Turning petro-dollars into renewable energy technology: Why the Arab world is helping advance clean energy innovation

Innovation

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By Zarina Khan

The term ‘petrodollars’ may simply mean money earned from the sale of oil, but that it is not all that it implies. It is a loaded and political term used almost always in reference to Middle Eastern oil producers and often suggests quick and maybe even undeserved returns without thought to long-term impact.

So it would come as a surprise to many, when that very same denigrated wealth – the petrodollar – is being invested in the clean energy and sustainability-focused innovation, that humanity needs to overcome the challenges posed by climate change. And by the oil producing Arab states, no less.

But that is what is being witnessed in parts of the Arab Gulf – large scale ‘petrodollar-funded’ investment in research and development in an area that in essence, aims to one day put the petrol industry out of business.

Clean energy initiatives in the Gulf

Energy initiatives

In 2006, the United Arab Emirates established the Masdar Initiative, to invest in renewable energy and clean technology, and today it has three business units and an independent post-graduate research institute under its umbrella, to further its goals. It’s Masdar Institute of Science and Technology, in particular, has the objective of evolving collaborative research and development capability in advanced energy and sustainability.

Across the border in Saudi Arabia, the King Abdullah University of Science and Technology was founded in 2009, with the largest endowment ever witnessed for a university – $20 billion. It too, has a goal of producing new innovative technology and high-value human capital, with its Solar and Photovoltaic Engineering Research Center in particular focusing on renewable energy technologies.

Nearby, the Qatar Foundation established the Qatar Environment and Energy Research Institute in 2011, to conduct and coordinate research that addresses energy and environmental issues, while the Qatar Science and Technology Park, aims to serve as a business hub and incubator for related industries.

The Middle East and North Africa solar power sector alone, could see investments up to $50 billion by 2020, the Middle East Solar Industry Association and Meed Insights MENA Solar Energy Report estimated. Considering that these three countries jointly are only about the size of Algeria with combined population of less than 40 million, that is a lot of renewable-energy focused investment.

Economic pragmatism at work

There are sound reasons for it. A major reason is pragmatism: the oil and gas that has provided the major portion of the national wealth for these states, will run out eventually. Saudi Arabia, believed to have the second largest oil reserve in the world, may run out of oil as early as 2030, according to a report from Citigroup in 2012. What does an economy that was powered by ‘petrodollars’ do when it has no more petrol to sell? If it does not have other high-value products and services to offer the global market, the simple answer is, it shrinks. Rather than see their economic development falter, forward-thinking Gulf States are investing today in alternative products, to continue to fuel their economic engines tomorrow.

Yet, why pick sustainable energy and clean technologies for economic diversification? Because it makes good economic sense. While there may be lower hanging fruits – industries that are less risky with stable returns– no sector offers as large of potential profit and caters to so massive a global market as sustainable energy. Energy is a product that every government and every industry needs in secure and affordable supply. The Gulf States are hoping to be among those, who can provide that through alternative energy technologies, and reap the resulting rewards. “You’re seeing countries like UAE make substantial investments in renewables because they realize that clean energy is going to be one of the largest growth industries of the 21st century,” Amit Ronen, the director of the George Washington University Solar Institute, told Aljazeera news.

An opportunity to create science and technology for the future

Petro-Dollars

But the most dynamic and compelling reason behind the why Arab petrodollars are funding renewable energy and clean technology, is opportunity. Research and development (R&D) in technology, is an expensive undertaking, particularly that, which looks to bring about massive shift changes and innovation. In this post-global recession reality, fewer governments have the available financial resources to invest in the costly and high-risk realm of advanced sustainable technologies and clean renewable energy.

The US – long time global R&D investment leader – will only be increasing federal R&D funding by 1.2 percent in 2015 (White House Office for Science and Technology Policy, 2014), with an overall decreasing trend in R&D investment as a percent of GDP, estimated at 2.77 in 2011 (World Bank). Europe is similarly flagging; the UK R&D spending overall fell 3% while the rest of the European Union invests a mere 2.06% of its GDP in R&D (Office for National Statistics, 2014).

“Where the west has retrenched, Asia has advanced,” the Batelle 2014 Global R&D Funding Investment report states. While Japan has been the historic Asian R&D giant, China has been gaining ground, and is expected to surpass US R&D funding by about 2022 (Martin Grueber, 2013). It is in that shifting balance, that the Gulf States are carving out their position today with their renewable energy and clean technology focused R&D investment. By leveraging their financial reserves, they are developing the new technology, systems and highly-trained human capital that world will need in the energy-constrained, climate change-beset future, securing for themselves and their people a continuing source of prosperity.

With the strength of these motivations and the breadth of the investment and support for renewable energy and advanced sustainable technologies in the Arab Gulf, the coming decades will serve to be the proving period for this bold new economic experiment.

Given the growing severity of climate change impacts, the world already needs green innovation, petrodollar funded or otherwise. If the revenue gained from fossil fuel sales can be used to help mitigate their impact on the environment, all the better.

Zarina Khan is a Massachusetts Institute of Technology Knight Science Journalism Fellow working in science communication in the United Arab Emirates.

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