In just four months, 2011 has proved a memorable year for the Middle East. But while media attention has focused on the unfolding political changes, a more subtle shift is taking place in the region’s energy sector.
Historically, the Middle East has been focused on the extraction and exportation of fossil fuels. But as oil and gas reservoirs start to show their age and as new fields become harder and more expensive to develop, the region is eyeing alternative forms of energy to satisfy its growing energy needs. The obvious choice so far has been nuclear power.
Nuclear is branded as the most secure form of energy, requiring minimal fuel and minimal cost for 40-60 years. From an environmental point of view, nuclear is also the best choice, generating far less CO2 emissions than conventional fossil fuels. While renewable energy such solar and wind are equally environmentally friendly they have not been as reliable.
As a result, governments across the Arab world have been tripping over each other to adopt nuclear power programs. Even Saudi Arabia, the custodian of the world’s largest oil reserves recently made headlines when it declared that nuclear power is “a must”. The revolving doors at hotels in Riyadh have since been busy welcoming senior executives from foreign nuclear companies armed with shiny shoes and even shinier sales pitches.
Earlier this year, those revolving doors came to an abrupt stop. The dramatic explosions at Japan’s Fukushima nuclear plant and the ongoing uncertainty surrounding its safe shutdown has led many people in this region to ask: is nuclear power worth the risk?
It’s true that historically nuclear power has been the least expensive and most reliable form of clean energy. But things are changing.
In the past 10 years, there has been a dramatic shift in the cost of solar power, with prices dropping by some 50 percent. Industry experts expect solar costs to continue dropping in the coming decade as the industry continues to come of age.
On the other hand, the cost of nuclear power is set to rise. After the 1979 Three Mile Island accident in the US, construction costs for nuclear reactors rose 95 percent. After the 1986 Chernobyl disaster in Ukraine, construction costs rose another 89 percent. The construction costs soared because of design changes required to address safety concerns. The same price hike is likely to take place following the Fukushima incident. As the former head of the International Atomic Energy Agency, Mohamed El Baradei recently said: “In the past we had to plan for the unexpected. Now, we have to plan for the impossible.”
Planning for the impossible will not be cheap. Nor will the clean-up costs should something go wrong. Compensation claims from the Fukushima explosions are expected to exceed $100bn. With liabilities like this, investors will think twice before committing to nuclear projects.
In terms of the potential for solar power, no other region is as endowed as the Middle East. In fact, if we were to sprinkle Saudi Arabia’s Rub Al Khali desert (Empty Quarters) with solar panels, we would produce enough energy to power two earths.
And of course there’s the safety issue. No matter how small the risk of another Fukushima accident may be, it can never be excluded. Even if nothing goes wrong, there remain questions about the sustainability of the radioactive waste that gets buried underground. In comparison, solar power is completely recyclable and does produce any bi-products that could harm us or our planet.
This new energy equation has shifted the spotlight to solar power. A recent survey by the Swiss bank Sarasin believes that one third of new and old nuclear capacity will be replaced globally by renewable plants with an overall capacity of 500 Gigawatt. Moreover, the oil giant Total’s recent majority-stake acquisition of SunPower at a cost of a $1.4bn is further evidence that the smart money is now on solar.
In Majles’ across the region there is now more and more talk about solar power. The UAE has led the way with the creation of Masdar and its official plan to deploy some 1,500MW of solar power by 2020. Saudi Arabia, never to be outdone, recently came out and announced plans to install some 18,000MW of solar power over the next 20 years. The momentum is rising. All that is missing now is an over-arching regulatory framework and an incentive structure to give life to the region’s nascent solar industry. The events in Japan will no doubt serve as a catalyst and help lay the foundation for policies that will allow this region to make far better use of its most abundant form of energy: the sun.
2011 will be remembered not only as the dawn of a new political era in the Middle East but also the dawn of a new energy era.
(Vahid Fotuhi is the chairman of the Emirates Solar Industry Association. The opinions expressed are his own.)
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