RenewableEnergyResources in Oman Our analysis indicates that the cost of electricity generation using fossil fuel technology, at present fuel prices, is lower than the cost of electricity produced using renewable energy technologies. There are however several factors that might reduce the observed differences in fossil fuel and renewable energy costs: • increases in the cost of fossil fuels; • reductions in the capital cost of renewable technologies resulting from more widespread application (economics of sale) and advances in techni- cal progress (noting that technical progress might also reduce the cost of fossil fuel technology); and • adjusting the cost of fossil fuel generation to reflect the 'environmental damage' of emissions (these costs could be directly ascribed as a benefit to renewable energy technologies). Fig 2.2 presents differentials in the cost natural gas and renewable (wind, solar thermal and solar PV) based electricity production at a range of gas prices. Fig. 2.2 Differences in gas costs and solar & wind energy production costs At the present gas price in Oman of 1.5 USD/MMBtu electricity produced using renewablee resources is considerably more costly than gas based electricity, Solar PV and Solar Thermal is significantly more costly. At a gas price of 6 USD/MMBtu the cost of electricity from wind turbines is marginally lower than that of electricity generated using natural gas. If we as- sume the opportunity cost of natural gas is 3.0 USD/MMBtu and add a depletion premium of 3% p.a., the cost of electricity produced by wind turbines and gas plant is broadly similar. The cost of electricity producedd using solar energy resources is higher than gas based electricity at all gas prices. significantly Page 20 of 134 .
RenewableEnergyResources in Oman Fig. 2.3 Difference in production costs between diesel power plant and solar PV and hybrid plants At the present diesel price in Oman of 0.38 USD/Litre the production costs of Solar PV and hybrid (PV and diesel) systems are considerably higher than diesel based generation. At a diesel price of around 1.30 USD/Litre, the cost of Solar PV systems and new diesel generation is broadly equivalent. The cost of diesel fuel would have to rise to around 1.55 USD/Litre, to equate the production costs of a hybrid system and diesel generation. 2.2.5 Non energy benefits Renewable energy used to produce electricity emits zero Green House Gas (GHG). Using renewable energy technologies in place of conventional fossil fuel plant would thereforee reduce Green House Gas emissions in the Sultanate, including CO 2 . The reduction in GHGG emissions (carbon) would be approximately 175 kg/MWh where renewable energy replaces natural gas and 212 kg/ /MWh when diesel fuel is replaced. Total savings in GHGG emissions will dependd on the contribution of renewable energy technologies to total electricity supply. The carbon damage cost in Oman is not known. Based on the average damage cost in some industrialised countries of around 20 USD/ton CO 2 , the following diagram illustrates the effect on renewable energy costs taking the cost of environmental damage into consideration. Page 21 of 134 .