Dubai : Barack Obama might have been less than enthusiastic recently about installing new solar panels at the White House, but this has in no way deterred the US from committing a growing cache in alternate energy resources.
Whatever the outcome of the upcoming mid-term elections in the country, the present momentum to create renewable energy opportunities looks likely to have broad bipartisan support.
And US politicians are likely to keep to the straight and narrow when it comes to alternate energy — public anger and dismay over the havoc wrought by the oil spill in the Gulf of Mexico is too recent to have them think otherwise. In fact, investments attracted by non-fossil fuel initiatives has been on a high for the last two years. Surprisingly so, at that.
Even as the country was combating the downsizing of its economy and the job losses spawned by it, "more renewable energy capacity was installed than conventional fossil or nuclear power stations," according to a recent report by Bank Sarasin, the Swiss financial institution.
The report — ‘Renewable Energies" Evolving from a Niche to a Mass Market' — finds that the year-on-year increases were higher by 50 per cent in the US.
It was not a trend confined to the US. New capacity generated by renewable energy sources — including solar cells and modules, wind turbines, etc. — recorded a 60 per cent gain in Europe on a year-on-year basis. Emerging categories such as bio-fuels geo-thermal efforts within the renewable energy umbrella are getting their due as well.
The Bank Sarasin report reckons that a substantial 130 billion euros (Dh666.24 billion) was spent in such capacities worldwide, a 23 per cent gain over the 2008 numbers. What is particularly noteworthy is that all of this was taking place when governments and businesses were scrambling to save each dollar.
If renewable energy could attract this scale of investments in a year of recession, there's nothing to indicate it will not be the same when the global economy is feeling more sanguine.
Even in the Middle East, governments have taken the lead in setting the agenda on renewable energy. One need look no further than Abu Dhabi's Masdar City initiative, even if its scale has been trimmed down to be more aligned with the current economic clime.
"We must bear in mind that multi-faceted developments are not realised in a day," said Prabissh Thomas, managing director of PTL Solar, which manages the regional interests of Reliance Solar and Carmanah Technologies, among others.
"In fact, the very fact that it is a project structured the way it is — the "city", the power component, the research institute and the Clean Tech Fund is admirable. Solar energy players are carefully watching the development and will be a part of it sooner rather than later."
But the feeling persists that the region as a whole has not singularly warmed up to seeking alternate energy resources that tend to be more favourable towards the environment.
It may be a question of legacy, with many of these countries having channelled substantial funding towards boosting their fossil fuel reserves. They may be in no mood to develop other energy resources at this point in time.
But Thomas does not believe this is the case. "There are several developments in federal and city level regulations vis-a-vis renewable energy," he said. " Last year, the news that Irena will be headquartered in Masdar City was further reiteration of the fact that the government is serious about its intention of encouraging renewable energy projects.
"To raise support for hosting Irena, the UAE government committed $22 million in annual support through 2015. The Abu Dhabi Fund for Development has also offered $50 million in annual loans to finance renewable energy projects in developing countries."
But the feeling persists that costs can be an inhibitive factor. "Most alternative sources projects, especially solar and hydro, have a long gestation period and higher capital expenditure," said Rohit Chawdhry, head of equities and alternative investments at Bahrain Islamic Bank.
"But once such initiatives start, the generation capacity can be huge, though — initially — the cost of producing such electricity can be three times that produced by thermal or gas. Also, the combined cycle gas turbine power plants are the norm for the region as it is awash in natural gas, which is subsidised when supplied to the power plant relative to the market prices."
Other factors could weigh into the debate. There is the nuclear energy option, actively being pursued by the UAE. Being more advanced in its evolution, what this provides is a more or less off-the-shelf technology with some tweaks added at a later stage to make it compatible with the needs.
So, where's the incentive to seek out and develop other energy resources. Also, there are some such as biofuels which may not be sustainable in the Middle East context.
"It [biofuel development in the region] is at least a decade behind some of the other countries," said Chawdhry. "This low level of progress emanates from the limited presence of agriculture in the region.
"Its difficult to foresee a situation where this might improve in the region, as it remains a net sugar importer rather than an exporter.
"In fact, the whole world is not producing enough biofuels. At the peak of oil prices in 2008, the ethanol market could barely provide 500,000 barrels per day compared with 86 million barrels a day of crude. Quite clearly, the biofuel shortage remains not just in the region."
Primary economic driver
The Bank Sarasin report concurs in this dim view of biofuels' medium-term prospects. "On the one hand sustainability criteria imposed on first-generation bio-fuels are being tightened up in many countries, while on the other hand more environmentally-friendly technologies of the second- and third-generation are currently in a critical development phase, making it difficult to estimate their potential.
"In view of the limited availability of arable land and their doubtful environmental benefits, first-generation bio-fuels have limited potential as a fossil-fuel substitute, either now or in the future.
"Third-generation bio-fuels are a new alternative. However, technologically speaking the manufacturing processes are still in their infancy, and the environmental impact have not been sufficiently investigated. Typical problems here include the use of energy-intensive fertilisers, high water consumption and land use for greenhouses or water tanks."
What further distorts the situation is that the second-generation biofuel technology is even now in the pilot phase, and it may be 2012 before it hits its commercial stride. Further advances such as sourcing it from algae and making it commercially viable are still some years away.
"With the rising oil price and falling prices for bio-fuels, demand by refineries has grown," said the Bank Sarasin report. "However, as long as production costs do not fall below those of fossil fuels, government directives and subsidy programmes will remain the primary economic driver.
"On the whole, though, bio-fuels are currently fraught with too many uncertainties: apart from question marks over the technical, economic and environmental viability of future bio-fuels, new competition is emerging due to the development of electric vehicles. Moreover, the raw material and product prices on which the profitability of bio-fuels depends are subject to large fluctuations."
At a time when the emphasis is on the now, anything that smacks remotely of the long-term might seem like a steep hurdle. Can governments and businesses alike summon the energy to surmount it? On this would rest the future for alternate energy.
Would you consider switching to this fuel? Do you think bio-fuel will help reduce the UAE’s carbon footprint? What more can be done to reduce the world’s carbon footprint?