall the growth in renewables, NBAD Group chief executive Alex Thursby said the underlying drivers for renewables are long term and strong, particularly across the West-East Corridor.
He noted that while consumer demand is shifting to a preference for clean energy, governments are pushing hard for policy change to decarbonise their economies, subsidies for fossil fuels are coming off and renewables have become cost competitive against hydrocarbons with new technologies, such as battery storage of clean energy, potentially adding to this advantage.
“In this new normal environment, there is a huge role for the financial community to play in fostering the growth of this sector,” he said, adding NBAD remains committed to being a positive force in the sector and accelerating the transition to a much needed new world of energy.
“Demand for renewable energy continues to grow across the globe and our research has identified that there is approximately $640bn of investment required for renewable energy projects across Asia and this part of the world,” Mark Yassin, head of global banking and co-head of wholesale banking at NBAD, said.
For the first time, 2015 saw the developing world attract greater capital flows into clean energy than the 30 OECD (Organisation for Economic Cooperation and Development) member countries, while the Middle East has timed its entry into this market well, according to him.
“The involvement of the financial community in the region will act as a catalyst for the growth of renewables,” he said, highlighting that NBAD has committed $10bn for environmentally sustainable activities over the next 10 years and is also working on a green bond proposition, putting it in the forefront of environmental financing across the West-East corridor.