I’m on the ground until December 6, and Bill Spindle is here for the duration of the two-week COP28 (United Nations’ Conference of the Parties, the 28th such summit).
Are you here? Email us: amy@ciphernews.com, bill.spindle@ciphernews.com and to reach the whole team: news@ciphernews.com.
In today’s edition: Bill gives us a dispatch from a recent trip to Saudi Arabia, Anca dives deep into solar in Africa and Amena charts the oil industry’s role in the energy transition.
Riyadh, Saudi Arabia has gained new economic dynamism in recent years, thanks to oil wealth and government efforts to diversify the economy. Photo credit: wajdram via Adobe Stock.
LATEST NEWS
Gulf petrostates bring an increasingly complex relationship with fossil fuels to COP28
RIYADH, SAUDI ARABIA—This capital, known historically as a drab desert city, today reverberates with construction, concerts, art shows, film screenings, sporting events and buzzy restaurants. Thanks to continued oil wealth and efforts by the government to both diversify its economy and loosen once-strict societal rules, many young Saudis suddenly see a future in their own country with opportunities and a new economic dynamism.
Rayan Al-Ghalayini, who grew up in the kingdom, didn’t ever expect to run a business back home when he graduated from the University of British Columbia in Vancouver, Canada back in 2014. Now he owns a fast-growing health and fitness business that’s expanding from Jeddah to Riyadh.
The 33-year-old entrepreneur is opening new gyms in the capital and designing wellness programs for companies to offer to their growing Saudi work forces, all in a country where yoga lessons were illegal just a few years ago.
Al-Ghalayini’s experience, like that of many other young people, represent the striking juxtaposition states like Saudi Arabia embody — one that is inextricably linked with oil and gas.
The petrostates in the Persian Gulf region are in the spotlight at the United Nations global climate summit opening tomorrow in Dubai, United Arab Emirates. The glare can be harsh, but it also reveals their increasingly complicated relationship with fossil fuels.
The UAE, with the seventh largest oil reserves in the world, has already stirred controversy by appointing the head of its national oil company as president of the event, known as COP28, and inviting the fossil fuel industry prominently into deliberations.
Regional heavyweight Saudi Arabia and the tiny emirate of Qatar — the world’s largest exporters of oil and gas respectively — are also expected to wield outsized influence at the gathering.
The trio of sheikdoms depend on more than just producing and exporting fossil fuels. They are also prolific consumers of oil and gas themselves, making their economies among the world’s most carbon-intensive, along with fellow Gulf monarchies Kuwait, Bahrain and Oman.
All have seen runaway growth in energy use as they’ve become rich selling fossil fuels and ruling families have placated their populations with copiously subsidized electricity and petrol. Cut-rate energy for consumers and businesses has encouraged extravagant use, including roads crowded with giant SUVs, indoor ski slopes, air-conditioned outdoor cafes and the extensive use of energy-intensive water desalination.
Qatar, a city state of 2.7 million people, emits more greenhouse gases per capita than any other country. The UAE, population about 10 million, ranks fifth and Saudi Arabia, population 36 million, ranks 14th.
These countries now face a tricky challenge when it comes to fossil fuels. They’re increasingly desperate to rein in their own consumption, while they aim to produce even more to sell overseas. They plan to use the profits to diversify their economies beyond oil and gas — the key to their prosperity in any post-fossil fuel era.
‘Go hard and go big’: How Australia got solar panels onto one in every three houses — The Guardian
Amy’s take: Generous subsidies available to everyone and sunny geography are two key recipes of this rooftop solar success, though critics say they’re too generous.
China’s Remote Deserts Are Hiding an Energy Revolution — Bloomberg Bill’s take: By far the most comprehensive look at China’s historic build out of wind and solar energy infrastructure, raising hope its emissions will go into decline in a few years. Terrific graphics.
EU Commission announces electricity grid action plan — Reuters
Anca’s take: What struck me is that new cross-border infrastructure connecting at least two EU countries should double in the next seven years. That’s on top of what each country needs to do nationally.
Carbon capture and storage hopes are pipe dreams, for now — Reuters
Amy’s take: Strong words from IEA. Indeed, carbon capture tech should be reserved for a few sectors unable to electrify, as opposed to a blank check to keep pumping oil as usual.
COP28: UAE planned to use climate talks to make oil deals — BBC Anca’s take: What’s worse — and inappropriate — is that the documents were prepared by the UAE’s COP28 team. This is only going to add to already high skepticism regarding this year’s summit hosts.
Biden to Skip U.N. Climate Summit, White House Official Says — The New York Times Bill’s take: Biden choosing not to attend, if that’s what transpires in the end, is a sign the administration doesn’t see massive diplomatic breakthroughs or historic watersheds coming to pass during COP28.
More of what we're reading:
Al Jaber Denies Using COP28 Presidency to Make Oil and Gas Deals —Bloomberg
Revealed: Saudi Arabia’s grand plan to ‘hook’ poor countries on oil — The Guardian
A solar panel connects to a water pump, which in turn connects to an irrigation system. It may not sound fancy, but this clean-powered technology is changing the lives of tens of thousands of smallholder farmers in rural areas of Africa without access to electricity.
By watering daily, farmers can increase crop yields between two and five times, depending on what they grow, says Tanguy Boussard, chief strategy officer at Kenya-based SunCulture, the company selling the product.
“The impact here is tremendous. It’s the first part of the value chain,” Boussard said. “[Farmers] press a button and they irrigate everything in an hour as opposed to several hours — so it completely changes their day.”
The cleantech irrigation solutions SunCulture offers to over 40,000 customers in Kenya, Uganda and Cote d'Ivoire are part of a growing mix of so-called off-grid systems that ensure electricity can reach remote rural areas in low-income countries even in the absence of a national power grid.
Since big infrastructure projects (such as building new transmission lines) are costly and slow to take off in lower income countries, innovative off-grid setups are gaining traction in the climate financing world as a way of more quickly and efficiently solving an energy access problem affecting hundreds of millions of people.
Money is starting to pour in through a mix of channels — multilateral and national development banks, philanthropies and private investors — showing how access to electricity empowers communities to grow their economies. This development, in turn, makes these regions more attractive for future energy investments.
Yet these solutions are also more challenging business propositions due to the higher cost of capital in developing countries, as Cipher previously reported — and companies say they need more financial back-up to scale-up projects for a lasting impact on the ground.
This article is the last in a series on climate financing leading up to the United Nations climate conference starting on Thursday. Check out a refresher on the full series below.
EXPLAINER
Climate finance at COP28
The central tenant of these climate talks is money — how to get more of it where it needs to go, especially to lower income countries so they can both adopt cleaner technologies and adapt to the impacts of a warming world already underway.
The climate finance stakes are massive but complicated, which is why Cipher has been publishing a six-part explainer series on the efforts to close the energy investment gap between wealthy and poorer nations. Here are those links again so you can get caught up fast:
Fossil fuel companies are a “marginal force” in global clean energy investments
Source: International Energy Agency, The Oil and Gas Industry in Net Zero Transitions 2023 • Annual average clean energy spending from 2019 to 2022. CCUS refers to carbon capture, utilization and storage technologies. BY:AMENA H. SAIYID
Oil and gas companies are responsible for a tiny portion of the world’s clean energy investments, according to a new International Energy Agency report. The record profits these companies have earned in recent years have gone largely back into fossil fuels instead of powering the energy transition, the agency finds.
“The fossil fuel sector must make tough decisions now, and their choices will have consequences for decades to come,” IEA executive director Fatih Birol said in a statement.
The report is setting the stakes high for the United Nations climate talks, known as COP28, getting underway this week in Dubai, where countries are expected to debate whether to phase out or phase down fossil fuels.
For these companies, investing in clean energy may be in their best interest in the long run, the report authors write. Based on IEA’s own projections, demand for oil and gas products is expected to peak by 2030, as consumers opt for cleaner technologies like electric vehicles, wind and solar. Moreover, IEA said the sector will be impacted by any mandated emission reductions that would reduce demand for fossil fuels.
Yet, the industry continues to sit on the sidelines of the clean energy talks, a “marginal force” at best when it ought to be reducing emissions from its operations, the agency writes in its report.
Oil and gas companies invested roughly $20 billion in clean energy technologies in 2022, reflecting 2.6% of their overall expenditures that year, the IEA found. That investment represented 1.5% of all global clean energy spending last year.
To the degree the oil companies are investing in cleaner technologies, they’re choosing to focus on those closer to their expertise burning molecules (i.e., biofuels, hydrogen and carbon capture tech), as opposed to powering electrons (like wind and solar), as the above chart shows.
That said, the report cautioned against what it called “excessive expectations and reliance” on carbon capture and storage by the oil industry. This tech, the report states, should be used for “certain sectors and circumstances, but it is not a way to retain the status quo.”
AND FINALLY... First gen cleantech
Cipher reader and managing director at Prelude Ventures Matt Eggers snapped this picture of a now defunct wind turbine on Angel Island, an uninhabited island and state park in San Francisco Bay. It seems the turbine, potentially installed in the 1980s, was part of the first generation of wind turbines and for a time offset a chunk of the park's electricity purchases.
Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.
Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.