Countries with fossil fuel-dependent economies are making a marked shift towards renewable energy. See Arab loan to fund renewables. Substantial financial investments in solar and wind projects throughout the Middle East and North Africa have gained global recognition as the hydrocarbon market looks to bolster alternative economies.
Despite the recent move to renewable energy, the Arab nations currently invest very little in comparison to the rest of the world. The United States and Europe have invested over $40 billion, respectively. China’s investments exceed $126.6 billion. In comparison, the Middle East and Africa have invested only $10 billion in renewable projects and infrastructure.
In addition to a heightened awareness of the environmental impact of the fossil fuel industry, the main drivers for change are economic. Solar and wind energy can now compete with conventional energy sources due to falling prices. Advances in technology, such as marine desalination, also contribute to the evolving industry.
Experts project global oil consumption to peak in the next 20 years. Motivated by the prospect of economic decline, oil and gas companies in Arab nations are analyzing the growth of the non-oil industry within the energy sector. An increase in domestic energy consumption is also driving the exploration of economical alternatives to the fossil fuel industry. In Saudi Arabia, the demand for domestic energy has increased by 60% in the last 10 years.
Diversification Within the Energy Industry
The potential success of a renewable energy economy hinges on a comprehensive plan that focuses on diversification within the energy economy. However, the increased investment in renewable projects has not resulted in a decrease in oil production. According to OPEC figures, the oil and gas sector in Saudi Arabia accounts for 50% of the country’s GDP. Thirty percent of the United Arab Emirates’ economy comes from gas and oil, and the industry accounts for 92% of Kuwait’s export revenues. These figures demonstrate that while Arab nations are investing in renewable energy, the transition from an oil-rich economy to a new alternative will not be a linear one.
With a significant dependence on the global economy, the oil and gas industries are paying close attention to new policies, such as a potential carbon tax, and exploring new approaches to a rapidly changing global economy and climate. Investing in renewable energy does not necessarily equal a slowing down of the fossil fuel market. However, it does signal a decisive move toward changing the way people consume energy domestically. If countries can harness alternative energy at home, they can export more oil and gas.
Companies are exploring and implementing various strategies to see how best to incorporate renewable energy domestically. The company responsible for distributing the majority of gas in Egypt, the Middle East and North Africa, TAQA Arabia, is one example. The company is looking into a system that promotes the use of solar energy during the day, while still relying on traditional energy sources at night.
Investing in a Brighter Future
Geography plays an outsized role in the Arab nations’ decision to invest in renewable energy. Oil economy-dependent countries in northern regions, such as Russia and Canada, will not feel the effects of climate change with the same immediacy as the Middle East. That reality leaves the region in a more vulnerable situation than their competitors, especially as the market faces other challenges in the forthcoming years.
The United Arab Emirates, Saudi Arabia, Egypt and Morocco have the greatest investments in renewable energy. One of the main incentives to move toward an economy with a strong reliance on renewable energy is the creation of new jobs. Diversification both within the energy industry and other disciplines, such as manufacturing or shipping, would increase stability as countries transition away from a fossil-fuel-dominated economy. For example, Morocco has created over 13,000 new jobs by building a market for solar water heaters.
There are also several government-supported projects looking to support renewable energy. For example, the Saudi Industrial Development Fund launched a project titled the Renewable Energy Financing Package, designed to aid in the development and growth of non-oil sectors. It will support not only the potential job market within the renewable energy sector, but also aid complementary technology, such as water storage, that will benefit from the diversity of projects.
One example of corresponding technology in the realm of renewable energy is sustainable water systems, such as desalination through reverse osmosis. Water is an integral piece of economic security for both the fossil fuel and renewable energy industry. Future investments in sustainable water infrastructure are essential to the creation and longevity of renewable systems.
The fossil fuel industry is paying attention to potential policies such as a carbon tax, and are adjusting based on substantial changes to the worldwide oil market in the upcoming years. There has been a noticeable change in tone when oil and gas companies talk about climate change and renewable energy. Particularly throughout the Middle East and North Africa, there is recent transparency regarding non-oil alternatives.
With Aramco now mentioning climate change and looking to lower their greenhouse gas emissions and Petroleum Development Oman’s investment in new projects, the future of renewable energy throughout the region is bright. To establish future economic stability, investing in renewables instead of oil will diversify bolster the economy and lead to more jobs within the energy sector.
Emily covers topics in sustainability and renewable energy, and you can read her latest work on her blog, Conservation Folks.