A new thread is weaving its way into the media’s energy coverage. In addition to the oil and gas market reporting, stories about Gulf states’ energy consumption and the need to better manage our fossil fuel resources are growing in prominence.
As these issues move from the realm of government policy into the arena of public debate, they bring with them important questions about our desire for clean, affordable energy. Clean energy is typically shorthand for renewable energy, power generated without fossil or nuclear fuels. Renewable energy has the advantage of being both free of the greenhouse gas emissions common to fossil fuels, and — as the name suggests — comes from what is in practical terms infinite sources.
In the Gulf states, solar is the most common form of renewable energy, although attention is also being given to wind. The total value of renewables projects and master plans, either completed or under execution, in the GCC states is $4.5 billion (Dh16.52 billion).
The downside, a challenge being wrestled with across the world, is the economics of incorporating renewable generation infrastructure into energy portfolios geared towards fossil fuels.
Renewable energy’s essentially infinite nature is in some ways of greater significance than the environmental benefits. One of the biggest challenges facing Gulf states is meeting businesses’ and people’s need for power in a manner that will not impede the generation of revenues through oil and gas exports. In essence this means reducing domestic oil and gas consumption, and renewables offer a way of achieving this.
The uptake of renewables is being accelerated, but we need to get everyone, producers and users, talking about this as a survival issue. We have to consider renewables from a holistic perspective. It is no longer enough to talk about a single power plant, city or country; we need to think about the whole region. The first step is always the most difficult, but it will get easier as the economics improve and people become better educated.
Another element of the region’s energy debate is, literally, closer to home. GCC households have the highest energy consumption in the world. Domestic consumption accounts for 47 per cent of the energy generated in the GCC states, compared to a global average of 25 per cent, according to a recent report by Deloitte. So reducing domestic energy consumption is another way of managing the pressure on our oil and gas reserves. Environmental benefits would also be reaped.
Across the region, governments are leading initiatives designed to reduce domestic energy consumption. These range from practical measures — such as switching off unnecessary lights and lowering slightly air-conditioning controls — to legislative steps to improve the insulation of new buildings.
Any discussion about reducing energy consumption leads inevitably to the thorny issue of affordability. Gulf state nationals typically enjoy highly subsidised energy supplies. Many view energy as part of their national wealth, and feel they have a right to a cheap supply.
This means, however, that there is no link in people’s minds between the cost to the government of ensuring energy supplies and the amount of energy they use; and while demand grows so does the cost of the energy infrastructure required to meet it.
The region’s imperative to cut domestic oil and gas consumption, however, is leading many governments to reassess subsidies, for both domestic and commercial users. Earlier in the year, the UAE Minister of Energy, Suhail Al Mazroui, warned that energy subsidies may stop unless a way to curb usage is found.
GCC governments’ investment in renewables is a clear signal of a creative strategy to help reduce fossil fuel consumption. This alone, however, will be insufficient. As a result, adjusting subsidies to reflect more accurately the cost of delivering reliable energy supplies also has a role to play in helping achieve better management of oil and gas reserves.
Any subsidy changes should be gradual, and include safeguards to ensure the most vulnerable in society will be protected. It is also worth remembering that by adopting advice promoted by governments on how to reduce household energy consumption, we are all empowered to offset subsidy changes’ financial effects. At the same time we will be making a positive contribution to our environment.
— The writer is Managing Director at Black & Veatch, GCC.
