Whether it’s the Iranian coup d'état of 1953, Saddam Hussein’s invasion of Kuwait in the first Gulf War, or the enormous riches accrued today by Saudi Princes, the oil industry has often had a negative and destabilising effect on the political and economic development of the Middle East.
Today, with global temperatures at their highest for some 115,000 years, fossil fuel extraction and emissions arguably pose an even greater threat to the region than ever before.
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“We know from research that the impact of climate change in the Middle East will be extremely strong,” says Christian Breyer, professor of solar economy at Lappeenranta University of Technology (LUT) in Finland. “In just a few decades it might not be possible to survive outside in the summer time at all.”
As countries around the world begin to recognise the dangers of global warming, demand for oil is also likely to fall, posing yet another threat to the legitimacy of oil-dependent MENA governments.
“Prices will decline in the future due to peak demand,” says Breyer. “The majority of oil production in the world is consumed in the transport sector but more or less all cars in the world can be fully electrified. Today electric vehicles are seeing growth rates of around 70% and higher globally. In a few years they will be even lower in cost and this will induce a very, very sharp decline in oil demand.”
Changing habits
Recognising these problems, over the years some MENA countries have begun to change their energy consumption habits. Morocco, a net oil importer, decided to focus on domestic, renewable resources around ten years ago, for example, when oil prices hit record highs of over $147 per barrel.
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By GlobalData“A lot of US dollars were just burnt by the importing of fossil fuels so they decided the best thing to do was ramp up wind and solar,” says Breyer.
Today, others are following suit. “Most have realised they have to adapt in one way or another,” Breyer says. “This explains the IPO of Saudi Aramco: it is the most valuable asset of Saudi Arabia but now they see that it’s the right time to cash out. Many countries are also interested in the business model of Norway. What they produce in oil and gas in the North Sea they fully export and then at home they have a clean system, with a 100% renewable power sector. The more open-minded MENA countries really see the power of this strategy.”
While devastating global warming already seems inevitable, according to Breyer, a fully renewable electricity system in the Middle East is not only possible, it’s financially beneficial.
A recent report from a team of researchers at LUT lead by Breyer, demonstrates that major oil-producing countries in the MENA region could turn renewable energy resources into potentially lucrative business opportunities, and – in the case of Iran – go fully renewable by as earlier as 2030.
“In our research we want to show how a world fully based on renewable energy could work,” Breyer says. “The core target is to show that with available resources and available technologies, energy consumption could transition to a future fully based on renewables between the year 2040 and 2050 if actions are started today.”
According to the study, the cost of a fully renewable electricity system would be around €40-€60 euros per MWhour, or even lower if different energy resources are connected to a super grid that can transmit high volumes of electricity across longer distances.
“Renewable energy will actually lower cost,” says Breyer. “And if these countries can sell oil in the world market and then invest in solar or wind capacity their wealth could be even higher.”
Being realistic
How does the study actually work though? “First of all we take the resources of the countries into account because solar and wind are a bit different,” Breyer explains. “Secondly we take the different technologies into account which are available as of today; that includes a broad set of maybe 30 different technologies. Thirdly we have as realistic as possible cost assumptions from now until 2050. For today those cost assumptions are simple but the more we move into the future, the more uncertainty there is.”
“After that we need to understand demand and how it develops year-by-year. We use a simple approach here of taking numbers from the International Energy Agency. Next we have to know, over a year, how that demand is structured. In the summer, for example, when all of the air conditioning is running during the day time, more energy is needed than during the evening. Then the last step is to describe the energy transition from today to 2050. In 2050 the model is forced to reach a 100% renewable energy system.”
Of course, that last step won’t be easy. In the case of Iran transforming the existing system into a fully renewable one “requires 49GW of solar photovoltaics, 77GW of wind power and 21GW of hydropower”, according to the study, and adding that “most of the hydropower already exists, but the solar and wind capacities would require new investments.
“Wind power can be installed in many parts of the country and solar systems in all parts of Iran for an attractive cost. Both technologies can be easily added to the existing energy infrastructure, which is mainly based on flexible fossil natural gas fired power plants plus hydropower.”
If Iran and other governments in the Middle East put these steps into place the benefits are hard to overstate. Breyer says: “In the past several wars in the region have involved other powers from outside seeking oil.Maybe with less oil and gas this could be a more peaceful region – though this is something we won’t see until decades in the future.
