NEW ENERGY; THE MIDDLE EAST PERSPECTIVE

A lengthy and engaging report from Lebanon’s "Daily Star" describes the prospects for New Energy from the point of view of the oil-producing, oil-economy-dependent Gulf Cooperation Council (GCC) countries of the Middle East.

The report quickly warns its audience to pay attention: “…growing economies of scale, technological breakthroughs and rising costs of competing fossil fuels play in favor of renewables, and official institutions like the EIA or the International Energy Agency (IEA) may be too conservative when they only assume a slight rise in relative importance of renewable energies until 2030…”

Then it brings the reassurance: “For the GCC countries and their most important export good, it needs to be stressed that with the exception of biofuels, renewables are used for electricity and heat generation. For the foreseeable future, renewables are not in a position either to substitute oil as a transport fuel or replace oil and gas as feedstock for the petrochemical industry on a large scale in the form of bioplastic. In current tight energy markets one might therefore think about them as a welcome addition to the energy mix rather than as a competition to oil…”

In the service of frankness, the report adds a caveat. The world’s dependence on oil for transport “… would only change if in the very long run alternative fuels or new technologies would be developed (e.g. hydrogen generated from renewable energy or electric cars)…”

Perhaps because its audience is the Old Energy world, the report does not return to the subject of electric transport. It clearly assumes the world will be dependent on GCC oil and gas for the foreseeable future. It will be interesting to see if that turns out to be true. Plug-in vehicles come to mass markets in 2 years.

What are those “welcome addition[s] to the energy mix” the GCC might take an interest in? There is some discussion of hydroelectric power but much of the report's focus, appropriately, is on wind and solar energies as sources of large-scale electricity generation for GCC and neighboring countries.

“In terms of growth rates, solar and wind energy have the highest growth rates of all energy forms worldwide…Considerable hopes are pinned to them, and if renewable energies acquire a larger share of the global energy mix in the future, it will come from these two energy forms.”

The report discusses solar power plant technologies and associated storage technologies at some length, with an interesting (Mid-East centric) history and description of future prospects.

It also takes a look at venture investment and R&D spending on wind, solar and storage technologies.

And it asks the big question: "What Developments Could Be Expected Within the Next Decade? What Is the Worst-Case-Scenario Effect on Oil?"

This leads to its discussion about biofuels. It is quite informative. It offers a discussion of the increasing production (“…land use for biofuels currently constitutes only 1 percent of total acreage worldwide (14 million hectares), a figure that the IEA sees increasing to 35 million hectares by 2030…”). And it discusses the limits on biofuels' growth (“…biofuels are unlikely to lead to large scale replacements of fossil fuels due to limited availability of land, competition with food production and a questionable energy balance in the case of ethanol production from corn. There is simply not enough land…”).

The report also offers statistics validating the negative impact of crop-based fuels on food prices: “A detailed study by New Energy Finance assumes a number at the lower end of estimates, with biofuels responsible for up to 8.1 percentage points of a 168 percent grain price increase since 2004 and up to 17 percent of a 136-percent price increase in food oils. The contribution of other factors was more important…” (See also BIOFUELS AND FOOD, BY THE NUMBERS)

The discussion of “third-generation biofuels” details the possibilities of algae and salicornia, a plant that grows on seawater. It comforts the oil producers with the stipulation these plants cannot replace oil because of their impractical land requirements. Having conveniently forgotten the possibility of electric vehicles dramatically reducing the need for liquid fuels, it nevertheless dangles this enticement: “…Research by the US Energy Department estimates that biofuel from algae could theoretically replace all the petroleum consumed in the US…”

For the detailed and interesting final conclusion on the future of oil and New Energy, see the report. The short version: “High costs of fossil fuels alongside technological breakthroughs and decreasing costs with growing economies of scale will play out well for renewable energies in the future, despite capacity constraints that need to be overcome. Renewable energies have developed into an industry to reckon with and are also underpinned by growing government support and concerns about global warming.”

A pretty generous assessment, considering the report's source and its audience. But there's more.

The report concludes with a long discussion about the prospects of two of the most visionary projects in the world, Desertec (see ALGERIA TO SEND SOLAR TO EUROPE) and Abu Dhabi’s Masdar Initiative (see OIL MONEY TO BUILD GREEN CITY).

Desertec: “The Trans-Mediterranean Renewable Energy Cooperation (TREC) is pursuing the Desertec project, which aims at building large-scale CSP plants in North Africa and transport the produced electricity via high voltage direct current cables to Europe, both already proven technologies…”

Masdar: “Abu Dhabi's Masdar initiative is the most significant initiative for renewable energy in the GCC thus far…Abu Dhabi has taken on the Saudi initiatives of the 1980s on a much larger scale, in order to take advantage of the technological progress and the improved economics that have taken place in renewable energy since then…”

The final paragraph, though lengthy, is more than worth some attention: “Renewable energies are about to capture a significant portion of the global energy mix. This portion is only likely to grow…Especially solar energy in the form of Concentrated Solar Power (CSP) and thin film PV cells integrated in buildings…Rising domestic energy needs for power generation and desalination, favorable conditions for solar energy production and interest in acquiring technological know-how make a perfect argument for renewable energy in the Gulf. Renewable energies can stretch the lifeline of the GCC's oil and gas exports, and in some decades from now, they even have the potential to develop into a major pillar of the economy. Energy created from renewables could gradually substitute oil as the GCC's major export item..."

The last 2 sentences are real gems: "Regarding renewable energies as the uneconomical hobby of esoteric "tree huggers" in Europe and the US would be a mistake; this point was passed a long time ago. Otherwise, the GCC countries may face the same fate as the Michigan Savings Bank, which denied Henry Ford an initial credit arguing that ‘the horse is here to stay, but the automobile is only a novelty - a fad.’”

The sun is there. (click to enlarge)

Alternative Energy Trends and Implications for GCC Countries
August 4, 2008 (The Daily Star)

WHO
Gulf Cooperation Council (GCC) countries: Bahrain, Qatar, Kuwait, Oman, Saudi Arabia, United Arab Emirates

WHAT
An insightful and well-informed report looks at the prospects for New Energy in the oil-producing world of the Persian Gulf states.

If the Gulf states build the right infrastructure, they could be exporting sun instead of oil by mid-century. (click to enlarge)

WHEN
- 2007: New Energy electricity generation capacity (excluding large hydro) was 240 GW, up 50% from 2004.
- 2007: Wind power capacity up 28%
- 2007: Grid-connected solar photovoltaics up 50% (not counting solar power plants)
- 2007: Solar heat collector capacity up 19%
- 2007: Biodiesel production up 50%
- 2007: Ethanol production was 4% of the 1,300 billion liters of gasoline consumed.
- 2010: People will start to move into Masdar City.
- 2013: Completion of Masdar City.
- 2050: Time frame for GCC shift to New Energy

WHERE
- Once again: 40 minutes of earth’s sunlight equals global energy use for a year.
- 13% of the world's surface has winds for efficient power generation, mainly in Northern and South America, Northern Europe, North-West Africa and Australia.
- The Middle East offers “suitable” conditions for the generation of solar power.
- Large CSP plants are under construction or projected in Nevada, Spain, Algeria, Israel, Mongolia, Morocco, Tunisia, Egypt and Abu Dhabi and will lead to use of solar energy on an industrial scale.
- Egypt, on its Suez coast, is the leading wind energy producer in Africa. Oman has a proposed 750-megawatt wind energy project. Potential has been identified for development on the Red Sea coasts, Yemen and in Khuzistan and northern Iran near the Caspian Sea. Persian Gulf wind potential is limited.

WHY
- New Energy investment, 2006: $70.9 billion, up 43% over the previous year.
Sectors with the highest investment: wind, solar and biofuels because these secotrs combine technology maturity, favorable policy incentives and investor interest. Investments mainly in the US and the EU. Investments in developing countries still minor and increasing quickly especially in China, India and Brazil.
- New Energy Research and Development (R&D), 2006: $16.3 billion, up from $13 billion the previous year
- Factors that will determine how New Energy grows: (1) The price of fossil and nuclear fuels and subsidies; (2) How economies of scale and tech breakthroughs affect New Energy price (ex: thin film PV, offshore wind parks, solar tower CSP); (3) Development of storage (ex: compressed air, molten salts); (4) Government support/policies; (5) Environmental concerns and cost trade
- The Masdar Initiative includes: (1) Masdar City, the first carbon neutral city in the world; (2) The Masdar Institute of Science and Technology (MIST), in cooperation with MIT (Massachusetts Institute of Technology), to convert the UAE from a technology importer to a technology exporter; (3) The Masdar Research Network, to network on the development of New Energy with research institutes in Europe, Asia and the US; (4) The Special Projects business unit to commercialize breakthrough New Energy (ex: the $2 billion investment in two thin film PV factories in Abu Dhabi and Erfurt/ Germany); (6) The Carbon business unit, one branch to develop emissions trading and a second branch for Carbon Capture and Sequestration development, with a $250 million Clean Tech Fund and a power plant project unit funded is financed by Masdar and Credit Suisse.

The Masdar Initiative is a bold, exciting undertaking that could payoff bigtime. (click to enlarge)

QUOTES
- From a Stanford research study as quoted in the report: "As such, the amount of wind energy over land could potentially cover over five times the current global energy and about 40 times the current electricity uses with little incremental pollution."
- Worth repeating: “Regarding renewable energies as the uneconomical hobby of esoteric "tree huggers" in Europe and the US would be a mistake; this point was passed a long time ago. Otherwise, the GCC countries may face the same fate as the Michigan Savings Bank, which denied Henry Ford an initial credit arguing that ‘the horse is here to stay, but the automobile is only a novelty - a fad.’”