Land of energy

Gerhard Hope asks if speculation is behind experiments in energy diversification

The UAE likes to set records, but some firsts are not as glorious as others. These include having the number-two highest carbon footprint, the number-two highest electricity consumption per capita (in Abu Dhabi) and the number-one highest ecological footprint. “I think a lot of this is caused by the lack of a real price on electricity,” said author and researcher Jim Krane at a recent lecture at the Dubai School of Government.

“This has pushed Abu Dhabi towards alternative forms of generation. I believe these new forms of energy are not really cost-effective with the current fossil generation technology in terms of gas, but they do offer a lot of benefits on the side, both politically and strategically, that may in the end improve conditions in terms of targeting demand – but that is a pretty speculative premise,” said Krane.

Looking at the bigger energy consumption picture in the GCC, Krane said “most of the GCC states are facing this paradoxical shortage of natural gas. It is a region that sits on top of 23% of the world’s proven gas reserves, but there seems to be a shortage in that governments are having trouble meeting their own needs.

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“I found it fascinating, and could not fathom how the ‘land of energy’ was finding it difficult to produce enough to generate electricity. So I began looking into some of the causes behind this, and they all seemed to point at the political system really enforced in the six countries, which are tribal monarchies or autocracies, whatever you want to call them.

“It seems like the political system was behind the consumption of energy, because governments were not easily able to change or charge a cost-effective price or tariff for electricity, so there was not really any incentive for consumers to use less electricity, and at the same time there was no incentive to build energy-efficient buildings or cities for that matter.

“At the same time, these political systems were also stymieing attempts to raise prices in order to target demand. It is a pretty interesting problem in that the political system seems to be behind both the rising consumption, and also preventing the solution. This has pushed Abu Dhabi towards alternative forms of generation.”

In 2009, Abu Dhabi announced a cautiously optimistic plan to use renewable energy sources for 7% of its generation capacity by 2020. This does not sound like a significant figure, but Krane pointed out “this challenging undertaking will require an installation of around 1.5 GW of generation capacity.”

As wind energy is not a viable option, the bulk of the 7% will have to be covered by solar generation technology, equating to a solar capacity equivalent to all of that currently at work in the entire US at present. This apparent solution has its own problems.

“Solar-generated electricity carries costs running four to six times as high as Abu Dhabi’s existing natural gas-dominated power supply. A closer scrutiny of local conditions has led to the discovery that, despite the desert geography, environmental conditions impeded the effectiveness of both of the two main solar technologies, raising costs further.”

Krane suggested this implies that Abu Dhabi’s renewable energy plan “cannot be justified on a competitive cost basis, but more as a speculative bet on future benefits of mastering an emerging technology.” In other words, Abu Dhabi is taking a bit of a gamble on which way the wind will blow in future.

Actually, this is quite in line with the general risk-taking that seems to characterise the region, from the initial long bet that the dusty pearl-diving oasis of Dubai could be transformed into a major tourism, industrial and commercial hub, to Abu Dhabi’s lofty 2030 Vision to become a world-leading ‘green’ metropolis.

One of the perhaps unforeseen consequences of the global economic crisis is that everyone is adverse to risk and vision these days, from banks to developers, contractors and suppliers.

I would like to think that coming to grips with the prevailing financial constraints will push those same institutions, companies and individuals to rise above expectations and produce the necessary sparks of vision to take the land of energy confidently forward into its renewable future.

Gerhard Hope is editor of MEP Middle East.