Editor’s Note: Borzou Daragahi, a veteran journalist, has covered the Middle East from a variety of perspectives and postings, including major oil producers and energy consumers. This is his first piece for Stimson.
By Barbara Slavin, Distinguished Fellow, Middle East Perspectives
A Middle East grappling with armed conflicts, geopolitical deadlocks, refugee crises, and the growing impact of climate change faces new upheaval in a quicker-than-expected worldwide transition to clean energy.
Many have predicted that the phasing out of fossil fuel consumption to mitigate the impact of climate change will reduce the economic and strategic relevance of the Middle East. What is unexpected is the pace. New technological advances are quickly eliminating obstacles to making renewable energy a reliable and cheap alternative to oil, gas, and coal.
Technologies for solar, wind, and hydroelectric power are advancing steadily. The hardware and software solutions for storing, managing, and distributing the spotty energy generated by sun, wind, and water are surging forward even more dramatically. Worldwide power storage capacity, 27 gigawatts in 2022, is expected to grow to 159 gigawatts by the end of 2024 and is projected to quadruple to 650 gigawatts by 2030, and to rise to 926 gigawatts by 2033. Such forecasts may be too conservative. Most predictions by governmental and intergovernmental bodies draw out the future growth of storage capacity linearly. However, growth in the sector has been exponential and shows little sign of slowing.
New tools that facilitate the use of renewables to power vehicles, homes, offices, institutions, industry, and cities emerge regularly. Near-weekly chemical engineering breakthroughs are accelerating the change. For example, the scarcity of lithium that is used as the cathode material in most rechargeable batteries was long seen as a constraint on the growth of storage capacity. But scientists and engineers financed by governments, private companies, and universities have been rapidly developing and deploying battery designs that use more plentiful elements that include sodium, hydrogen, zinc, and iron. Such materials are not only cheaper but often safer and more efficient than lithium. Lithium alternatives are already being manufactured on an industrial scale. China in May launched what experts have described as the world’s first grid-scale sodium-ion battery storage facility, a 10 Mwh clean energy plant that can power 10,000 homes or a couple of small data centers.
Much like the pace of microchip development over the decades, tech advances and economies of scale are making both mobile and stationary power storage cheaper, smaller, and more efficient. Over the last 30 years, energy storage density—the measure of how much power can be concentrated into a square kilogram of material — has quintupled while costs for batteries have plummeted from $9,000 to $50 per watt-hour.
Battery development has taken place alongside the growth and proliferation of increasingly efficient charging technologies that have already helped make EVs an integral part of many national automobile sectors. Worldwide, about one in five new cars registered is now an EV, according to the International Energy Agency. Even Hummer has rolled out an EV version of its gas guzzlers
EV adoption still has considerable room to grow. Currently, EV sales remain overwhelmingly concentrated in China, Europe, and the U.S., making much of the world an untapped EV market that competing American, European, and Asian vehicle makers are scrambling to access.
Over the last several years, there has also been increasing adoption of battery-electric applications across a range of carbon-spewing industries. Hundreds of companies across the world are developing or already selling battery-electric trucking, marine transport, mining, aviation, and even defense vehicles and tools. Electric-powered space rockets or fighter jets may be far off. But 90-passenger battery-powered planes that can make the 450-mile flight between Boston and Washington, and battery-electric freighters plugging into offshore windmill-powered charging stations in the North Sea are perhaps less than a decade away.
“As battery costs fall and energy density improves, one application after another opens up,” said a report published earlier this year by the Rocky Mountain Institute, a think tank focusing on renewable energy. “We call this the battery domino effect: the act of one market going battery-electric brings the scale and technological improvements to tip the next. Battery technology first tipped in consumer electronics, then two- and three-wheelers and cars. Now trucks and battery storage are set to follow. By 2030, batteries will likely be taking market share in shipping and aviation too.”
The world will need fossil fuels for the foreseeable future. Demand for electric power is increasing globally at an annual rate of about 2 percent while demand for natural gas is predicted to grow at 2.5 percent this year. Even after a full energy transition, petroleum will still likely be used in the production of plastics, chemicals, building materials, cosmetics, and textiles.
But renewable growth is outpacing both electricity and natural gas demand. By 2028, renewable energy is expected to account for more than 42 percent of the world’s electricity production, up from 30 percent last year, an annual growth rate of 8 percent. A possible future in which fossil fuels are no longer burned is slowly coming into focus.
Energy prices reflect that. Oil prices have been largely stagnant over the last decade, despite regional turmoil, and demand is decelerating. Natural gas prices have steadily dropped since spiking after the 2022 Russian invasion of Ukraine. Over the next few years, they will likely further decline, disrupting the economies of all hydrocarbon-producing nations but causing more pain in those overwhelmingly dependent on fossil fuel sales. A 2023 report by Carbon Tracker, a think tank that researches the financial impact of climate change, estimated that oil-dependent “petrostates” worldwide could see their energy revenues slashed by between 50 percent and 70 percent, with $8 trillion in potential earnings wiped out by 2040 under a “moderately paced energy transition.”
Nowhere else in the world is there such a high concentration of nations so directly and indirectly dependent on hydrocarbon export revenues as the Middle East and North Africa. While fossil fuels amount to about a quarter of Indonesia’s total export revenues and 16 percent of Brazil’s, oil and gas sales make up at least three quarters of export revenues in Algeria, Libya, Iraq, Saudi Arabia, Qatar, Kuwait, and Oman, according to data collected by the World Bank. Overall, oil and gas made up 68 percent of the Middle East and North Africa’s export revenue in 2021, compared with 10 percent in Latin America and the Caribbean in 2023 and 39 percent in sub-Saharan Africa in 2022.
A more rapidly paced energy transition could deplete the financial resources of a Middle East already mired in troubles. Crises include the Israeli-Palestinian struggle, the simmering warfare between Israel and Iran and its proxies, and festering armed conflicts entangling local, regional, and global powers in Yemen, Syria, Libya, Sudan, and Iraq. Adding to both the fragility of the region and the urgency of the energy transition are escalating heat waves, droughts, forest fires, and desertification attributed to climate change.
Some Middle East countries have been able to ease their reliance on fossil fuel energy exports. Over the years, Iran has been forced to reduce its dependence on oil and gas to below 50 percent because of sanctions that have prompted it to rely on exports of petrochemicals, plastics, aluminum, copper, steel, and food.
Both Saudi Crown Prince Mohammed bin Salman and the United Arab Emirates’ leadership have tried with varying degrees of urgency and success to diversify their economies and grow non-energy sectors such as professional services and entertainment. Saudi Arabia, Algeria, Morocco, the UAE, and others have also taken steps to leverage the abundant sunshine of the Mediterranean basin and the Middle East, as well as record-low solar panel prices, to launch solar power projects, perhaps with an eye to swapping oil and gas for clean energy exports someday.
But much more is likely necessary. Oil-producing Middle East nations are far too slow in cutting badly outdated energy subsidies that encourage domestic overconsumption and squander resources better invested in education and infrastructure. According to an International Monetary Fund working paper, both Saudi Arabia and Iran spent 27 percent of GDP on energy subsidies in 2022.
Policymakers in both the energy-exporting nations of the Persian Gulf and North Africa and those in Lebanon, Tunisia, Jordan, and Egypt relying on them for remittances and capital can no longer maintain such short-sighted policies. They should be encouraged to more quickly implement changes to adapt to a post-fossil fuel world, or else risk being outpaced by technological change.
Borzou Daragahi is an award-winning international journalist who has covered the Middle East, North Africa, and Europe since 2002. He has been based in Tehran, Baghdad, Beirut, Cairo, and Istanbul and worked for the Financial Times. Los Angeles Times, and The Independent, among others.
How Will the Middle East Navigate An Accelerating Transition From Fossil Fuels?
By Borzou Daragahi
Middle East & North Africa
Editor’s Note: Borzou Daragahi, a veteran journalist, has covered the Middle East from a variety of perspectives and postings, including major oil producers and energy consumers. This is his first piece for Stimson.
By Barbara Slavin, Distinguished Fellow, Middle East Perspectives
A Middle East grappling with armed conflicts, geopolitical deadlocks, refugee crises, and the growing impact of climate change faces new upheaval in a quicker-than-expected worldwide transition to clean energy.
Many have predicted that the phasing out of fossil fuel consumption to mitigate the impact of climate change will reduce the economic and strategic relevance of the Middle East. What is unexpected is the pace. New technological advances are quickly eliminating obstacles to making renewable energy a reliable and cheap alternative to oil, gas, and coal.
Technologies for solar, wind, and hydroelectric power are advancing steadily. The hardware and software solutions for storing, managing, and distributing the spotty energy generated by sun, wind, and water are surging forward even more dramatically. Worldwide power storage capacity, 27 gigawatts in 2022, is expected to grow to 159 gigawatts by the end of 2024 and is projected to quadruple to 650 gigawatts by 2030, and to rise to 926 gigawatts by 2033. Such forecasts may be too conservative. Most predictions by governmental and intergovernmental bodies draw out the future growth of storage capacity linearly. However, growth in the sector has been exponential and shows little sign of slowing.
New tools that facilitate the use of renewables to power vehicles, homes, offices, institutions, industry, and cities emerge regularly. Near-weekly chemical engineering breakthroughs are accelerating the change. For example, the scarcity of lithium that is used as the cathode material in most rechargeable batteries was long seen as a constraint on the growth of storage capacity. But scientists and engineers financed by governments, private companies, and universities have been rapidly developing and deploying battery designs that use more plentiful elements that include sodium, hydrogen, zinc, and iron. Such materials are not only cheaper but often safer and more efficient than lithium. Lithium alternatives are already being manufactured on an industrial scale. China in May launched what experts have described as the world’s first grid-scale sodium-ion battery storage facility, a 10 Mwh clean energy plant that can power 10,000 homes or a couple of small data centers.
Much like the pace of microchip development over the decades, tech advances and economies of scale are making both mobile and stationary power storage cheaper, smaller, and more efficient. Over the last 30 years, energy storage density—the measure of how much power can be concentrated into a square kilogram of material — has quintupled while costs for batteries have plummeted from $9,000 to $50 per watt-hour.
Battery development has taken place alongside the growth and proliferation of increasingly efficient charging technologies that have already helped make EVs an integral part of many national automobile sectors. Worldwide, about one in five new cars registered is now an EV, according to the International Energy Agency. Even Hummer has rolled out an EV version of its gas guzzlers
EV adoption still has considerable room to grow. Currently, EV sales remain overwhelmingly concentrated in China, Europe, and the U.S., making much of the world an untapped EV market that competing American, European, and Asian vehicle makers are scrambling to access.
Over the last several years, there has also been increasing adoption of battery-electric applications across a range of carbon-spewing industries. Hundreds of companies across the world are developing or already selling battery-electric trucking, marine transport, mining, aviation, and even defense vehicles and tools. Electric-powered space rockets or fighter jets may be far off. But 90-passenger battery-powered planes that can make the 450-mile flight between Boston and Washington, and battery-electric freighters plugging into offshore windmill-powered charging stations in the North Sea are perhaps less than a decade away.
“As battery costs fall and energy density improves, one application after another opens up,” said a report published earlier this year by the Rocky Mountain Institute, a think tank focusing on renewable energy. “We call this the battery domino effect: the act of one market going battery-electric brings the scale and technological improvements to tip the next. Battery technology first tipped in consumer electronics, then two- and three-wheelers and cars. Now trucks and battery storage are set to follow. By 2030, batteries will likely be taking market share in shipping and aviation too.”
The world will need fossil fuels for the foreseeable future. Demand for electric power is increasing globally at an annual rate of about 2 percent while demand for natural gas is predicted to grow at 2.5 percent this year. Even after a full energy transition, petroleum will still likely be used in the production of plastics, chemicals, building materials, cosmetics, and textiles.
But renewable growth is outpacing both electricity and natural gas demand. By 2028, renewable energy is expected to account for more than 42 percent of the world’s electricity production, up from 30 percent last year, an annual growth rate of 8 percent. A possible future in which fossil fuels are no longer burned is slowly coming into focus.
Energy prices reflect that. Oil prices have been largely stagnant over the last decade, despite regional turmoil, and demand is decelerating. Natural gas prices have steadily dropped since spiking after the 2022 Russian invasion of Ukraine. Over the next few years, they will likely further decline, disrupting the economies of all hydrocarbon-producing nations but causing more pain in those overwhelmingly dependent on fossil fuel sales. A 2023 report by Carbon Tracker, a think tank that researches the financial impact of climate change, estimated that oil-dependent “petrostates” worldwide could see their energy revenues slashed by between 50 percent and 70 percent, with $8 trillion in potential earnings wiped out by 2040 under a “moderately paced energy transition.”
Nowhere else in the world is there such a high concentration of nations so directly and indirectly dependent on hydrocarbon export revenues as the Middle East and North Africa. While fossil fuels amount to about a quarter of Indonesia’s total export revenues and 16 percent of Brazil’s, oil and gas sales make up at least three quarters of export revenues in Algeria, Libya, Iraq, Saudi Arabia, Qatar, Kuwait, and Oman, according to data collected by the World Bank. Overall, oil and gas made up 68 percent of the Middle East and North Africa’s export revenue in 2021, compared with 10 percent in Latin America and the Caribbean in 2023 and 39 percent in sub-Saharan Africa in 2022.
A more rapidly paced energy transition could deplete the financial resources of a Middle East already mired in troubles. Crises include the Israeli-Palestinian struggle, the simmering warfare between Israel and Iran and its proxies, and festering armed conflicts entangling local, regional, and global powers in Yemen, Syria, Libya, Sudan, and Iraq. Adding to both the fragility of the region and the urgency of the energy transition are escalating heat waves, droughts, forest fires, and desertification attributed to climate change.
Some Middle East countries have been able to ease their reliance on fossil fuel energy exports. Over the years, Iran has been forced to reduce its dependence on oil and gas to below 50 percent because of sanctions that have prompted it to rely on exports of petrochemicals, plastics, aluminum, copper, steel, and food.
Both Saudi Crown Prince Mohammed bin Salman and the United Arab Emirates’ leadership have tried with varying degrees of urgency and success to diversify their economies and grow non-energy sectors such as professional services and entertainment. Saudi Arabia, Algeria, Morocco, the UAE, and others have also taken steps to leverage the abundant sunshine of the Mediterranean basin and the Middle East, as well as record-low solar panel prices, to launch solar power projects, perhaps with an eye to swapping oil and gas for clean energy exports someday.
But much more is likely necessary. Oil-producing Middle East nations are far too slow in cutting badly outdated energy subsidies that encourage domestic overconsumption and squander resources better invested in education and infrastructure. According to an International Monetary Fund working paper, both Saudi Arabia and Iran spent 27 percent of GDP on energy subsidies in 2022.
Policymakers in both the energy-exporting nations of the Persian Gulf and North Africa and those in Lebanon, Tunisia, Jordan, and Egypt relying on them for remittances and capital can no longer maintain such short-sighted policies. They should be encouraged to more quickly implement changes to adapt to a post-fossil fuel world, or else risk being outpaced by technological change.
Borzou Daragahi is an award-winning international journalist who has covered the Middle East, North Africa, and Europe since 2002. He has been based in Tehran, Baghdad, Beirut, Cairo, and Istanbul and worked for the Financial Times. Los Angeles Times, and The Independent, among others.
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