Why The Middle East Will Lead The World In Developing Sustainable Energy

Each year, the World Energy Council, with consulting firm Oliver Wyman, assesses which of the world’s energy systems are closest to providing sustainable energy, defined as energy that is affordable, secure and environmentally-sound.

The “World Energy Trilemma” report released in November at the United Nations Climate Change Conference in Doha shows that the energy systems of the UAE, Qatar, Saudi Arabia and Kuwait lag behind nearly half of those in the rest of the world in their ability to provide sustainable energy (see table). But it also demonstrates why the Middle East may soon emerge as the world leader in this area: the region is adopting many of the practical and interconnected steps required to achieve sustainable energy faster than many other nations can.

A growing global energy gap is emerging as a threat to economic growth and social stability. If the supply of sustainable energy continues to lag behind rapidly rising demand worldwide, billions of people could be forced to live without reliable electricity. Economic prosperity could also be put in jeopardy. Already, 1.3bn people live without access to electricity. This number will rise significantly, since demand is expected to jump by more than 30% over the next two decades.

This energy mismatch is especially acute in the Middle East. Corporate and residential demand for energy has been growing faster than the region’s gross domestic product. Left unaddressed, this rapidly rising demand threatens to harm these countries’ competitiveness. So it is not surprising that many of the region’s leaders have rightly identified energy sustainability as a priority. Doha Bank Group’s CEO R Seetharaman, recently said that GCC countries should have enough solar and wind potential to generate electricity to meet all of their energy needs. Shaikh Muhammad bin Rashid Al Maktum, Dubai’s ruler and prime minister of the UAE, went so far as to say at a recent World Energy Forum held in Dubai that he hopes his country will be a “role model” for sustainable energy.

These goals are not far-fetched. Drawing upon interviews with 40 top energy executives around the world, the World Energy Trilemma report argues that countries must develop coherent and long-term policies that respond to energy needs holistically to truly obtain sustainable energy systems. Many nations have contradictory and ad hoc policies that are developed in ‘silos’ and shift in response to the results of elections. By contrast, most governments in the Middle East have set out aggressive plans for reaching sustainable energy goals over the next eight to 18 years. These plans not only take into account their energy departments’ aspirations, but also their plans for industrial and educational progress.

Middle Eastern nations have also been adept at introducing potentially unpopular but critical measures to make consumers and businesses more aware of the importance of conserving energy. Dubai is one of a handful of places in the world that has managed to implement consumption-based electricity and water tariffs to promote efficient consumption of electricity and water. (Others are Toronto, California and Japan.)

Another area where the region has an advantage is in its ability to encourage long-term private investments in energy infrastructure and technologies. Huge investments are required to improve access to energy worldwide, develop new energy technologies and update aging infrastructure. But most cash-strapped governments have limited funds to support a shift to a low-carbon future.

The Middle East has the financial resources to take on ambitious projects and is much less burdened by bureaucratic red tape than many countries, once a decision has been taken. Recently, Saudi Arabia’s King ‘Abd Allah City for Atomic and Renewable Energy (KACARE) announced plans to invest $109bn to create a solar industry capable of generating one third of the nation’s peak power demand by 2032. Abu Dhabi is investing billions of dollars to construct the world’s first zero-carbon city.

The Middle East is well positioned to take the lead in the global sustainable energy race that is about to reshape the world’s energy landscape. Most of the region’s countries improved their ability to provide sustainable energy last year as some of their new initiatives began to take hold, according to World Energy Council/Oliver Wyman calculations. This is just the beginning.

*Mark Robson is a Dubai-based partner at Oliver Wyman. He is the partner who led the development of The World Energy Trilemma Report.