Renewable energy in Oman

After being slightly behind the curve on renewable energy generation as compared to the other countries in the region, in recent years Oman has been taking affirmative action on future green energy production with the implementation of ambitious targets. The current aim for Oman is for 16% of the its electricity generation to be derived entirely from green energy sources by 2025, and 30% by 2030. The Government has also implemented a development plan labelled ‘Oman Vision 2040’ which includes a focus on a sustainable environment, namely through the increased harnessing of sustainable energy sources. Furthermore, Oman has also committed to reaching net-zero emissions by 2050. The Authority for Public Services Regulation (“APSR”), in line with these aims, announced in March 2022 that Oman will no longer be procuring new gas-fired power plants and instead only focusing on building up its renewable energy generation capacity, supporting the sustainability aims for the future of Oman.  

The expansion drive in respect of Oman’s green energy sector comes at the direction of His Majesty Haitham bin Tariq through his issuing of a royal directive in March 2022. This directive mandated, within the Ministry of Energy and Minerals, the formation of a new division dedicated to hydrogen and clean energy, as well as the creation of Hydrogen Oman (“Hydrom”), a Government owned company which is mandated to develop the green hydrogen sector in Oman, with a vision to establish Oman as a global leader in green hydrogen production, entailing a target production of 1 million tonnes by 2030.   

In recent times, Oman has made extensive advancements in the procurement of utility-scale sustainable energy projects. Nama Power and Procurement Company SAOC (“PWP”), Oman’s statutory monopoly power procurer, procured their first utility-scale, solar power plant in 2020 named Ibri-II, with a capacity of 500MW which was developed by a consortium led by ACWA Power and came into operation in January 2022. Subsequently, PWP has also procured two more solar IPPs in the Ad Dakhiliyah region titled Manah I and Manah II each with a 500MW capacity. These were recently awarded to two separate developers, namely, the consortium of EDF and Korea Western Power Co Ltd, and the consortium of Sembcorp Industries Ltd and Jinko Power Technology Co Ltd, respectively, and are slated to achieve commercial operation in 2024. Future solar IPP projects have also been planned, with Ibri-III, a similar 500MW capacity plant, neighbouring Ibri-II, just about to start its procurement process.  

In addition to the various solar IPPs, PWP has also planned several wind power projects. Expanding from the successful launch and continual operation of Oman’s first wind IPP entitled Dhofar-I, two further wind projects, Jaalan Bani Bu Ali IPP and Harweel Wind IPP, with a proposed capacity of 100MW  have been planned. Furthermore, a larger, ‘mega project’ is underway, dubbed Duqm Wind IPP which is said to consist of two phases totalling a combined capacity of over 300MW. The targeted commercial operation for all these wind projects is the middle to end of 2026. In addition, and looking further ahead, a 100MW wind IPP at Ras Madrakah and a similar capacity wind IPP at Sadah with target scheduled commercial operation dates of 2027 and 2028 respectively, are also slated for procurement.  

Petroleum Development Oman (“PDO”), the leading exploration and production company in Oman which is majority owned by the Government, has also ventured into renewable energy projects with Amin Solar IPP being their first utility-scale solar IPP, currently in operation. PDO has numerous other renewable energy projects planned, including two 100 MW wind projects, Riyah I IPP and Riyah II IPP. In addition, PDO is also procuring the first solar storage IPP, North Solar Storage IPP which is a 100MW solar project with a battery energy storage system to provide 10MW of constant supply at night. All these projects are in the midst of their procurement process with a target commercial operation within 2024.  

Beyond utility-scale projects, the progress towards a greener Oman comes in the form of smaller, individual projects for small-scale businesses and homeowners alike. APSR has introduced ‘Sahim’, a strategy for solar-powered energy generation in homes with the added benefit of remuneration for excess energy produced. Following the successful implementation of Sahim-I in 2017, Sahim-II is being planned with a focus on allowing solar PV developers to construct and operate grid-connected systems on a wider scale across multiple properties, covering around 30% of residential properties in Oman.  

Under the current laws, renewable energy is not yet distinguished from other sources of energy. The Regulation and Privatisation of the Electricity and Related Water Sector Law promulgated by Royal Decree No. 78 of 2004 states that any individual seeking to produce, distribute, transmit or supply electricity must obtain a licence or licence exemption from APSR. This applies to all electricity, including that generated from renewable energy sources. Although the recent Royal Decree No. 10 of 2023 represents advancements in renewable energy law (allocating land for renewable energy and clean hydrogen projects), the laws function does not progress renewable energy regulation beyond land allocation and still does not allow for private-to-private renewable energy production, without an approval or exemption from APSR (although it is expected that even if permitted, there would be some level of regulation by APSR).  

Following a Royal Directive issued in March 2022, which mandated the formation of a new division dedicated to hydrogen and clean energy, as well as the creation of Hydrom (a Government owned company which is mandated to develop the green hydrogen sector in Oman), Oman is seeking to become the main green hydrogen producer in the Middle East region.  

It is doing so without having any specific hydrogen related legislation or regulation beyond a short law (Royal Decree 10 of 2023). This law allocates land for renewable energy and clean hydrogen projects and grants Hydrom as the usufructuary of such land. Hydrom has the right to divide the land and grant sub-usufructs via auction to developers of renewable energy and clean hydrogen projects.  

Although Oman’s existing legal and regulatory framework for projects is not specific to green hydrogen, green hydrogen projects can still be developed as each component of a green hydrogen project can be regulated. For example, the renewable energy generation would be regulated by the APSR and the electrolysis would be regulated by the Ministry of Commerce, Industry and Investment Promotion as an industrial process project. 

Hydrom has powered ahead with the first round of auctions for land blocks to be allocated for green hydrogen projects. Land was awarded to successful applicants in December 2022 and on 1 June 2023. The first block (Z1-01) was awarded to a consortium comprised of Copenhagen Infrastructure Partners, Blue Power Partners and Al Khadra with the goal of producing 200,000 tonnes of green hydrogen per annum from 4.5GW of renewable energy capacity which would also power planned green steel plants located in the Port of Duqm within the Special Economic Zones at Duqm. The second block was awarded towards the end of June 2023 to a consortium consisting of POSCO Holdings, MESCAT Middle East DMCC, Samsung Engineering, Futuretech Energy Ventures, Korea East-West Power and Korea Southern Power. The block is expected to produce 5GW of renewable energy (including a battery energy storage system) and is expected to produce 200,000 tonnes of green hydrogen per annum.  Round 2 of the auctions for three land blocks in the Dhofar region commenced at the end of June 2023 with the aim to award by end of first quarter of 2024.  

Prior to both the Royal Directive issued in March 2022 and the establishment of Hydrom, there were a number of green hydrogen projects in the early stages of development, which are now known as “legacy projects”. Legacy projects which intend to continue have now been absorbed under Hydrom’s mandate to develop the green hydrogen sector, and six such legacy projects have signed MOUs with Hydrom, four of which (DEME Concessions, Amnah, BP Oman and Green Energy Oman) have now gone on to sign development agreements with Hydrom that are supposed to include, to some extent, the same commercial terms being imposed on developers through the auctions. The result is that all green hydrogen related projects whether developed for export or otherwise, now have to involve Hydrom in some capacity, including entering into a development agreement with Hydrom.  

Hydrom will also be overseeing the development of common utilities infrastructure and has signed an MOU with OQ Gas Networks, the exclusive operator and owner of Oman’s natural gas transportation system. The MOU aims to establish collaboration in developing and operating green hydrogen pipelines.