At the forefront of innovation

Kuwait

Hassan Qasem, CEO of Alternative Energy Projects Co (AEPCo), talks to The Energy Year about the company’s contributions to the renewable energy market and their approach to technological innovation. AEPCo is a Kuwait-based company established with the aim of making innovative, renewable energy solutions readily available in the MENA markets.

What has been Alternative Energy Projects’ latest contribution to the GCC area renewable energy market?
Alternative Energy Projects, currently rebranding itself as AEPCo, has been expanding its market segment. Our presence in Kuwait is still limited, while the company’s main project pipeline is in Jordan and Oman. In Oman, we participated in developing the Ibri II 600-megawatt solar photovoltaic power plant, which has been operational since August 2021 and is the largest in the country. The renewable energy market in Oman is growing at a galloping pace, thanks to the investor-friendly regulations introduced by the Omani government. AEPCo is keen on seizing the unfolding opportunities there, which is why we already have another 1-GW project in the pipeline.
In addition, we have expanded our portfolio in Jordan, focusing mainly on the commercial-industrial, or, as we call it, C&I segment. That means we do not sell electricity to the government but directly to private entities, from malls and factories to telecommunications, where we enter into long-term contracts. To date, we have signed contracts for four projects in Jordan, and five more are in the pipeline. In total, AEPCo owns operational assets with a capacity of 760 MW.

What is your modus operandi as a renewable energy project developer?
We work through partners or on our own as project developers. We are not an executor, but we develop projects from scratch and then own them on a percentage basis. Our teams arrange for the design, permitting, finance, third-party executor appointment and the project’s operation once it is implemented. In other words, we work through build-operate-transfer (BOT) or build-operate-own (BOO) schemes with private companies through power-purchase agreements (PPAs), where we sell electricity to the government at a defined rate through a long-term contract. That is the case in Oman with the Ibri II Solar PV energy project, which we operate with ACWA Power and Gulf Investment Corporation, in agreement with the Oman Power and Water Procurement Company.

What is your approach to technological innovation in the renewable energy industry?
In almost every country we operate, we build a small testing facility to test the latest technologies available in the market for future use in our projects. We are doing that in Oman through the Ibri Test Facility, a special setup consisting of about 15 KW of different kinds of PV modules and mounting technology.
We have experimented with many engineering technologies through this scheme, especially solar-related ones. Among these is albedo enhancement technique, which consists of changing the colour of the ground to reflect more sunlight back to solar panels and increase energy generation. We implemented this technique at Ibri – a 13-square kilometre PV power plant – by installing a special collection material underneath the panels. For smaller clients, in addition to technological innovation, we focus on optimising the deployed technologies by increasing their performance while reducing their cost.

What role do you play in the Kuwait renewable energy market?
We have executed a few projects in Kuwait for the government. Three are with the Public Authority for Housing Welfare for the West Abdullah Al-Mubarak Residential Development, and the other is the large multi-car parking complex for the Ministry of Finance. However, we stopped taking on these projects because they do not fit our business model. We did them only to have a track record in Kuwait. We are developers, not contractors. When we take on a project, we handle the entire process and eventually own the assets we develop as a percentage. That is different in Kuwait, where you primarily work for the government under a contractual model.
That is for two reasons. First, in terms of government-to-government fares, Kuwait’s electricity price is pegged to the price of oil in the market, meaning the higher the oil price, the higher the cost of energy. It is thus convenient for the government to install solar, since it is the cheapest technology for power generation, which results in savings. Secondly, three years ago, the government introduced a regulation requiring all new governmental facilities to have a minimum of 10% of their energy requirements sourced from renewables.
Besides the government, some rare clients request adaptation and installation of renewable energy primarily because they want to obtain gold or platinum LEED certification or must meet certain requirements under their ESG policy.

What are the main challenges to developing the Kuwaiti renewable energy market?
The Kuwaiti market has several misalignments due to heavy subsidisation and the need for an institutional energy framework. Most of the total cost of electricity is subsidised; that is, offtakers pay only 2 fils [USD 0.07] per kWh. If these subsidies are in place, the clients have no incentive to push the development of the renewable energy market.
Such market distortion brings inefficiency. Green technology is the cheapest energy-maker in the world today. If we look at the cost of the final product, meaning energy, rather than focusing on capex, renewable, solar and wind technologies do, in fact, produce the cheapest energy in the market. Therefore, the Kuwaiti government should encourage opening the renewable energy market rather than over-subsidising electricity. That is not happening due to the absence of framework, procedure and regulation.
Nevertheless, two months ago, the government announced a draft mandating the implementation of a feed-in tariff (FIT) system based on the European FIT model. Under this model, an entity receives payments from the government for the electricity generated by its renewable energy systems. Introducing such a scheme would translate into a significant step forward in developing the Kuwaiti renewable energy market.

What are your operative objectives for the coming years?
We will certainly focus on operating our assets. First and foremost, the Ibri II PV plant in Oman and another 50-MW plant that we are about to close in Jordan. As for Kuwait, we aim to participate in phase three of the Shagaya Concentrated Solar Power Project, which is expected to be tendered in Q2 next year. Phase two has been cancelled, but they have tried integrating it into phase three. Tentatively, they plan to generate three additional gigawatts, and the project will be worth approximately USD 3.5 billion. It is a massive project encompassing three technologies: wind, concentrated solar power (CSP) – also known as thermal energy – and PV. We expect the government to separate it into multiple bundles of 300-400 MW each and tender them separately. That would be highly beneficial, as it would increase the competition, allowing various players to participate while minimising the risks for the government.
We also want to make our contribution to the development of the Kuwaiti renewable energy market. What is most needed for this market to thrive is the establishment of a strategy and implementation. With our experience, we can help regulators create an enabling framework of procedures, regulations and incentives. Furthermore, we can provide educational training by leveraging our ESG experience once the market is open.
Finally, we can move hand in hand with the government on financing. That will undoubtedly be the first challenge once the market opens due to the reluctance of Kuwaiti banks and funds to finance green projects. This is an aspect in which Kuwait banks lag behind those in the rest of the GCC region. In fact, there is only one infrastructure bank in the country, and it never invests in renewables. AEPCo can help reverse this course by establishing and bringing a fund to the table, something we are currently working on.
Looking at the future, we aim to turn AEPCo into a fully mandated green energy developer backed by multilateral funds to cover the whole region.

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