DUBAI: For some time now, energy experts have been calling attention to the urgent need for oil-producing Gulf Cooperation Council (GCC) countries to enable a circular carbon economy and move to a cleaner, technology-driven future.
In a sign of the shifting strategic priorities of the bloc’s biggest oil producer, Saudi Arabia was the host this year of the international Carbon Capture, Utilization and Storage (CCUS) conference.
Speakers at the Riyadh conference laid out the case for a step-by-step transition to less carbon-intensive and more environmentally friendly technologies in the Kingdom’s long-term national interest.
“Global climate objectives are dictating much of the technological shifts in the energy sector, and the momentum behind sectors like solar, wind or battery storage is immense,” said Dario Traum, head of EMEA Energy Transition at BloombergNEF.
“To be modern, diversified and competitive, Saudi Arabia’s economy needs to adopt these new technologies wholeheartedly.
“Saudi Arabia has set extremely ambitious (goals) for the transformation of the country, and these will be best served if it fully acknowledges the shifting economics and technology of the energy sector.”
The speakers said a transformation of the energy sector is bound to generate new growth opportunities while delivering a cleaner environment for the population to live in.
“Saudi Arabia, as a society and an economy, is going through a rapid transition,” said Antoine Vagneur-Jones, MENA lead analyst at BloombergNEF.
“A lot of the focus has been put on diversification to reduce the weight of the oil sector and attract more international investors into the country,” he added.
“Accelerating clean energy investments will have to be matched by measures similar to those needed in the other sectors the Saudi government is looking to grow.”
Vagneur-Jones said for a start, the electricity-generation sector has to be opened fully for independent power producers.
According to him, there are few, if any, examples of rapidly growing clean energy markets without this condition being met.
“Auctions are a great way to attract international investors,” he told Arab News. “Saudi Arabia’s tenders have been slow to deliver results and have focused on contracting very large projects. This approach fails to provide the frequency and transparency needed to support the development of a vibrant clean energy industry.”
Some other routes through which the Kingdom could nurture a clean energy boom, according to Vagneur-Jones, are energy price reforms to facilitate the adoption of rooftop solar panels, and regulatory changes to create a demand for clean energy power-purchase agreements.
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Speaking in the same vein, Traum said: “The main way in which the world is currently reducing emissions is through energy efficiency, and through the substitution of the most polluting forms of energy with some that emit less or no emissions, for example through the switch from coal to gas, gas to renewables, and combustion engines to electric ones in cars.”
He added: “These changes will deliver the vast majority of the emissions reductions needed to meet global climate objectives.”
Nevertheless, there will remain a number of “hard to abate” sectors in which switching to clean electricity may prove difficult, Traum cautioned.
Citing heavy industries such as steel manufacturing and cement production as examples, he said new solutions such as clean hydrogen and the capturing and storing of carbon may become necessary for decarbonization.
Balancing the costs and benefits will prove equally daunting. Developing CCUS will require substantial investments from the industries concerned and governments to scale up solutions so they become economically viable.
While there are signs of activity resuming in some markets, research and development spending in the energy sector is said to be nowhere near where it needs to be for CCUS to play a central role in the near to medium term.
Experts say sweeping reforms and transitions are difficult for every country, especially when the sectors most in need of overhaul are central to the economic DNA of a country, as is the case with oil in Saudi Arabia.
“Clean energy today is a global success story that is increasingly driven by the competitiveness of the sector,” Traum said.
“Solar and wind are the cheapest forms of new clean energy generation in virtually all of the world.”
In the context of the Kingdom, Traum, said: “The authorities have historically let the population benefit from the energy riches of the country through a variety of fiscal transfers, including heavily subsidized retail energy prices.”
While this has delivered historic socioeconomic benefits, today it distorts the economics of energy technologies, and thus is a barrier to the rapid adoption of renewables and the government’s plan to diversify the economy, he added.
Traum said the historical importance of the oil sector does not mean Saudi Arabia cannot reinvent itself as one of the largest clean energy markets globally within a year or two from now.
“Scheduling regular auctions, with a pre-agreed volume, and transparency in the bidding process has shown to create rapid investment booms in dozens of countries around the world, with Kazakhstan, Mexico and India being notable examples,” he added.
“There is no reason that an economy the size of Saudi Arabia’s, with its remarkable solar resources, (cannot) join these frontrunner markets.”
Elsewhere in the GCC region, there is tangible evidence that energy transition is happening, especially in Dubai, according to Faisal Rashid, director of demand-side management at the emirate’s Supreme Council of Energy.
“There are disruptive technologies that enable us to make our energy infrastructure more smart,” he said, citing a slew of examples: Energy storage, net-zero-energy buildings, vehicle electrification, smart grid and metering, digitalization of energy systems, and integrated water-optimization strategies.
Elaborating on the topic, Rashid added: “If we speak about both supply and demand, energy efficiency and solar adaptation in our region, there is good potential for drastic improvement, (especially) due to the very high per capita energy intensity. Renewable energy storage and more efficient cooling are also key opportunities.”
Over the past decade, renewables are said to have lived up to their potential, with capacity growth worldwide having exceeded fossil fuel volumes.
“We can save up to 30 percent on average by using proven technologies and known measures,” Rashid told Arab News.
“Green mobility by increasing electric vehicles and hybrids are also viable and being pursued in Dubai, aiming to reduce fossil fuel usage with 2030 as the horizon and improve air quality.”
Dr. Najib Dandachi, CEO of UAE-based consultancy Al-Usul, said transportation and electricity production are responsible for a little more than 50 percent of emissions, and the GCC is no exception.
“In fact, the situation may be exacerbated by water desalination and the limited existence of public transport in most of the countries of the region,” he told Arab News.
“However, most GCC countries have embarked on truly aggressive clean energy programs that will rapidly displace fossil-fuel, thermal-power generation.”
Dandachi considers Saudi Arabia the most ambitious country in this regard, pointing out that it recently upgraded its plans with the aim to generate about 27 gigawatts of clean energy by 2024.
“All agencies must cooperate and coordinate to maximize the chances of achieving those targets in a relatively very short time,” he said.
“Additionally, there are serious efforts spearheaded by the UAE to develop renewables-based water-desalination plants, the objective being to reduce its carbon footprint as much as technically feasible.”
Under the circumstances, increased cooperation and alliances with experienced consultants, suppliers and advisors, who understand the particular nature of the business environment, will be of the essence, Dandachi said.