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Environmental facts and economic realities

Najib Saab, Issue 239, February 2018.

When the eighth session of the Assembly of International Renewable Energy Agency (IRENA) took place in Abu Dhabi last month, some were expecting a decline in clean energy investments, in view of President Donald Trump's emerging policies. In fact, it was exactly the opposite. Renewable energy proved to be the corner stone in the energy mix, and those who defy the rules of the new game will only put themselves out of the market.

The Arab region is not far from these developments, as was evident in the Abu Dhabi meetings. Electricity production from renewable energy will quadruple in less than 20 years to more than 20 percent, yet gas will remain the main source of electricity during that period. Saudi Arabia will see the largest renewable energy projects in the coming years, starting this year with the launch of eight projects exceeding 4 gigawatts. The winning companies will cover the funding in full, with the government committing to buying the electricity at a fixed price for a period of 25 years. As competition intensifies and solar panel prices continue to fall, Saudi Arabia is expected to attract the world's lowest price at 2.3 dollar/cents per kilowatt-hour. This is the cheapest price so far to generate electricity from any source of energy. Abu Dhabi Future Energy Company (Masdar) continues to invest in renewable energy locally and globally, while the private sector is rushing into solar and wind generation projects in countries that have developed laws that encourage and protect investments, such as Morocco and Jordan.

In conjunction with the IRENA meetings, most international car companies announced programs to convert a large part of their production to electric engines. French company Peugeot-Citroën will offer an electric option for all its models by 2025, following a similar announcement from Swedish Volvo that set 2020 as the date for the transformation. Ford is investing $11 billion to develop 40 models of hybrid and electric cars before 2022. Whereas General Motors is working on developing cheap and profitable electric cars by 2021, trying to catch up with Tesla, the leader in electric technology in the US auto market. Certainly, the low cost of electricity production from clean renewable energies was a main drive in electric cars boom, with some cities, such as Paris and London, announcing a ban on cars that run on fuel and gas within a period of 10 to 20 years.

With these accelerating developments, the number of electric cars in the world is expected to rise from 3 million today to 300 million vehicles over 15 years, which constitutes around 15 percent of the world's automotive fleet. However, the oil branch of the UAE company Mubadala does not rule out a more extreme scenario if countries impose an early ban on regular cars with internal combustion engines to preserve health and stop climate change causing carbon emissions. In this case, the use of petroleum in transportation can be dangerously reduced before 2040. That is why oil producing countries are rushing to make the most of the current income, by rapidly diversifying their economies in anticipation of a radical change, which, by all indications, is inevitably coming within 20 to 30 years.

According to Bloomberg, investments in renewable energy in 2017 exceeded the threshold of $300 billion. Even if the investment increase did not exceed 3 percent from 2016, the actual increase in electricity production is much higher. With solar and wind prices falling, every dollar invested today yields more electricity than the previous year.

On a global level, Bloomberg expects 2018 solar power installations at 107 gigawatts, up from 98 gigawatts a year ago, with China remaining in the lead with about half of the total. Wind power production is rising from 56 gigawatts in 2017 to 59 gigawatts this year. As battery prices continue to fall and their efficiency doubles, the cost of storing electricity will fall to unprecedented levels, which will also reflect a decline in the prices of electric vehicles. Despite Trump's measures to support coal, it will continue to decline, not only for environmental reasons, but mainly because it is no longer economically feasible.

The future of energy is not only governed by the requirements of the environment and climate, but also by economic realities. And those are in favor of renewable.


Arab Environment in 10 Years
ARAB ENVIRONMENT IN 10 YEARS crowns a decade of the series of annual reports produced by the Arab Forum for Environment and Development (AFED) on the state of Arab environment. It tracks and analyzes changes focusing on policies and governance, including level of response and engagement in international environmental treaties. It also highlights developments in six selected priority areas, namely water, energy, air, food, green economy and environmental scientific research.
Environmental Agenda
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