A farewell to oil?

Bastian Fischer discusses the importance of renewables

The 10MW PV plant at Masdar City.
The 10MW PV plant at Masdar City.

Bastian Fischer, Vice President of industry strategy, Oracle Utilities, discusses the importance of renewables in diversifying Middle Eastern utilities away from a dependence on oil

One of the most pressing energy challenges facing the Middle East over the next few decades is its rapidly growing population, which is causing the market for energy to increase by 82 per cent from 2007 to 2035.

Governments are currently meeting this increased demand by using large supplies of oil for domestic energy generation. This is especially true as Middle Eastern countries look to grow and develop their economies in order to support continued urbanisation and reliance on digital technology.

The use of oil to meet rising energy demand is discussed in research conducted by the US Energy Information Administration, which highlighted that oil consumption per capita is over 50 per cent higher in Saudi Arabia than the US.

This trend is spurring many countries in the region to invest in clean energy, which also allows them to safeguard and diversify their export revenues. There are clear signs that a shift towards renewable sources is gradually taking place.

For example, investment in the renewable energy sector grew globally by 30 per cent to $211bn in 2010, with the Middle East & Africa increasing investment the most rapidly (up 104 per cent in 2010).

Although the Middle East boasts one of the richest oil reserves in the world; the ability to diversify its energy sources and increase energy efficiency requires significant investment in a new transmission and distribution grid, more trained staff, as well as smarter thinking about the supply and demand of current energy sources.

Renewable energy sources, such as wind and solar have great development potential in the Middle East and their subsequent integration into the energy grid have a critical role to play in diversifying the regions energy sources.

The motivation to implement renewable energy sources into the power network is not only fuelled by the need to meet increased demand.

Ecofys, a renewable energy consultancy, predicts that if 100 per cent of the world’s energy demands are met by renewable sources by 2050, this would cut energy demand by 15 per cent over the next four decades and deliver savings of nearly €4 trillion compared to a ‘business-as-usual’ scenario.

The rising price and growing demand for oil means depleting reserves in the Middle East are exacerbated by the region’s own growing energy needs. Saudi Arabia now consumes almost 130,000 barrels of oil per day for domestic power generation, almost double the amount of a decade ago.

This costs the kingdom $6.5bn a year in lost exports. According to Ali Saleh Al-Barrak, chief executive officer of Saudi Electricity Company, there has been an increasing demand for electric power at the rate of eight per cent per year in Saudi Arabia.

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Mr Al-Barrack also claims that 55 per cent of the utilities’ energy is consumed by domestic use, and consumption per capita has doubled over the last 15 years.

It is clear that the need to increase the use of renewable energy sources is strongly motivated by the chance to establish a strong future economy. Countries that achieve this will become less reliant on oil for domestic power generation and be able to export more to other countries.

Many countries in the Middle East are already taking positive steps to increase their use of renewable sources, showing that even oil rich regions understand the need to promote significant growth in renewables over the next two decades and beyond.

For example, Jordan intends to source 10 per cent of its energy from renewable sources by 2020 and Kuwait aims for a more modest five per cent goal. Much of the region is ideally suited to solar energy with large areas of desert and reliable weather conditions.

In fact, a solar farm of 180 square kilometres, or one per cent of the country’s territory, could supply all of Kuwait’s energy needs. Egypt built its first 140MW solar thermal plant last year and a second $700m plant will come online in 2017.

There is also growing interest in developing smart energy systems and technology. Ali Saleh Al-Barrak asserts that the Saudi Electricity Company is looking to increase energy preservation by giving consumers access to technologies such as smart meters, to encourage better energy use.

Over the next few years the utility is planning to invest $40bn in generation expansion and $24bn for expanding distribution, including additional investment in making its energy system more intelligent and smart.

One of the most productive and reliable sources of renewable energy is solar power. Desertec, a foundation responsible for increasing the use of solar energy, calls for the establishment of a network of concentrated solar-thermal power plants throughout the Middle East and North Africa to usher in a new era of energy exports.

The 40-year, €400bn proposal could provide Europe with 15 per cent of its energy requirements. The desert regions of the Middle East have great potential for solar and wind power.

In the recently published Future of Energy report by Oracle Utilities, Dr Gerry Wolff of Desertec-UK, put the potential of solar power into perspective by stating that ‘a small fraction of the world’s deserts could generate electricity equivalent to the world’s total energy consumption – although it would be prudent to combine desert power with other renewables in other parts of the world’.

As technology advances, the cost of renewables will start coming down and subsidies for traditional sources of power will be progressively withdrawn. It is possible that within 10 years the commercial balance and future research in new energy sources will shift increasingly in favour of renewables.

In order to achieve this transformation, we must develop and implement information rich smart grids that are capable of integrating clean technologies and are able to automatically balance power supply and demand in the distribution grid.

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The smart grid is one of the most important measures in helping diversify the Middle East’s energy sources, because it can help achieve goals without changing lifestyles, and sometimes with relatively small investments.

Using ICT also creates a win-win situation where it is possible to reduce the use of carbon based fuel, reduce emissions, stimulate economic growth, jobs and innovation, and save money. If implemented correctly, the smart grid will transform the energy landscape whilst creating jobs and economic growth in the Middle East.

Smart grid technologies also have a key role to play in the distribution of renewable energy sources within the grid. Instead of being concentrated in a central location, such as a power plant, renewable sources are often distributed across many locations and the smart grid will enable the even distribution of these clean sources due to the interconnectivity delivered.

This interconnectivity will help address a common criticism of renewable energy, that due to unpredictable weather patterns it is unreliable.

Greater interconnection, such as switching to daytime solar in power or night-time wind, will increase a network’s ability to accommodate variable renewables, helping to overcome this challenge. This will particularly favour countries such as Saudi Arabia and Egypt which have large stretches of coastline and desserts that are extremely hot by day, but can be freezing at night.

The smart grid will also see utility companies having to manage a vast amount more data than they do currently due to its ability to provide near real-time monitoring of the power network.

In fact a recent survey by Lux Research revealed that the increase in the quantity of data that smart grids are expected to produce could see utility companies having to manage up to 900 per cent more data by 2020.

While this obviously presents a challenge which utility companies will need to overcome, it will help to deliver a more complete consumer profile to utilities, helping them better manage the integration of renewable energies for periods of peak and low demand into the grid, which will help conserve energy further. As well, this deeper customer insight will enable utility companies to better differentiate their offerings from competitors.

Technology has a critical role to play in increasing the Middle East’s use of renewable energy and improving energy efficiency in the region. The significant environmental and economic benefits, delivered by the adoption of clean energy are ones which governments simply cannot afford to miss out on.

The capabilities delivered by the smart grid regarding the use of renewable energy are vital for the adoption of clean energy sources.

By implementing a smart grid infrastructure, capable of effectively integrating and distributing many renewable energy sources and improving energy efficiency, the Middle East can go a long way to diversify its energy usage and supplement revenues from oil exportation.

The Middle East has great potential and a wealth of resources to completely restructure its energy network and dependence on hydrocarbons. However, it is imperative that governments and utilities continue to drive investment in renewable energy and rolling out the smart grid, so that the region can enjoy a successful use of renewable energies to provide power to people for generations to com


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