<p>Future of Sustainable Energy</p>
<p>Corporate Commercial / Bahrain</p>
This article aims to shed light on the efforts of the Kingdom of Bahrain (“Bahrain”) in achieving sustainable development through initiatives to safeguard the environment while pursuing its ambitious national development agenda. Additionally, we focus on the legal and regulatory framework currently in place that potential investors would need to consider when taking part in such initiatives.
His Majesty King Hamad bin Isa Al Khalifa introduced Bahrain's Economic Vision 2030 (“Vision 2030”) in October 2008. It is a comprehensive economic plan that lays out a clear course for the country's continued economic growth and has as its central objective improving the quality of life for all Bahrainis. The three guiding principles of sustainability, fairness, and competitiveness serve as the foundation of Vision 2030, which aims to shape the future of the government, society, and economy.
Bahrain is dedicated to safeguarding the environment and preserving natural resources as part of which it has incorporated the United Nations General Assembly's Sustainable Development Goals (“SDGs”) into the Kingdom's Government Action Plan and Vision 2030, resulting in significant progress in these areas.
Bahrain has set up a large number of governmental organizations, committees, and institutions to create plans, guidelines, and strategies for achieving sustainability in all of its forms and despite the difficulties the world community is facing in the wake of the COVID-19 pandemic, Bahrain has signed multilateral agreements related to sustainability and is continuing to uphold its obligations under them.
Bahrain’s commitment towards sustainable and clean energy in brief include the following:
Economic Vision 2030 - “Protecting our natural environment will include directing investments to technologies that reduce carbon emissions, minimise pollution and promote the sourcing of more sustainable energy.”
NEEAP and NREAP (discussed further below)-
Energy Efficiency Target: 6% by 2025
Renewable Energy Targets: 5% by 2025 and 10% by 2035
SDG Goal No. 7 - “Ensure access to affordable, reliable, sustainable and modern energy for all”.
Paris Agreement - Bahrain committed to reduce greenhouse gas emissions through submission of its Intended Nationally Determined Contribution.
League of Arab States, Arab Ministerial Council for Electricity - “Each Arab State shall adopt a national renewable energy action plan (NREAP). Each of the member states shall develop a National Energy Efficiency Action Plan (NEEAP).”
The Sustainable Energy Authority
In order to achieve Bahrain's strategies and goals for sustainability, the Sustainable Energy Unit (“SEU”) was initially established in November 2014 as a joint initiative between the Office of the Minister of Electricity and Water Affairs and the United Nations Development Program (UNDP). The SEU has since evolved to become the Sustainable Energy Authority (“SEA”) which was set up pursuant to decree No. 87 of 2019. The SEA proposes initiatives and projects that update and develop sustainable energy sources by encouraging the private sector to raise energy efficiency and the use of sustainable energy sources to generate electric power.
The SEA proposes initiatives and projects that update and develop sustainable energy sources by encouraging the private sector to raise energy efficiency and the use of sustainable energy sources to generate electric power.
The SEA’s main goals are to promote energy efficiency and renewable energy in the Kingdom of Bahrain, as well as to develop an integrated and sustainable energy policy. The authority also works to close the capacity, institutional, and legal gaps so that Bahrain's energy sector is prepared to handle upcoming challenges.
In close collaboration with stakeholders and partners in the Kingdom of Bahrain, SEA is the organization charged with directing and promoting energy efficiency practices, transferring and disseminating renewable energy technologies, and developing policies and regulatory frameworks in these areas.
Since its foundation (initially as SEU) it developed two important policy documents for Bahrain:
The NREAP identifies viable renewable energy options, sets targets and proposes policies and initiatives to achieve these targets, while the NEEAP was introduced with the aim to use less energy. Both these policies are discussed in further detail below.
Overview of NREAP
The NREAP was developed in clear recognition of the benefits of renewable energy and the development of renewable energy initiatives and represents the implementation of Bahrain’s regional and international commitments under the Paris Agreement, the SDGs and the League of Arab States Renewable Energy Framework.
It identifies feasible renewable energy options for Bahrain, sets the targets, and proposes policies and actions to harness the identified renewable energy opportunities. It sets a national renewable energy target of 5% by 2025 and 10% by 2035 (the targets are based on the projected peak load electricity capacities, excluding industry’s own generation, and equate to 255 MW of installed capacity by 2025, and to 710 MW by 2035 (NREAP)). The targets will be met by a proposed renewable energy mix consisting of solar, wind, and waste to energy technologies.
The long-term benefits of incorporating renewable energy into Bahrain's energy mix include maximizing the country's use of its own gas resources, lowering greenhouse gas emissions, improving economic competitiveness, reducing electricity peak demand, and enhancing energy security. NREAP estimates that achieving the 5% renewable energy target will not only result in clean energy generation but also an annual financial savings of BD 1.6 million as well as attract more than BD 140 million of investment into the economy.
To achieve its targets, the NREAP envisages deployment of viable opportunities for decentralized urban generation and development of large-scale renewable energy power plants (offshore and onshore) to include (but not limited to):
Solar systems for new housing units
Solar systems for government buildings
Decentralized solar in urban developments (solar lighting, solar parking)
Decentralized rooftop solar on existing residential and commercial buildings
Utility-scale renewable energy plants by large industry groups
Solar farms in new town developments
Near shore or offshore wind farms
Integrated renewable energy technologies in large infrastructure projects (causeways and railway systems)
Overview of NEEAP
The NEEAP includes a comprehensive set of initiatives, which builds on previous accomplishments and aims to further the Kingdom's potential for energy efficiency. It includes energy efficiency plans created by various institutions as well as specific programs and new initiatives across numerous sectors. The NEEAP further specifies implementing strategies, establishes a national target for energy savings, and offers energy and financial savings projections.
The NEEAP sets a reduction in energy consumption of 6% by 2025. It estimates that achieving the 6% national energy efficiency target will result in cumulative government monetary savings of BHD 82 million and an anticipated financial impact of BHD 230 million, after deducting the cost of implementation (based on energy savings of 5,800 GWh on a primary energy equivalent basis in year 2025 and avoided investments in electricity generation of BHD 172 million (NEEAP)).
Some of the NEEAP initiatives include:
Minimum energy performance standards and labelling of appliances
Vehicle efficiency and standards and labelling
Building energy efficiency code
Green public procurement
The SEA has been tasked to lead the coordination efforts in implementing the NREAP and the NEEAP in order to provide technical assistance in the deployment of renewable energy projects as well as promoting sustainable energy policies and practices in Bahrain. The SEA’s responsibilities include:
Coordinate implementation activities among all stakeholders through developing partnerships;
Inform stakeholders on the progress of implementation of the NREAP and the NEEAP;
Draft energy efficiency and renewable energy policies and regulations and support the establishment of standard operating procedures for their implementation;
Carry out feasibility studies, resource potential assessment, cost-benefit analysis of various technology options and business models, as well as oversee the implementation of pilot projects;
Provide technical assistance in developing tendering documents, drafting requests for proposals, evaluating bids, and assessing outcomes of pilot projects;
Carry out information dissemination and awareness raising campaigns through launching a dedicated website, organizing press conferences, promoting renewable energy at various public events;
Organize and support capacity building and training activities for government and non-government stakeholders.
The Electricity and Water Authority (“EWA”) has issued a standard guideline concerning the connection of distributed Solar PV Plants with the electricity distribution network of the Kingdom of Bahrain (Solar PV Grid-Connection Guideline). This guideline places a responsibility on EWA to design a suitable process which determines the appropriate point of connection and assess the capacity of the network to host the connecting solar PV generating plant at the point of connection, whilst maintaining the safety of the overall national grid. The Solar PV Grid-Connection Guidelines are envisaged to establish the applicable technical standard which both regulators and stakeholders must abide by in interconnections relating to renewable energy sources.
The Net-metering mechanism allows a consumer with surplus energy produced through clean energy sourcesits solar panels to be fed back into the national grid. At the time of reconciliation, any excess electricity generated is credited as electricity units carried over to the next billing cycle. If a consumer has multiple properties, he can utilise the excess electricity of one property to be credited to its other property.
Investing in Renewable Energy in Bahrain
In this next section, we set out some of the legal and regulatory considerations to be taken into account for investors looking into investing either in solo or joint venture projects in Bahrain.
1. Incorporation and Approvals
Any person or entity which operates and/or provides commercial services in Bahrain is required to have a suitable legal presence in Bahrain, involving duly registering with the MOIC pursuant to the Commercial Registry Law Number 27 of 2015. The Ministry of Industry & Commerce (“MOIC”) is the licensing authority responsible for issuance of commercial registration for companies and other licenses required for an economic activity.
2. Foreign Ownership Limitations
Certain commercial activities are restricted i.e. they require participation (as shareholder(s)) by Bahrani or GCC nationals. This can typically be between a minimum of 1% to 51% depending on the nature of activities and unless an exemption is granted at Ministerial level, such foreign ownership restrictions must be adhered to. Please note that where a corporate shareholder established in a GCC jurisdiction is utilised to seek to satisfy these requirements, that GCC shareholder must be directly, ultimately and at every level of the ownership chain 100% owned by GCC nationals.
In the context of employment, Bahrainisation is a strategic nationalisation programme in Bahrain which regulates the labour market and imposes a quota of Bahraini national employees that should be appointed by companies established in the country. The maximum number of expatriate visas which an entity in Bahrain can obtain is dependent upon the type of activity the Bahrain Entity performs and the Bahrainisation policy imposed by the Labour Market Regulation Authority (“LMRA”).
4. Import Approval
In the event the project company is required to import any specialised equipment or apparatus, such goods should adhere to the Gulf Standardisation Organisation (“GSO”) requirements (which were ratified by Bahrain pursuant to Decision (33) of 2005)). Additionally, any equipment or apparatus concerning equipment and apparatus in connection with solar energy generation must also adhere to applicable technical standards adopted by the International Electrotechnical Commission.
5. Land Rights
Most projects (involving setting up of a plant such solar or wind turbines) would require a company to enter into a relevant right of use of land such as a lease (or license) with land owners.
Bahrain provides for what could be termed as ‘ordinary leases’ which are generally regulated under Law No. 27 of 2014 on the Property Lease Law. The Lease Law requires leases to be registered with the Ministry of Justice via the Bahrain eGovernment portal (bahrain.bh) within one (1) month of completion, failing which the Rent Disputes Committee will not hear disputes for unregistered leases. Notwithstanding this, leases do not provide proprietary rights in land and are therefore not registerable at the Survey Land and Registration Bureau (SLRB), Bahrain’s land department and registry. As such, lease rights do not attach to or create a legal interest in the property, but are rather contractual in nature. Plots of land leased for ‘developmental purposes’ are excluded from the Lease Law’s scope of application. Some considerations to note under the Lease Law is that it prohibits tenants from undertaking alterations without the written consent of the landlord(s) (except where such alteration does not harm the lessor).
In addition, Law 27 of 2017 on the Real Estate Sector Regulation (Real Estate Law), allows for additional land rights as follows:
Long Term Lease: A right in rem over property of a term not less than ten (10) years and not exceeding ninety-nine (99) years, unless it is agreed that it be renewed.
Usufruct: A right in rem over property that authorises its holder to use and exploit the property or real estate unit in accordance with the applicable law. The term of a usufruct right may be for up to ninety-nine (99) years.
Musataha: A right in rem over property that authorises its holder to construct facilities or buildings on a land belonging to another for a limited period of time.
The primary advantage of holding usufructs, musataha rights and long-term leases rights over ordinary leases is that the former are registerable property rights (i.e. they can be registered with the SLRB). Where such rights are not registered, the law is clear that the rights shall not be created, established, transferred, changed or cancelled between the interested parties nor third parties.
A project company can also enter into licensing arrangement with the landowner, which does not grant any proprietary interest however grants to the project company a license / right to use the premises for the intended purpose. Licenses are not directly regulated under any specific laws, but are rather, contractual in nature and governed by broader general contractual principles. From a project company’s perspective, it is important to note that keeping in view that the law does not cover licenses, no protections are available under law (as opposed to leases, which provide for obligations to be fulfilled by the landlord), therefore, any and all protections for the licensee are required to be contractually covered in a license agreement.
Bahrain's commitment and ambitious plans towards achieving its SDGS and in particular the development of sustainable energy sector, enhanced by its business-friendly environment puts the country at the forefront for both domestic and international investment.