LONDON: A new report commissioned by the National Bank of Abu Dhabi was released earlier this week, stating that renewables are the future for the Middle East as they are already cheaper and more reliable than oil.
The oil-rich region currently has the highest energy and carbon intensity in the world, as well as one of the world’s highest carbon emission rates, making it seem an unlikely global leader for renewables. But the new report by the University of Cambridge and PwC stresses all economic indicators are pointing the Gulf region in the direction of clean energies.
Eduardo Goncalves, a director and key spokesperson on Middle East issues for The Climate Group commented: “The Middle East is fast becoming a major hub for the global clean economy, and the banks’ new report provides further evidence – and a positive signal as we head toward the global climate talks in Paris – that renewables are the common sense direction for the region’s energy markets.
“There is already a huge amount of investment and innovation in the region, with some remarkable examples of recent leadership, including the United Arab Emirates’ new Green Growth Strategy to create 160,000 new jobs by 2030 - with a total boost for the GDP of the country by up to 5%.”
The report highlights that the renewables industry is where the money is now flowing around the world, which makes clear the opportunity for the Middle East:
- In 2014, global investment in solar energy totalled US$150 billion and US$100 billion in wind power.
- In the last few years, more than half of total global investment in new electricity generation went into new technologies for renewables.
- Technology costs are decreasing and governments are implementing policies to move to a low carbon economy, opening the renewables sector to more investment. In the last six years prices of solar PV have fallen by 80% and prices of on-shore wind by 40%.
One of the last tenders in the United Arab Emirates show that even with the oil price being US$10 per barrel and gas US$5 per MMBtu (million metric British thermal unit), photovoltaic technologies are now a cheaper option. The Dubai Electricity and Water Authority even accepted a bid for a 200 megawatt solar PV plant at the low price of US$0.0584 per KWh last December.
Recent figures by the International Energy Agency also estimate solar to become the cheapest form of electricity generation between 2025 and 2030.
CLEAN TECH AVAILABILITY
Globally solar PV and on-shore wind are currently leading the renewables market, as proven by more investment coming not only from Western countries, but also from emerging markets like China.
In 2013 for instance, China alone accounted for 37% of global growth in installed solar PV capacity, and is expected to keep growing to account for 37% of global capacity by 2050.
The report’s compelling figures are conservative however, as it does not take into account future developments in clean technologies. It is based only on those which are available now, being tested and cost-effective. Energy storage capacity is a sector which still requires more research for example, but investment is increasing and expected to be US$5 billion a year by 2020.
“As Sheikh Ahmed Zaki Yamani, former oil minister of Saudi Arabia predicted, we are now looking at the ‘end of an oil age’”, added Eduardo Goncalves. “And like Saudi Arabia, other oil-producing states and regions also see clearly that the clean economy is where the smart business is. But to ensure the most cost-effective solar growth, like all regions wishing to secure their lead in the low carbon economy, the Middle East must also invest in renewable energy storage.”
The report also stresses how quickly the countries in the Gulf area are developing. Emerging economies around the world will soon drastically increase their energy needs, as cities become bigger much quicker than developed countries did, and the growing middle-classes require more power.
Needing clean, affordable and reliable energy solutions fast, these countries offer opportunities for the private sector to invest early and capitalize on the new low carbon economies.
Image: Energy trends in Gulf countres, National Bank of Abu Dhabi by the University of Cambridge and PwC
In total, global energy trends for the next 20 years show energy demand will triple by 2030 compared to 2014, a growth the report points out is unstable: “In practical terms, it is simply not possible to build enough new generation capacity, traditional or renewable, in time to meet this growth in demand which explains why energy efficiency measures will also have to play such a key role alongside generation.”
But making the Middle East’s energy system more efficient in order to meet this demand is achievable. The report quotes research from 2014 by the Lawrence Berkeley National Laboratory about the costs of energy efficiency, which shows it costs utilities just US$2.1 cents in total to reduce energy demand by 1kWh, which is less than half the cost of producing the same amount of electricity at a power plant.
By Denise Puca