OECD: Drive to adopt alternative energy options

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A European-funded task force led by the Organisation for Economic Co-operation and Development is making a fresh push to encourage the Middle East and North Africa to adopt alternative energy – not just as a way to free up cash spent on increasingly expensive energy imports, but as a good social and economic policy that could help advance the region.

A solar panel on the roof of a rural house not only powers up a laundry machine that would otherwise tax the electricity grid, it allows the women inside to study for classes instead of washing clothes.

A European-funded task force led by the Organisation for Economic Co-operation and Development is making a fresh push to encourage the Middle East and North Africa to adopt alternative energy – not just as a way to free up cash spent on increasingly expensive energy imports, but as a good social and economic policy that could help advance the region.

The commission this month unveiled a 134-page report on the region’s potential for harnessing solar and wind power and proposes regulatory changes that could encourage the growth of private sector investment in alternative energy.

“With little policy emphasis on energy efficiency and an intensive use of fossil fuels, the countries in the Mena region will be particularly exposed to the negative consequences of rising energy prices,” says the executive summary of the report. “To embed sustainable, long-term economic growth in the Mena region, countries must diversify their energy resources.”

Hydrocarbons produce 90 per cent of the region’s electricity output. Meanwhile, renewable resources such as wind, solar and water account for only about 3.5 per cent of the entire electrical power mix among the seven Mena countries in the report, compared with 17.3 per cent in the OECD countries, according to a 2009 study by the International Energy Agency. Since 2000, energy consumption in the region has risen about 5.2 per cent a year, according to a study by BP cited in the report.

The report focuses on the potential for growing alternative energy sectors in Egypt, Algeria, Jordan, Morocco, Tunisia and the United Arab Emirates by luring entrepreneurs into the business. It proposes offering incentives such as payment structures for individuals and companies that produce excess electricity, cash grants and tax incentives, as well as regulatory changes and market-based incentives.

Some of the proposals seem far-fetched. It is easy to advocate new rules and regulations but much harder to implement in places without strong central authority or undergoing seismic political transitions.

The UAE has already launched ambitious alternative energy projects, but the Arab Spring uprisings have put any progress “on hold” in other parts of the region, the report acknowledges.

Nevertheless, because of the potential, countries should begin setting targets for moving away from fossil fuel dependency, says Ania Thiemann, the author of the report and a senior economist at the OECD. In Egypt “it could almost entirely be done with solar and wind energy”, she said in an interview on the sidelines of the confab in Cairo. “This is a country with 311 days of sun a year.”

Given the region’s latitude, the report argues that desert fields of solar panels could make North Africa a net supplier of clean energy to the European Union.

The report also depicts investment in alternatives as a way to tackle some of the other challenges in the region. Bringing electricity to 22m rural people who lack it in places like southern Iraq helps lift them out of poverty. Solar-powered desalinisation plants ease water shortages in countries such as Yemen, the report says.

Perhaps most significantly, alternative energy production with “significantly higher labour intensity than fossil fuels” can ease unemployment that contributes to continued instability in countries such as Egypt and Tunisia, the report says. In the 27 countries of the EU, renewable energy has already added 1.4m jobs.

“It’s a question of putting in place a policy framework,” Ms Thiemann says. “There’s very little transparency and most deals are made on the side.”

SOURCE: Financial Times, April 22nd 2013: http://www.ft.com/cms/s/0/5d992920-ab21-11e2-ac71-00144feabdc0.html#axzz2RH6F85lr