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Oil Can't Compete With Renewables, Says National Bank of Abu Dhabi

Business

You wouldn't expect a bank in the oil-rich Middle East to be touting the future of renewable energy over that of oil. But that's just what the National Bank of Abu Dhabi (NBAD) is doing with its new report, Financing the Future of Energy: The opportunity for the Gulf's financial services sector.

Even with its rapid growth in energy consumption and its rich store of oil, renewables are the future of the Middle East, says new report.

Aimed primarily at investors and focusing on financial performance and potential, the report found that fossil fuels just weren't keeping up with solar and wind, and were less likely to do so in the future, even if oil prices dropped much lower than they are now.

"It provides insights into how that community might engage with public and private sector stakeholders to create a more energy efficient economy, turning the aspirations of the region into a reality that will attract the attention of the rest of the world and unlock significant financial opportunities," says the report's introduction.

Energy demand is expected to triple in the next 15 years in the rapidly growing Persian Gulf region—already the biggest energy consumer per capita in the world—a demand far outstripping the current supply. Yet, despite the recent plunge in oil prices, the report says that that demand will be more efficiently filled by renewables, offering more reliable and lucrative investment opportunities than oil.

"Some of the report’s findings may surprise you, as they did me," writes NBAD CEO Alex Thursby in the report's introduction. "For example, renewable energy technologies are far further advanced than many may believe: solar photovoltaic (PV) and on-shore wind have a track record of successful deployment, and costs have fallen dramatically in the past few years. In many parts of the world, indeed, they are now competitive with hydrocarbon energy sources. Already, more than half of the investment in new electricity generation worldwide is in renewables. Potentially, the gains to be made from focusing on energy efficiency are as great as the benefits of increasing generation. Together, these help us to reframe how we think about the prospects for energy in the region."

Among the report's surprisingly findings are that fossil fuels are already uncompetitive with solar in terms of price, and that would be true even if oil fell as low as $10 a barrel. And with the supply of fossil fuels finite and increasingly difficult to extract, the bank believes that almost all future investments will be in renewables.

"Prices have fallen dramatically in the past few years: solar PV falling by 80 percent in six years, and on-shore wind by 40 percent," it says. "The speed of this shift towards grid parity with fossil fuels means that, in many instances, perceptions of the role of renewables in the energy mix have not caught up with reality."

It also points out that some of the objections to renewables—for instance, the intermittency of wind and sunshine—are being overcome as the development of storage technologies picks up steam. It suggests that such technologies present excellent investment opportunities.

"There has been an historic concern that renewables are an unreliable option, because the wind blows only intermittently and the sun does not shine all the time, but that is proving to be less of an issue,” the report says. "Developments in storage technologies are progressing rapidly, and in the next few years utility-scale solutions will be deployed that further minimize concern around what was until recently seen as a major inhibitor to the uptake of renewable generation."

It also suggested that investment opportunities would exist in developing countries such as Kenya as their middle class grew and they looked to escape the volatility of oil prices and control their energy supply locally.

"When we look to the future, it is very clear that renewables will be an established part of the global energy mix," writes Thursby. "Governments around the world, including the Gulf region, are setting out their ambitions for decarbonizing their economies, and the global debate about energy has never been more intense."

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A volcano erupts on New Zealand's Whakaari/White Island on Dec. 9, 2019. Michael Schade / Twitter

A powerful volcano on Monday rocked an uninhabited island frequented by tourists about 30 miles off New Zealand's coast. Authorities have confirmed that five people died. They expect that number to rise as some are missing and police officials issued a statement that flights around the islands revealed "no signs of life had been seen at any point,", as The Guardian reported.

"Based on the information we have, we do not believe there are any survivors on the island," the police said in their official statement. "Police is working urgently to confirm the exact number of those who have died, further to the five confirmed deceased already."

The eruption happened on New Zealand's Whakaari/White Island, an islet jutting out of the Bay of Plenty, off the country's North Island. The island is privately owned and is typically visited for day-trips by thousands of tourists every year, according to The New York Times.

Michael Schade / Twitter

At the time of the eruption on Monday, about 50 passengers from the Ovation of Seas were on the island, including more than 30 who were part of a Royal Caribbean cruise trip, according to CNN. Twenty-three people, including the five dead, were evacuated from the island.

The eruption occurred at 2:11 pm local time on Monday, as footage from a crater camera owned and operated by GeoNet, New Zealand's geological hazards agency, shows. The camera also shows dozens of people walking near the rim as white smoke billows just before the eruption, according to Reuters.

Police were unable to reach the island because searing white ash posed imminent danger to rescue workers, said John Tims, New Zealand's deputy police commissioner, as he stood next to Prime Minister Jacinda Ardern in a press conference, as The New York Times reported. Tims said rescue workers would assess the safety of approaching the island on Tuesday morning. "We know the urgency to go back to the island," he told reporters.

"The physical environment is unsafe for us to return to the island," Tims added, as CNN reported. "It's important that we consider the health and safety of rescuers, so we're taking advice from experts going forward."

Authorities have had no communication with anyone on the island. They are frantically working to identify how many people remain and who they are, according to CNN.

Geologists said the eruption is not unexpected and some questioned why the island is open to tourism.

"The volcano has been restless for a few weeks, resulting in the raising of the alert level, so that this eruption is not really a surprise," said Bill McGuire, emeritus professor of geophysical and climate hazards at University College London, as The Guardian reported.

"White Island has been a disaster waiting to happen for many years," said Raymond Cas, emeritus professor at Monash University's school of earth, atmosphere and environment, as The Guardian reported. "Having visited it twice, I have always felt that it was too dangerous to allow the daily tour groups that visit the uninhabited island volcano by boat and helicopter."

The prime minister arrived Monday night in Whakatane, the town closest to the eruption, where day boats visiting the island are docked. Whakatane has a large Maori population.

Ardern met with local council leaders on Monday. She is scheduled to meet with search and rescue teams and will speak to the media at 7 a.m. local time (1 p.m. EST), after drones survey the island, as CNN reported.

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