MIDEAST WASTING POTENTIAL AS BIG AS THE SUN, AS STRONG AS THE WIND

Report finds MENA region lagging on renewable power
Tamsin Carlisle, March 14, 2010 (The National)
and
A New Source of Power; The Potential for Renewable Energy in the MENA Region
Ibrahim El-Husseini, Dr. Walid Fayad, Tarek El Sayed and Daniel Zywietz, March 2010 (Booz & Co.)

THE POINT
In 1950, the Arabian-American Oil company (made up of the oil companies that became today’s Exxon-Mobil and Chevron-Texaco, among others) ran into a problem. They couldn’t keep their profits high if they were forced to pay what the Saudis wanted for their oil and what they owed the U.S. government in taxes. So, Big Oil being the kingmakers it is in the U.S. political system, arranged something called “the golden gimmick.” It allowed them a 50% cut in federal taxes on their profits so they could meet Saudi King Ibn Saud’s price.

Ever since then, the MidEast has been ruled by oil potentates – at the expense of the U.S. taxpayer. Big Oil has continued to reap unconscionable profits, at the expense of the taxpayer. And both began conspiring to keep the U.S. taxpayer/consumer hooked on oil.

In the 1970s, U.S. domestic oil production peaked and started falling off and the potentates began using their oil to manipulate political events. It created the opportunity for some visionary scientists who had been playing with something called “photovoltaics” that turned the light of the sun into electricity (photo=light, voltaics=volts of electricity) to get a word in edgewise. “How about using the energy of the sun and forget about oil?” they asked.

At the time, U.S. consumer/taxpayers happened to be - due to the potentates' greedy oil price manipulations - waiting in long gas station lines. They had the time to grudgingly consider the scientists’ suggestion and the longer they waited in line, the more they liked the idea of photovoltaics.

Flash forward almost 4 decades, two MidEast wars, two World Trade Center attacks and one psuedo-clash of cultures later. A lot more people like the idea of the sun and very few outside the oil and gas industry who know about the golden gimmick and other Big Oil tax fiddles think they should stay in place.

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In the MidEast, oil supplies are peaking and falling off in some countries and threatening to in others, cities are growing polluted, aggravated heat from global climate change is becoming intolerable, single commodity economies are narrowing and failing from the “oil curse” and the entrenched oil industries are not supplying enough work for burgeoning populations. Suddenly, there are a lot of people – even some in the royal families and privileged few with oil riches – who are looking up at the sun and wondering if its energy has something better to offer.

A New Source of Power; The Potential for Renewable Energy in the MENA Region, by Ibrahim El-Husseini, Dr. Walid Fayad, Tarek El Sayed and Daniel Zywietz for Booz & Co., say it does.

The offer: The 146-gigawatt power capacity of the combined MidEast/North Africa (MENA) nations will need to expand by at least 80-to-90 gigawatts by 2017. They can make the situation worse by expanding their dependence on fossil fuels or they can turn toward the future and develop their unmatched solar and other New Energy resources to meet this coming need.

The way: MENA nations have an estimated 45% of total world New Energy potential and practically none of its installed capacity. Besides the world’s biggest solar potential, MENA nations have substantial wind. Now being squandered, MENA New Energy could meet current world electricity demand three times over. To turn toward the future, all they have to do is turn away from golden gimmicks and step into the golden light of their sun and the richness of their winds.

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THE DETAILS
Since the earliest efforts to build New Energy on a large scale in the 1970s and 1980s, its economic viability has been subject to the fluctuations in the prices of oil and natural gas. Four trends make the current New Energy expansion different:

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(1) Despite the irrational noise made based on bogus science, legitimate concerns of informed citizens around the world and even in MENA nations about global climate change are growing. While the popular media has allowed trivial bugaboos in sound and comprehensive scientific studies to be bandied as significant, the real scientific evidence of worsening global climate change is almost daily becoming ever more undeniable.

(2) Even in the face of a worldwide economic downturn, oil and natural gas prices fell less than would be expected and returned more quickly than expected to historic highs, threatening the affordable access of consumers everywhere to the fossil fuels on which they now depend. Fossil fuel-rich nations like Russia have demonstrated how they can hold dependent European nations hostage if domestic sources are not developed. MENA nations can choose dependency on diminishing Old Energy reserves or New Energy expansion.

(3) Demand for energy is rising even as the price of and accessibility to the Old Energies is falling away and the supply of New Energy is increasing. The principles of supply and demand are turning the logic toward developing MENA’s enormous New Energy resources.

(4) Some contemporary New Energy technologies make them now reliable and affordable at utility scales and others await only economies of scale to become so. Almost half of the new power generation built in the U.S. and Europe in 2008 and 2009 was New Energy. The abundance of MENA nations’ assets offer an unprecedented business opportunity.

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MENA nations’ assets differentiate their much richer opportunities from those of other world sites in six basic ways:

(1) The geographic position of MENA nations gives them nearly half (45%) of the world’s New Energy assets and makes them capable of supplying at least 3 times the entire world energy demand. Wind and solar energy resources are especially abundant in sparsely populated areas.

(2) Despite the MENA nations’ historic abundance of Old Energy resources, supplies in many places have peaked and in other places are peaking (or believed by most experts to be peaking where actual numbers are concealed). Demand among burgeoning MENA populations is growing at 7% per year and will require their supplies to grow from 146 gigawatts to ~230 gigawatts in the next 7 years. Many MENA nations’ do not have the Old Energy resources to meet this anticipated demand.

(3) MENA nations have the world’s 2nd-worst air pollution. It is already costing them nearly 1% of their GDP (twice the world average) and many are too poor to afford it. Qatar generates 3 times the U.S.'s unacceptable CO2 per capita. New Energy will cut pollution and the health care and other costs it drives.

(4) Investment in New Energy and transmission infrastructure will pay for itself in rich energy exports to Europe from supplies that will never run out or create the many other problems associated with the Old Energies.

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(5) Building the opportunity of New Energy is a long-term undertaking and will only enhance and extend the value of the Old Energy reserves of the MENA nations. The logic of investing in a shift from energy resources that are dwindling to energy resources that will inevitably someday replace them is undeniable. Any other choice is simply unwise and uneconomic. OPEC’s share of the world’s oil consumption is expected to grow from 42% to 52% in the coming 2 decades. The question is, what will OPEC nations do with their wealth and what will they do when the oil runs out and/or the oil demand drops off?

(6) By increasing consumption of New Energy, MENA nations would also increase the need for its abundant natural gas resources because gas is the ideal choice as back-up for the New Energies. At the same time, the building of New Energy and transmission infrastructure will provide the jobs that the oil and gas industries, which contribute only 1% of the region’s jobs, do not.

Wind technology is already price competitive with fossil fuels. The MENA region’s wind assets on land are significant but its offshore potential is even greater. Its offshore wind is especially rich on both the readily accessible, developed and trafficked Gulf of Suez and on the Saudi Arabian coast of the Red Sea. The variability of wind power is typically balanced with natural gas-generated electricity, furthering its value to MENA nations.

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Anybody unaware of the MENA solar assets must be not only blind but the victim of a neurological disease that eliminates their capacity to feel hot and cold. Though the brightness makes it excellent for photovoltaic (PV) development, the heat reduces the efficiency of some kinds of PV panels.

The ceaseless heat, on the other hand, makes MENA nations’ capacity to generate electricity from concentrating solar power (CSP) plants enormously abundant. CSP plant technology is the ideal match with natural gas plants to eliminate the forecastable variability of the New Energies and guarantee an uninterrupted supply of electricity for domestic and export grids until economic forms of utility-scale electricity storage are perfected.

At the same time, a combination of small wind and PV solar is the ideal energy solution for the many off-grid communities of MENA nations.

There are also geothermal assets that the region’s experience with drilling would make more accessible. And there is a rich potential to develop third generation biomass (especially algae) capabilities, thought by many to be the ideal successor to oil in the world's heavy transport sector.

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Generating New Energy electricity at economically competitive prices is the real challenge for MENA nations. The subsidized market cost of natural gas is extremely low, approximately half what electricity costs U.S. ratepayers, but it comes with other costs. Dependence leads to health impacts (externalities) that are not part of the market price. The established infrastructure for delivering natural gas is another inequality between the Old and New Energies in the MENA region. New Energy would require an extensive development of transmission capacity to be competitive.

Leaving out the questions of externalities and delivery costs, off-grid PV is now price competitive with the diesel generators it would likely replace and the cost of wind is now competitive with unsubsidized natural gas. The real capacity of New Energy to replace natural gas dependence in MENA nations, however, rests on how competitive the price of solar power plant (SPP)-generated electricity can be.

General estimates suggest that the cost of unsubsidized SPP-generated electricity will match natural gas-generated electricity sometime between 2015 and 2025. Whether it is sooner or later depends largely on how fast CSP technology advances, how long MENA nations subsidize Old Energy and whether the nations of the world impose a price for greenhouse gas emissions.

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MENA region governments can kick-start the shift to New Energy by:
(1) Developing a comprehensive New Energy strategy that (a) starts small, (b) grows quickly and (c) begins now;
(2) Establishing institutional and bureaucratic accessibility for developers, such as clear rules and permitting processes;
(3) Instituting policies and incentives such as tax credits, grants and feed-in tariffs that drive New Energy growth;
(4) Funding and facilitating new transmission and grid integration of the New Energies; and
(5) Creating institutions, policies and incentives that drive New Energy innovation, New Energy manufacturing capabilities and the expansion of a workforce of knowledgeable scientists, competent engineers, reliable technicians and available blue collar workers to implement New Energy.

New Energy remains a field in which dominance is not entrenched. The MENA nations are ideally positioned to capture an important segment of the market if they seize the initiative.

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QUOTES
- Ibrahim el Husseini, partner/report lead author, Booz & Company: "Renewables in much of the MENA region are underfunded or not funded at all, in part due to the region's abundant supplies of fossil fuels…[They therefore] cannot currently compete with the region's fuel of choice, natural gas…"

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- From the Booz study: “…Abu Dhabi launched the Masdar Initiative in April 2006 to establish an entirely new economic sector dedicated to alternative and sustainable energy…[1] The property development unit is responsible for developing Masdar City, the first zero-emissions city in the world…[2] The utilities and asset-management unit is building a portfolio of operating assets and strategic investments in renewable energy…[3] The industries unit will invest in production assets and develop Masdar’s high-tech solar cluster…[4] The carbon management unit is developing a portfolio of clean development mechanism projects and a carbon capture and storage network in Abu Dhabi…[5] The Masdar Institute is a graduate-level scientific and engineering institution focused on education and research in renewable energy and sustainable technology.”

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- The conclusion to the Booz study: “Although some countries in the MENA region have begun renewable energy projects, the region as a whole is still rife with potential. Competitive positions in this sector are not yet set, and there is substantial opportunity for first movers to become global leaders by adopting the requisite policies and launching bold initiatives. Countries that move quickly, such as the UAE with its unique Masdar Initiative and its hosting of the International Renewable Energy Agency headquarters, could build a sizable and sustainable competitive advantage.”