Renewable energy in Kuwait is well supported. The Kuwait Petroleum Company and the Ministry of Water and Electricity sponsored a joint study by the Kuwait Institute of Scientific Research to determine the potential for renewable energy given an optimal generation mix. Study details have been presented publicly, revealing the following model inputs: wind and solar resource assessment data, RE technology costs short- and long-term, short-term hourly demand profiles, long-term power demand forecasts, power sector plant performance, and energy price forecasts.
The Reference case generation mix is fossil fuel only and is compared to 10% and 20% renewable energy targets, which are defined as a percentage of power production to be achieved by 2030.
The optimization model deployed by KISR defines the generation mix by year. Under both targets, wind energy is implemented first, followed by utility-scale PV. Surprisingly, utility PV is scrapped after 10 years under the 20% target and is replaced by CSP. In practice, this could be difficult to justify, but there are two possible explanations for the truncated operating life: 1) PV is subject to higher environmental stress in the MENA region, justifying replacement; and 2) capital cost forecasts for CSP show a rapid decline in the model data inputs, supporting substitution. Meawnhile, the output data also confirms reductions in fuel oil and natural gas generation over time. The result: higher realized netback revenues from expanded hydrocarbon sales.
KISR reports show that the optimal generation mix is 11% renewable energy in the absence of a nuclear option. The low percentage can only be understood by estimating the economic impact of the various cases in the absence of detailed public exposure. Specifically, the trajectory for the levelized cost of energy (LCOE) by year for the capacity weighted generation mix under each scenario is calculated below. At the same time, the netback revenue potential tied to increasing hydrocarbon exports is estimated:
- The slow adaption rate of the RE10% target has the most attractive LCOE profile and is better able to capture long-term expected declines in generation capital costs.
- The faster adoption rate of the RE20% case is not as attractive and has an early LCOE that exceeds the reference case and a late stage LCOE that exceeds the RE10% target;
- Displacement of fuel oil and natural gas generation under the RE10% case offers netback revenues that are estimated to be $2.3 billion higher than the reference case by 2030; and
- The nominal LCOE in 2030 for the reference case is $165/MWh, but declines to $153/MWh under the RE10% target.