Follow me on Twitter @DrSchwark.
On a recent trip to the United Arab Emirates, I was impressed with the level of investment in infrastructure and the pace of economic development and modernization. I was also shocked, however, how little energy efficiency and conversation seemed to factor in. The way of life in Dubai and Abu Dhabi (the two emirates I visited) runs on cheap energy just as much as the economic transformation of the UAE is fuelled by oil wealth. The fact that this source of income will at some point run out clearly informa the strategic decisions the leadership in both Dubai and Abu Dhabi have made. While Dubai is striving to be a global hub for the service industries from banking and consulting to communications, Abu Dhabi seems committed to retain its leadership in energy.
Today, the United Arab Emirates occupies a prominent place in the global energy system. As one of the world’s most significant oil and gas producers, the UAE holds the seventh-largest proved reserves of oil as well as the seventh-largest proved reserves of natural gas. While some argue this locks the county into the hydrocarbon economy, the designation of Abu Dhabi as the home for the International Renewable Energy Agency (IRENA), and the UAE’s plan to build the world’s first carbon neutral city, Masdar City, prove the country’s commitment to renewable energy. To sustain the United Arab Emirates’ global energy leadership, however, this strategy needs to evolve and to be better aligned with the global transition towards low-carbon energy.
What are the driving factors in this transition? I see four factors relevant for the UAE: Firstly, because it burns cleaner and is more flexible as a fuel for power plants than other fossil fuels, natural gas will become the dominant fossil fuel. While natural gas will not fully replace oil, we will see more natural gas used in transportation. Secondly, emission of short lived greenhouse gases such as methane will see enhanced regulation with the goal of reducing these emissions significantly, if not completely. A particular focus will be on leaks from oil and gas drilling. Thirdly, energy efficiency will take on greater urgency. The world needs to use its energy better and reduce the wasteful use of its scarce energy resources. Finally, renewable energy sources will receive more support through direct or indirect subsidies.
How does this create a leadership opportunity for the United Arab Emirates? Firstly, the UAE is already refocusing on natural gas, a shift that for instance is reflected in this year’s Abu Dhabi International Petroleum Exhibition and Conference. What is currently underrepresented, however, is the push to use natural gas in the transport sector, a transition much discussed in the U.S. and Europe.
Secondly, the United Arab Emirates should strive for environmental excellence in oil and gas production, even aiming to replace Norway as the world leader in the elimination of unintended oil and gas production-related emissions of greenhouse gases.
Thirdly, the necessary upgrade of electricity grids within the UAE provides the opportunity to take a big leap forward with the ‘smart grid’ technology that allows more intelligent demand management and the more efficient use of power generating capacity. This should be complemented with incentives to upgrade household appliances and particularly air conditioners to the latest efficiency standards. With both policies combined, the UAE could become the regional energy efficiency leader.
Fourth and finally, the most advanced Emirates, Abu Dhabi and Dubai, should evolve their existing renewable energy targets and kick-start the regional market with feed-in-tariffs for residential and small commercial solar PV systems. The sun as a resource is abundant, solar PV system prices have all but collapsed, and the German example shows that feed-in-tariffs unlock significant private investment when they are backed by a credible sovereign. More electricity from solar energy will help supply electricity in times of peak demand during the day, and an upgraded power grid should allow for the easy integration of numerous decentralized power sources.
The future energy transition provides the United Arab Emirates with the opportunity to assert its role as a global energy leader. If proactive, the UAE can truly shape the global energy agenda for the twenty-first century.