Alternative energy resources gaining importance slowly, but steadilyAlternative energy usage has been critical to sustaining the economic growth of the Middle East and North Africa region with a large-scale shift in its energy supplies becoming imperative in the face of rapidly rising local energy demand, which in itself cannot be met due to the imbalance created by oil and gas exports
The region has to significantly bolster its energy efficiency and begin to harness power from commercially viable, scalable and efficient alternative sources and technologies to transform itself from complete oil dependency to a balanced diet which prominently features alternative fuels, according to alternate asset management company, Al Masah Capital, in its latest report titled ‘Unlocking the potential of alternative energy in the MENA region’.
Alternative fuel development is gathering pace in the region in line with regional governments’ commitments to energy saving and fossil fuel consumption reduction. While the shift from fossil fuels to renewable energy will require the construction of wind energy, Concentrating Solar Power and other green installations on a vast scale, significantly altering the face of the region, the green energy mandates are bound to transform the region’s energy supply matrix in the near future.
"New energies including wind power, Concentrating Solar Power plants and biomass and environmentally clean technologies are a necessity for the region to keep pace with its new energy demand. This is the only way it can conserve its main lifeline, oil, for the long term," said Shailesh Dash, CEO & Member of the Board, Al Masah Capital.
He added that the MENA region’s huge investments in energy intensive industries, rapid infrastructural and real estate developments, growing population and water consumption had significantly augmented energy needs.
Total primary energy consumption in the Middle East increased at a CAGR of 5.3 per cent during 1999-2009, the second-highest growth rate globally, after that recorded by Asia-Pacific, over the same period.
The region recorded an average annual growth rate of 4 per cent in oil consumption during the past decade (1999-2009), higher than the 3.2 per cent registered during 1989-1999. Similarly, natural gas consumption increased at a CAGR of 6.6 per cent during 1999-2009 compared to 6 per cent for the period 1989-1999.
With oil contributing on average 50 per cent to the GCC’s total GDP, the region’s economic prosperity is linked to hydrocarbons. MENA countries own around 61 per cent of the world’s proven oil reserves and approximately 45 per cent of its proven natural gas reserves.
"However, with growing global energy demand and increasing domestic consumption, production rates are rising sharply, resulting in fast depletion of resources," Dash pointed out.
The R/P ratio for oil reserves in MENA declined from more than 110 years in 1989 to 85 in 2009, while the R/P ratio for natural gas reserves decreased from over 368 years in 1989 to around 187 in 2009.
Further, the MENA region meets 98 per cent of its primary energy needs through oil and gas.
"Abundant hydrocarbon resources and low costs have become the bane of the region, contributing to substantial energy consumption in the region over the years."
"Conservation of these resources is essential as they are finite and generate significant export revenue for the region, serving as a pillar of economic development. Hence, efforts are on to develop alternate energy sources to meet domestic energy consumption and conserve valuable energy reserves."
Dash said that although the current usage of alternative energy in the MENA region was minimal, significant alternative energy projects were underway. "Many of them are in the planning stages but these efforts will eventually bear fruit. The important thing is that this need is being recognized now rather than later when it might be too late."
Renewable energy contributed merely 3 per cent to the total electricity generation in the Middle East in 2007. TotalTotalLoading… renewable energy generation in MENA increased at a CAGR of 8.4 per cent during 2000-07, with Egypt and Iran in the vanguard of green energy usage.
The six Gulf Cooperation Council nations, major producers of oil and gas, were lagging behind in usage of renewable energy sources. "There was no production of renewable energy in these countries until 2008. However, several alternative energy projects are under development currently, while many are being considered."
In 2008, Egypt had the largest share (56.8 per cent) in total renewable energy generated in the MENA region, followed by Iran (18 per cent).
"Hydroelectricity is the only well-developed, non-fossil fuel form of electricity in MENA. Iran has the most developed hydroelectricity sources and generated 10 per cent of its electricity from hydropower in 2009."
Due to the geographic location of the MENA region, climatic conditions are conducive for the development of renewable energy sources, most notably concentrated solar energy and wind turbines. The vast desert is ideal for solar energy, while coast lines of the Mediterranean region and North Africa are most suited for wind energy.
MENA, with average daily sunlight exceeding 8.8 hours, low cloud covers, limited rainfall and abundant free land space, has optimal physical resources for the construction of large-scale Concentrating Solar Power plants.
According to the International Energy Agency (IEA), concentrated solar energy (CSP) plants in the region could cater to 100 times the combined electricity consumption of MENA and Europe!
"The biggest resource in the MENA region is solar irradiance with a potential to meet the total demand for electricity worldwide."
Based on climatic conditions and geographic location, Al Masah Capital said Egypt had the best physical resources to implement solar technologies in the MENA region followed by Oman, Saudi Arabia, Jordan and the United Arab Emirates.
In terms of current utilization, Morocco had the largest installed photovoltaic capacity in the region.
By digging deeper into the issue at hand, Al Masah’s research report sheds an important spotlight on a key dilemma facing this region. A dilemma for which a comprehensive solution is needed if there is to be further progress in the economic and social development of this region. For all the good that has been done so far, a dedicated alternative energy option is a necessity for the path to prosperity to continue.
