Economic analysis of clean energy options for Kuwait

Purpose – An economic assessment was performed of the potential for clean energy options to contribute to the power and desalination needs in the State of Kuwait over the next 20 to 40 years. The paper aims to summarize two analyses that were performed for the Kuwait Institute for Scientific Research to develop a strategy promoting renewable energy and evaluating alternative technologies including nuclear energy. Design/methodology/approach – The analyses were performed using a power and water model for Kuwait that was constructed using the International Energy Agency – Energy Technology Systems Analysis Programme (IEA‐ETSAP) TIMES modeling framework. Data provided by the Ministry of Electricity and Water (MEW) and the Kuwait Petroleum Company (KPC) characterizes the projected demand for power and water; the existing and planned power generation and water desalination plants, including the expected retirement of existing plants; and future fossil fuel prices and availability. New power generation options – including renewable energy (RE), nuclear, combined cycle gas turbines (CCGT) and reheat steam power plants (RHSPP) – were compared in this least‐cost optimization framework. Findings – The model results indicate that by 2030 the cost‐effective RE share is 11 percent of electricity generation in the reference case and 8 percent in the case with the nuclear option. The RE technologies alone provide a 2030 net‐back value compared to the reference case of US$2.35 billion, while in the nuclear case they increase the 2030 net‐back value by an additional US$1.5 billion. Increasing the RE share, as a government policy, to 10 percent, 15 percent and 20 percent, decreases the 2030 netback benefit by US$1.0, $3.6 and $8.3 billion, respectively. Research limitations/implications – Sensitivity runs based on scenarios that assume higher RE costs or lower availability, lower demand growth, lower oil and gas prices, higher nuclear plant investment costs, and RE capacity credit were analyzed. Practical implications – The analysis provides a compelling economic basis for initiating a renewable energy program in the State of Kuwait. However, these forecasted benefits will only materialize to the extent the projected RE investments are achieved if they begin in earnest soon. Originality/value – The analysis identifies a cost‐effective share of renewable energy use in Kuwait as about 11 percent of electricity generation in 2030. The investment in renewable energy provides the State of Kuwait with a net‐back value of US$2.35 billion, due to the fuel savings that are generated by using renewables.