Posted by: r.m. | January 21, 2009

Arab sun, not Arab oil

Abu Dhabi announced at a summit of world leaders on renewable energy yesterday that it would become the first petro-driven economy to make a significant commitment to renewables … Sheikh Mohammed bin Zayed Al Nahyan, crown prince of Abu Dhabi, has decreed that 7% of power will come from green energy sources by 2020. … Masdar expects to mainly use solar energy to reach its 7% targets but is also looking at wind and even geothermal power, where heat from the ground is used as a power source.”

7%.

Seven per cent!

But there is enough solar power over Arab lands to power all the electrical demands. “[Arab] countries can produce all their day-time energy needs from solar power,” said Stefan Muller, the managing director of Asia Pacific region at Conergy, the German producer of solar and wind power technologies.

This (promised) increase in demand of solar power is critical. Small as it is.

The international economic recession has hurt the renewable energy industry since it has caused governmental subsidies to this young industry to decline. As reported in The Time, “the renewable energy industry — especially young solar manufacturers — is struggling to survive. The recession has already claimed victims: Three Western solar manufacturers, OptiSolar, HelioVolt and SunEdison, are reportedly cutting jobs in the face of declining demand. Where there was a glut of orders for new solar systems as recently as the past summer, prices for rooftop solar arrays have dropped 8% to 10% since October, and are likely to keep falling this year. Layoffs are happening even in the more mature wind industry — including big companies like the Spanish firm Gamesa, which let go of staff in one of its Pennsylvania factories. The bad economy is clearly the main culprit — with houses and jobs at risk, fewer consumers are willing to make a long-term bet on a solar system — but so have ebbing subsidies for solar in Europe, where manufacturers in the U.S. still send most of their product abroad. Without Spain and Germany — leaders in European solar — soaking up systems, the research firm New Energy Finance estimates an oversupply in the industry of nearly 4 gigawatts in 2009. …

That leaves the U.S. market to make up the difference, and with Obama’s election, many renewable energy advocates were confident the country was about to make a solar leap. But the credit market’s deep freeze has hit new solar projects just as it has almost every other facet of the economy — the only difference is that many solar manufacturers don’t have the cash reserves to ride out a long downturn. That could leave the U.S. shorthanded on solar at the very time when it’s finally gotten serious about renewables. “This is still a capital intensive business,” says Harris. “Either you have the money and the project will happen, or it won’t.”

One way to get the money: the expanded tax credits for renewables in Obama’s stimulus plan. The problem is that credits reduce a company’s tax bills, but many renewable energy companies are start-ups that have yet to become profitable — meaning they don’t pay enough taxes to benefit from a credit. Until recently, banks like Lehman Brothers bought credits from renewable energy companies and used them to reduce their own tax liabilities — for the good that did. With that market vaporized, Washington can increase tax credits all it wants, but the policy will have little effect. The answer is to make the tax credits directly refundable, so that if a solar start-up can use its credits to reduce its tax bill to below zero, it would actually receive a check from the government for the difference. “That would solve the problem, and we could go right to work,” says O’Brien. So far, Obama’s stimulus package does not include refundable credits, though they could be included in later legislation. O’Brien, who works on government relations and is based in Washington, says some in Congress worry that making the credits refundable would set an uncomfortable precedent. But if the government truly wants to change the energy sector — and make green jobs more than just green rhetoric — refundability is the way to make sure the solar industry doesn’t go dark.”


Responses

  1. I agree with you, however concentration should be on other sectors too like: Hydroelectric energy, Ocean Energy, Wind Energy etc which you have not focused in your article. I liked your article, well analyzed and penned down. Thanks, Sandy.
    http://www.justmeans.com

  2. It is sad to see such a brilliant sollution to the energy demands of the Arab world come to such terms. Solar energy is indeed a brilliant renewable energy. What puzzles me is why the Arab states are not making use of such energy. If the only thing in their mind is profit, then even using solar energy now can prove to be more profitable than depending on their own oil and fossil fuels for generating their energy. They can invest heavily in solar power now and reap the rewards later when they become almost independant of fossil fuel use for energy. This could later increase their profits dramatically. Solar energy is perfectly suitable for the gulf states with their flat terrain and a minimum of 10 months of strong sun each year.

  3. 7% of the total energy production coming from green resources is a very small fraction of what arab counties can do to fight against climate change and have clean production. Yet I see that commitment with this number till 2020 is a good step. This will cause other countries to do like the UAE.
    Oil is not infinite, at some point the arab countries should think seriously what will be their fate if the oil finishes and they do not look for other energy powers


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