The oil price slump below $30 barrel is spurring some of the world’s biggest oil exporters to curb domestic consumption of fossil fuels and invest in wind and solar power, according to government officials meeting in Abu Dhabi.
A month after the historic climate agreement in Paris, Saudi Arabia, Russia, Iran, Kuwait, the United Arab Emirates and other oil exporters are in the midst of overhauling domestic energy policies and seeking alternatives to oil and gas for electricity.
The main motive is not reducing greenhouse gas emissions, but cutting back on domestic energy demand that is taking up a rising share of production. Oil exporters would rather sell their fossil fuels abroad than burn them at home, government officials attending meetings of the International Renewable Energy Agency (Irena) said.
Since oil prices began their precipitous slide, Saudi Arabia, Iran, Kuwait, the UAE and other big oil producers have cut electricity and water subsidies, imposed energy conservation measures, and encouraged homeowners to install solar panels in an effort to cut back on domestic consumption.
Speaking on the sidelines of Irena’s annual meetings and Abu Dhabi’s sustainability week, officials said the slide in prices offered further incentive to get off oil – at least as a source of electricity.
“It is just common sense in my opinion,” said Saad Salem Al Jandel, a research scientist at the Kuwait Institute for Scientific Research and a delegate to the Irena meeting.
“We are spending so much, something like $8bn (£5.6bn) to $10bn on fuel and power stations, so we want to replace part of it with renewables, and we can also do better with energy conservation and energy efficiency.”
Al Jandel went on: “Instead of using oil in power generation we might sell it and get hard currency.”
Iranian officials have arrived at a similar conclusion. With the lifting of sanctions, Iran was looking to free up more oil and gas for export by cutting domestic demand, Jafar Mohammadnejad Sigaroudi, deputy planning and development in Iran’s ministry of energy, told the Guardian.
“We hope to use our gas for other uses, such as exporting,” he said. Draft regulations, due to be adopted by the Iranian parliament in the coming weeks, set a new energy conservation target and realigned prices for wind and solar energy, imposing a social cost for carbon that will help bring the cost of renewables almost at a par with fossil fuels – even with oil below $30 a barrel.
“Renewables can be the same as fossil fuel because the price of oil is decreasing but the cost of transmission is very high,” he said.
The initiatives confound the conventional wisdom that low oil prices discourage the transition to renewable energy, a view reiterated by the head of the International Energy Agency in Davos on Wednesday, but are born of harsh necessity.
Since 2000, energy demand among the Middle Eastern oil producers has grown at 5% a year, outstripping China and India. Saudi Arabia, the world’s biggest oil exporter, is now the seventh largest consumer of fossil fuels, according to a report from Irena published on Wednesday.
The United Nations agency, which was founded to promote renewable energy and is based in Abu Dhabi, warned the rise in domestic energy risked eating into exports.
Across the oil-producing region, countries are taking measures to cut domestic demand.
Saudi Arabia, which faces a $98bn budget deficit and is considering listing the state-owned Aramco oil company on the stock exchange, has set a goal of cutting electricity demand 8% by 2021.
The UAE, which diverts about a quarter of its production for domestic energy use, this month began charging households for water and electricity. “The whole mentality of our people will have to change,” said Thani Ahmed Al Zeyoudi, the director of energy and climate change. “I think in the upcoming 10 years we will see a major shift in the whole region.”
Kuwait set a target of sourcing 15% of its electricity from wind and solar by 2030, and making buildings 10% more energy efficient, Al Jandel said.
Qatar planned to get 20% of its electricity from renewables and reduce water consumption by 35%, according to Irena’s report.
Egypt set a renewables target of 30% by 2030, Mohamed Shaker El-Markabi, the country’s electricity and renewable energy minister, told the Irena meeting.
Jordan, which imports virtually all of its oil and gas, installed solar panels on the royal household and set a target of sourcing 20% of its electricity from solar and wind power by 2025. The king imported Tesla electric cars for himself and senior ministers, and the authorities waived the country’s prohibitive car import duties on hybrids and plug-ins.
The reforms just made sense, said Ibrahim Saif, the country’s energy minister.
Posted on Thursday Jan 21