Posted in Construction, on July 5, 2020, Further cuts to MENA construction sector expected for 2020 as the region appearing to be hit with a triple whammy, per GlobalData, would sound in our opinion as a realistic assessment at this conjecture of the construction industry in the MENA.
The Middle East and North Africa (MENA) construction sector is expected to be bit by the triple whammy of lower oil production, low oil prices and contracting non-oil sectors. Leading data and analytics company GlobalData has further cut its construction output growth forecast for the region for 2020 to -2.4%, down from the previous forecast of 1.4%, in light of continued spread of COVID-19.
Yasmine Ghozzi, Economist at GlobalData, comments: “Construction activity for the remainder of 2020 is set to see poor performance. While there is usually weak construction activity in the holy month of Ramadan and during the hot summer months of June, July and August, this is usually compensated by strong performance at the beginning and end of the year. However, this will not be the case this year due to the strict lockdown policies that extended until the end of May.
“The sector is expected to face headwinds in 2021 with a slow recovery, but the pace of this will be uneven across countries in the region. Fiscal deficits and public debt levels will be substantially higher in 2021. Fiscal consolidation will hinder non-oil growth across the region, where governments still play a considerable role in spurring domestic demand.
“In addition, public investment is likely to be moderate, which will translate into fewer prospects for private sector businesses to grow – especially within sectors such as infrastructure. Expected increase in taxes, selected subsidy cuts and the introduction of several public sector service charges will influence households’ purchasing power, having a knock-on effect on future commercial investments.”
Amid the worsening situation with regards to the COVID-19 outbreak and the decline in oil prices, GlobalData has further cut its forecast for construction output growth in Saudi Arabia to -1.8% from its previous forecast of 2.9% in 2020 and expects a recovery in the sector of 3.3% in 2021. The government’s decision to host limited annual ten-day Hajj entails a possible loss of estimated revenue at more than US$10bn, adding more pressure on the Kingdom’s economy.
Ghozzi adds: “GlobalData has estimated a contraction of 2.1% in construction output growth in the UAE but expects a rebound in 2021 of 3.1%. In one of the largest global energy infrastructure transactions, Abu Dhabi National Oil Company (ADNOC) raised US$10bn by leasing a 49% stake in its gas pipelines for 20 years. This landmark deal is important especially during the prevailing industry downturn in order to keep profitability.
“GlobalData has also cut further the growth rates for Qatar, Kuwait and Oman in 2020 to -3.4%, -7.8% and -8.1%, respectively. Qatar’s economy this year will be affected by decline in tourist arrivals, low consumer spending and low oil prices. Nevertheless, strong fiscal stimulus and spending on infrastructure projects should provide support.
“The negative outlook for Kuwait is weighed down by lower oil prices and the prospect of a higher fiscal deficit, possibly compromising the government’s capital spending on construction and infrastructure. Business unfriendliness constitutes a barrier to reforms in the Kuwaiti economy; the extensions in tenders’ deadlines compounded by an inflexible bureaucratic procurement setup that slows decision-making will delay progress for several Kuwaiti megaprojects.”
Egypt’s construction sector is set to continue performing well despite poor performance of the non-oil sector in April. GlobalData expects construction to grow at 7.7% in 2020, slowing from 9.5% in 2019, given a short-term slow down due to the pandemic and 8.9% in 2021, and to continue maintaining a positive trend throughout the forecast period. In the Arab Maghreb, GlobalData has further cut forecasts for construction growth in Tunisia, Morocco and Algeria to -3%, -2.1%, and -2.5%, respectively, in 2020 and 0.7%, 1.2% and 1.9%, respectively, in 2021.
GlobalData has a bleak view of Iran’s construction sector throughout the forecast period. A slowdown in economic activity caused by the virus outbreak and a possible wave of further US sanctions (in the event Trump wins a second term) will continue to wreak havoc on its economy, and drastically affecting construction activities.
A Multi-million national green growth plan launched today is reported in this article of the Jordan News Agency.
Amman, July 6 (Petra) — Jordan on Monday launched a multi-million ambitious green growth plan as part of a broader national drive towards a green economy and sustainable development.
The six-pronged 2021-2025 National Green Growth Plan, which was announced by Minister of Environment and Agriculture Saleh Kharabsheh, comprises executive plans targeting the key sectors of water, waste management, energy, agriculture, tourism and transport.
In part, the blueprint is intended to help build sustainable sectors that are more resilient and adaptive to adverse phenomena, including climate change and the fallout of emergencies, such as the coronavirus pandemic. It was drawn up in collaboration with the Global Green Growth Institute (GGGI).
Kharabsheh told a teleconference with government representatives and global stakeholders that the plan is designed to ensure alignment between green growth, climate change and sustainable development goals within the sectoral strategic framework.
Marshall Brown, Senior Officer/ Jordan Program at the GGGI, underlined the importance of multi-stakeholder cooperation to translate the plan on the ground, and said that the private sector and international partners have a key role to support this effort.
In the energy sector, the plan envisages the development of a smart electric grid, backing the Jordan Renewable Energy and Energy Efficiency Fund’s bid for the Green Climate Fund’s accreditation and a public-private partnership for the construction of EV charging stations at a total cost of $85 million.
The plan sets $965 million as the total cost of water projects, which include the rollout of a financial mechanism to support water harvesting projects, in addition to carrying out a technical project to rationalize industrial water use. Also in the water sector, the plan envisages the construction of an industrial wastewater treatment plant in Zarqa.
With regard to waste management, the plan includes the establishment of an excellence center for waste management, research and development, a feasibility study for the launch of projects aimed at separating organics from municipal solid waste, and finally a pilot project on the extended producer responsibility in the e-waste sector. The total cost of projects in the waste management sector is put at $248 million.
Turning to agriculture, the plan includes an information management and communication capacity-building project within the green growth framework. It also pursues a resource management project in the production of olive and olive oil. Other key projects in this area includes investing in hydroponics and a national afforestation project. The combined cost of these projects stands at $194 million.
Another key focus of the plan is the transport sector, where the total project cost is envisioned at $167 million. The projects in this domain include the rollout of smart transport systems, the establishment of a transport excellence center and the introduction of environmentally-friendly transport solutions in Irbid, Zarqa and Madaba.
As for tourism, the plan contains a set of ambitious projects, which include the establishment of an excellence center aimed at developing the tourism industry and maximizing ecotourism in protected areas, as well as a project for resource rationalization in the tourism and hospitality sectors for a total cost of $173 million.
The Nile and the dam: Can Egypt, Ethiopia and Sudan find a way forward? Wondered Daniel C. Stoll in Middle East Eye of 2 July 2020 before adding: Since it began construction in 2011, Ethiopia has been at odds with its downstream neighbours, especially Egypt, over the Renaissance Dam’s very existence.
The image above is of the Grand Ethiopian Renaissance Dam as pictured on 26 December (AFP).
As Ethiopia moves closer to filling the reservoir behind the Grand Ethiopian Renaissance Dam (GERD), parties are frantically searching for a way to decrease tensions and ensure that negotiations – not sabre-rattling – help Egypt, Ethiopia and Sudan find a way forward.
The window for finding a resolution, however, appears to be closing quickly.
Ethiopia has long said that it would use the onset of its rainy season in July to begin filling the dam’s reservoir. Since it began construction in 2011, Ethiopia has been at odds with its downstream neighbours, especially Egypt, over the dam’s very existence.
While Ethiopia touts the $4.6bn GERD as a key to the country’s development and a source of cheap electricity for Ethiopia and its neighbours, Egypt claims the dam represents an existential threat that will choke off the Nile’s flow into Egypt and imperil its citizens.
Despite the bellicose rhetoric from the two countries and the constant exchange of threats and counter-threats, Egypt, Ethiopia and Sudan have managed over the years to talk through their differences and agree on many key issues. In 2015, they inked a Declaration of Principles, committing all three countries to cooperation on the dam’s construction and to the peaceful resolution of any disagreements that might arise.
Each has too much to lose to let conditions within the Nile River Valley reach a point of outright conflict
While relations among the three riparian states in subsequent years have been marked more by acrimony than agreement, they did come together for talks coordinated by the US Department of Treasury and the World Bank in late 2019 and early 2020. These talks produced a draft agreement containing a number of key points related to the dam and its reservoir (estimated to hold more than 74 billion cubic metres of water).
Sudan’s foreign minister, Asmaa Mohamed Abdalla, said in a letter to the UN Security Council on 2 June that the talks had produced 90 percent of an agreement. Just before the three countries were scheduled to initial the draft agreement in late February, however, Ethiopia refused to accept it, and the threats and recriminations resumed.
Left unresolved are two key issues: the current lack of any drought mitigation protocols and the absence of any dispute resolution process.
Since Egypt receives almost 98 percent of its freshwater for agricultural, industrial and municipal uses from the Nile, the country insists that Ethiopia must commit to releasing a specific amount of water during periods of prolonged drought to ensure a consistent and predictable flow into Egypt. Both Sudan and Egypt also insist on a clear process for resolving disputes over the operation of the dam.
For its part, Ethiopia insists that committing a specified volume of water during periods of drought will ultimately drain the reservoir, thereby impeding Ethiopia’s ability to generate the electricity it badly needs. It also believes that Egypt is trying to perpetuate what it regards as Egypt’s unfair claim to substantial amounts of the Nile’s waters.
Since February, several outside players – including the EU, US and South Africa (as head of the African Union) – have tried to bring the riparian states back to the negotiating table, but with little success.
In early April, Ethiopia proposed a two-year interim agreement, arguing it would help reduce tensions and rebuild trust. Egypt rejected the proposal, however, asserting that an incremental approach would allow Ethiopia to avoid agreeing to a more comprehensive approach. Sudan also insists on a comprehensive agreement.
In a further attempt to pursue a diplomatic solution, both Sudan and Egypt have asked the UN Security Council to take up the issue under Article 35 of the UN Charter. UN Secretary-General Antonio Guterres has said that the UN stands ready to help the parties come to an agreement.
While a Security Council debate may eventually identify a way forward, the council’s deliberate modus operandi is unlikely to produce any dramatic breakthrough in the short term. Both Ethiopian Prime Minister Abiy Ahmed and Egyptian President Abdel Fattah al-Sisi are facing considerable pressure within their respective countries to “hang tough” and not be seen as compromising on issues of such vital national interest. Why the US wants to avert conflict over the NileRead More »
It is unclear how the council would create conditions for compromise, and yet compromise the three states must do. Each has too much to lose to let conditions within the Nile River Valley reach a point of outright conflict.
Sudan could benefit greatly from access to the cheap and abundant electricity that the GERD is expected to provide. It also needs assurances that nothing will affect the Nile’s flow into Sudan and impede the operation of its Roseires Dam.
While Ethiopia appears to have the upper hand in this situation – given its growing economy and the strategically important position it occupies along the river – it, too, needs some kind of negotiated solution. A diplomatic solution would deepen its already growing influence in the basin and enhance its credentials as the dominant power in the region – a consideration that appears at the forefront of Abiy Ahmed’s strategic calculus. It would help reassure potential buyers of GERD’s electricity that Ethiopia is a trusted and reliable partner.
For Egypt, the stakes are obvious: other than a modest amount of groundwater, Egypt has no other ready source of water for its rapidly expanding population (currently 102 million and estimated to be growing at a rate of 1.94 percent a year).
A negotiated agreement would also most likely give Egypt, and Sudan as well, access to important technical and environmental data related to the Nile’s flow and conditions in the basin upstream, information crucial for making informed decisions on water policy.
All countries would benefit from a less bellicose geopolitical environment within the basin, but compromise will be difficult
Finally, achieving some kind of resolution to this particularly thorny issue would allow the Sisi government to focus on an expanding number of domestic and foreign policy challenges, including increasingly tense relations with Libya, as well as growing domestic political and social unrest.
All countries would benefit from a less bellicose geopolitical environment within the basin, but compromise will be difficult. Egypt will need to recognise that Ethiopia has a right to pursue its ambitious development schemes, while acknowledging Ethiopia’s growing influence in the basin specifically and the Red Sea region more generally – influence that will come at the expense of Egypt’s long-held dominance in the region.
For its part, Ethiopia will need to recognise the precarious position of its downstream neighbours, particularly Egypt, and provide credible reassurances that it will release sufficient amounts of water during periods of drought.
While Ethiopia has long resisted bringing in third parties to help facilitate negotiations, it is possible that the African Union could play a constructive role in this regard. Egypt would have to overcome its reluctance to giving the AU a more dominant role, but having the AU involved in negotiations would be in keeping with Egypt’s long-held demand for outside intervention.
Ultimately, the time might have come for negotiations to go beyond the ministerial level and involve instead the heads of government. To date, negotiations have generally involved the respective ministers of irrigation or water. Achieving a resolution to these final, contentious issues may well require the direct participation of the senior political leadership of each country.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Eye.
Daniel C. StollDaniel C Stoll is Associate Dean for Global Affairs at St Norbert College in the US. He is the co-author most recently of International Conflict Over Water Resources in Himalayan Asia (Palgrave Macmillan) and has written extensively on issues of water resources management in Africa and the Middle East.
Randy Rivera, Executive Director of FinTEx, a member-led community focused on promoting innovation and collaboration within Fintech in Qatar and the MENA region, has said that his organization continues to work with international financial services industry participants.
During a June 23, 2020 virtual panel discussion (hosted by the US-Qatar Business Council) on “Qatar’s Growing Fintech Sector & Business Opportunities,” Rivera stated:
“We [aim to] … match talent with opportunity and what is going on in Qatar fits as an attractive platform not just for the Fintechs involved but for the Qatari market and the Middle East overall.”
“The design of these programs reflects thoughtfulness, broad participation and commitment of the right mix of leaders who can affect change and attract the talent to make that change uniquely impactful, not just to the market, but to the regional fintech community as well.”
Qatar is now a major financial hub in the Middle East. The country’s human development index (HDI) value is around 0.85, which puts it in the “very high” human development (and quality of life) category.
Qatar is ranked at 41 out of 189 countries and territories. Its HDI value has increased from around 0.75 to 0.85 in the past two decades – which indicates that the living standards of its residents may have improved significantly due to its booming economy.
As mentioned in a release shared with CI, Qatar aims to further support and develop a strong business community and a competitive environment that will help local SMEs while also attracting foreign SMEs.
The release revealed:
“Qatar has advanced 18 spots in the national level of entrepreneurial activity, securing the 15th rank globally and the 2nd in the MENA region for the Total Early-Stage Entrepreneurial Activity (TEA) index, according to the Global Entrepreneurship Monitor (GEM) Report 2019/2020.”
Amy Nauiokas, founder and CEO at Anthemis, a VC investment platform with over 100 portfolio firms, believes Qatar provides “a promising environment and set of opportunities for Fintech growth.”
Nauiokas, whose company supports an ecosystem of over 10,000 investors, incumbents, and high-potential Fintech firms, globally, stated:
“We look forward to solidifying some key relationships in Qatar as Anthemis further builds our MENA strategy.”
Mohammed Barakat, MD of US Qatar Business Council, who also attended the webinar, said:
“Considering Qatar’s large payment processing and remittance market and its strategy to become a regional gateway for a huge market, I foresee rapid growth in Qatar’s FinTech sector.”
The US-Qatar Business Council aims to support trade and investment between the two nations and to also build strategic business relationships.
As noted in the release, there are over 120 wholly-owned US firms operating in Qatar, and over 700 U.S.-Qatar joint projects currently active in the Middle Eastern nation.
As reported recently, the Qatar Financial Center will launch “Fintech Circle,” a co-workspace for qualifying financial technology firms free of charge for a year.
We asked our 2020 intake of Technology Pioneers for their views on how technology will change the world in the next five years.
From quantum computers and 5G in action to managing cancer chronically, here are their predictions for our near-term future.
1. AI-optimized manufacturing
Paper and pencil tracking, luck, significant global travel and opaque supply chains are part of today’s status quo, resulting in large amounts of wasted energy, materials and time. Accelerated in part by the long-term shutdown of international and regional travel by COVID-19, companies that design and build products will rapidly adopt cloud-based technologies to aggregate, intelligently transform, and contextually present product and process data from manufacturing lines throughout their supply chains. By 2025, this ubiquitous stream of data and the intelligent algorithms crunching it will enable manufacturing lines to continuously optimize towards higher levels of output and product quality – reducing overall waste in manufacturing by up to 50%. As a result, we will enjoy higher quality products, produced faster, at lower cost to our pocketbooks and the environment.
In 2025, carbon footprints will be viewed as socially unacceptable, much like drink driving is today. The COVID-19 pandemic will have focused the public’s attention on the need to take action to deal with threats to our way of life, our health and our future. Public attention will drive government policy and behavioural changes, with carbon footprints becoming a subject of worldwide scrutiny. Individuals, companies and countries will seek the quickest and most affordable ways to achieve net-zero – the elimination of their carbon footprint. The creation of a sustainable, net-zero future will be built through a far-reaching energy transformation that significantly reduces the world’s carbon emissions, and through the emergence of a massive carbon management industry that captures, utilizes and eliminates carbon dioxide. We’ll see a diversity of new technologies aimed at both reducing and removing the world’s emissions – unleashing a wave of innovation to compare with the industrial and digital Revolutions of the past.
By 2025, quantum computing will have outgrown its infancy, and a first generation of commercial devices will be able tackle meaningful, real-world problems. One major application of this new kind of computer will be the simulation of complex chemical reactions, a powerful tool that opens up new avenues in drug development. Quantum chemistry calculations will also aid the design of novel materials with desired properties, for instance better catalysts for the automotive industry that curb emissions and help fight climate change. Right now, the development of pharmaceuticals and performance materials relies massively on trial and error, which means it is an iterative, time-consuming and terribly expensive process. Quantum computers may soon be able to change this. They will significantly shorten product development cycles and reduce the costs for R&D.
4. Healthcare paradigm shift to prevention through diet
By 2025, healthcare systems will adopt more preventative health approaches based on the developing science behind the health benefits of plant-rich, nutrient-dense diets. This trend will be enabled by AI-powered and systems biology-based technology that exponentially grows our knowledge of the role of specific dietary phytonutrients in specific human health and functional outcomes. After the pandemic of 2020, consumers will be more aware of the importance of their underlying health and will increasingly demand healthier food to help support their natural defences. Armed with a much deeper understanding of nutrition, the global food industry can respond by offering a broader range of product options to support optimal health outcomes. The healthcare industry can respond by promoting earth’s plant intelligence for more resilient lives and to incentivize people to take care of themselves in an effort to reduce unsustainable costs.
5. 5G will enhance the global economy and save lives
Overnight, we’ve experienced a sharp increase in delivery services with a need for “day-of” goods from providers like Amazon and Instacart – but it has been limited. With 5G networks in place, tied directly into autonomous bots, goods would be delivered safely within hours.
Wifi can’t scale to meet higher capacity demands. Sheltering-in-place has moved businesses and classrooms to video conferencing, highlighting poor-quality networks. Low latency 5G networks would resolve this lack of network reliability and even allow for more high-capacity services like telehealth, telesurgery and ER services. Businesses can offset the high cost of mobility with economy-boosting activities including smart factories, real-time monitoring, and content-intensive, real-time edge-compute services. 5G private networks make this possible and changes the mobile services economy.
The roll-out of 5G creates markets that we only imagine – like self-driving bots, along with a mobility-as-a-service economy – and others we can’t imagine, enabling next generations to invent thriving markets and prosperous causes.
Technology drives data, data catalyzes knowledge, and knowledge enables empowerment. In tomorrow’s world, cancer will be managed like any chronic health condition —we will be able to precisely identify what we may be facing and be empowered to overcome it.
In other words, a new normal will emerge in how we can manage cancer. We will see more early and proactive screening with improved diagnostics innovation, such as in better genome sequencing technology or in liquid biopsy, that promises higher ease of testing, higher accuracy and ideally at an affordable cost. Early detection and intervention in common cancer types will not only save lives but reduce the financial and emotional burden of late discovery.
We will also see a revolution in treatment propelled by technology. Gene editing and immunotherapy that bring fewer side effects will have made greater headway. With advances in early screening and treatment going hand in hand, cancer will no longer be the cursed ‘C’ word that inspires such fear among people.
Historically, robotics has turned around many industries, while a few select sectors – such as grocery retail – have remained largely untouched . With the use of a new robotics application called ‘microfulfillment’, Grocery retailing will no longer look the same. The use of robotics downstream at a ‘hyper local’ level (as opposed to the traditional upstream application in the supply chain) will disrupt this 100-year-old, $5 trillion industry and all its stakeholders will experience significant change. Retailers will operate at a higher order of magnitude on productivity, which will in turn result in positive and enticing returns in the online grocery business (unheard of at the moment). This technology also unlocks broader access to food and a better customer proposition to consumers at large: speed, product availability and cost. Microfulfillment centers are located in existing (and typically less productive) real estate at the store level and can operate 5-10% more cheaply than a brick and mortar store. We predict that value will be equally captured by retailers and consumers as online.
One thing the current pandemic has shown us is how important technology is for maintaining and facilitating communication – not simply for work purposes, but for building real emotional connections. In the next few years we can expect to see this progress accelerate, with AI technology built to connect people at a human level and drive them closer to each other, even when physically they’re apart. The line between physical space and virtual will forever be blurred. We’ll start to see capabilities for global events – from SXSW to the Glastonbury Festival – to provide fully digitalized alternatives, beyond simple live streaming into full experiences. However, it’s not as simple as just providing these services – data privacy will have to be prioritised in order to create confidence among consumers. At the beginning of the COVID-19 pandemic we saw a lot in the news about concerns over the security of video conferencing companies. These concerns aren’t going anywhere and as digital connectivity increases, brands simply can’t afford to give users anything less than full transparency and control over their data.
9. Putting individuals – not institutions – at the heart of healthcare
By 2025, the lines separating culture, information technology and health will be blurred. Engineering biology, machine learning and the sharing economy will establish a framework for decentralising the healthcare continuum, moving it from institutions to the individual. Propelling this forward are advances in artificial intelligence and new supply chain delivery mechanisms, which require the real-time biological data that engineering biology will deliver as simple, low-cost diagnostic tests to individuals in every corner of the globe. As a result, morbidity, mortality and costs will decrease in acute conditions, such as infectious diseases, because only the most severe cases will need additional care. Fewer infected people will leave their homes, dramatically altering disease epidemiology while decreasing the burden on healthcare systems. A corresponding decrease in costs and increase in the quality of care follows, as inexpensive diagnostics move expenses and power to the individual, simultaneously increasing the cost-efficiency of care. Inextricable links between health, socio-economic status and quality of life will begin to loosen, and tensions that exist by equating health with access to healthcare institutions will dissipate. From daily care to pandemics, these converging technologies will alter economic and social factors to relieve many pressures on the global human condition.
Construction will become a synchronized sequence of manufacturing processes, delivering control, change and production at scale. It will be a safer, faster and more cost-effective way to build the homes, offices, factories and other structures we need to thrive in cities and beyond. As rich datasets are created across the construction industry through the internet of things, AI and image capture, to name a few, this vision is already coming to life. Using data to deeply understand industry processes is profoundly enhancing the ability of field professionals to trust their instincts in real-time decision making, enabling learning and progress while gaining trust and adoption.
Actionable data sheds light where we could not see before, empowering leaders to manage projects proactively rather than reactively. Precision in planning and execution enables construction professionals to control the environment, instead of it controlling them, and creates repeatable processes that are easier to control, automate, and teach.
That’s the future of construction. And it’s already begun.
11. Gigaton-scale CO2 removal will help to reverse climate change
A scale up of negative emission technologies, such as carbon dioxide removal, will remove climate-relevant amounts of CO2 from the air. This will be necessary in order to limit global warming to 1.5°C. While humanity will do everything possible to stop emitting more carbon into the atmosphere, it will also do everything it can in order to remove historic CO2 from the air permanently. By becoming widely accessible, the demand for CO2 removal will increase and costs will fall. CO2 removal will be scaled up to the gigaton-level, and will become the responsible option for removing unavoidable emissions from the air. It will empower individuals to have a direct and climate-positive impact on the level of CO2 in the atmosphere. It will ultimately help to prevent global warming from reaching dangerous levels and give humanity the potential to reverse climate change.
Jan Wurzbacher, Co-Founder and co-CEO of Climeworks
12. A new era in medicine
Medicine has always been on a quest to gather more knowledge and understanding of human biology for better clinical decision-making. AI is that new tool that will enable us to extract more insights at an unprecedented level from all the medical ‘big data’ that has never really been fully taken advantage of in the past. It will shift the world of medicine and how it is practiced.
Improvements in AI will finally put access to wealth creation within reach of the masses. Financial advisors, who are knowledge workers, have been the mainstay of wealth management: using customized strategies to grow a small nest egg into a larger one. Since knowledge workers are expensive, access to wealth management has often meant you already need to be wealthy to preserve and grow your wealth. As a result, historically, wealth management has been out of reach of those who needed it most. Artificial intelligence is improving at such a speed that the strategies employed by these financial advisors will be accessible via technology, and therefore affordable for the masses. Just like you don’t need to know how near-field communication works to use ApplePay, tens of millions of people won’t have to know modern portfolio theory to be able to have their money work for them.
14. A clean energy revolution supported by digital twins
Over the next five years, the energy transition will reach a tipping point. The cost of new-build renewable energy will be lower than the marginal cost of fossil fuels. A global innovation ecosystem will have provided an environment in which problems can be addressed collectively, and allowed for the deployment of innovation to be scaled rapidly. As a result, we will have seen an astounding increase in offshore wind capacity. We will have achieved this through an unwavering commitment to digitalization, which will have gathered a pace that aligns with Moore’s law to mirror solar’s innovation curve. The rapid development of digital twins – virtual replicas of physical devices – will support a systems-level transformation of the energy sector. The scientific machine learning that combines physics-based models with big data will lead to leaner designs, lower operating costs and ultimately clean, affordable energy for all. The ability to monitor structural health in real-time and fix things before they break will result in safer, more resilient infrastructure and everything from wind farms to bridges and unmanned aerial vehicles being protected by a real-time digital twin.
15. Understanding the microscopic secrets hidden on surfaces
Every surface on Earth carries hidden information that will prove essential for avoiding pandemic-related crises, both now and in the future. The built environment, where humans spend 90% of their lives, is laden with naturally occurring microbiomes comprised of bacterial, fungal and viral ecosystems. Technology that accelerates our ability to rapidly sample, digitalize and interpret microbiome data will transform our understanding of how pathogens spread. Exposing this invisible microbiome data layer will identify genetic signatures that can predict when and where people and groups are shedding pathogens, which surfaces and environments present the highest transmission risk, and how these risks are impacted by our actions and change over time. We are just scratching the surface of what microbiome data insights offer and will see this accelerate over the next five years. These insights will not only help us avoid and respond to pandemics, but will influence how we design, operate and clean environments like buildings, cars, subways and planes, in addition to how we support economic activity without sacrificing public health.
16. Machine learning and AI expedite decarbonization in carbon-heavy industries
Over the next five years, carbon-heavy industries will use machine learning and AI technology to dramatically reduce their carbon footprint. Traditionally, industries like manufacturing and oil and gas have been slow to implement decarbonization efforts as they struggle to maintain productivity and profitability while doing so. However, climate change, as well as regulatory pressure and market volatility, are pushing these industries to adjust. For example, oil and gas and industrial manufacturing organizations are feeling the pinch of regulators, who want them to significantly reduce CO2 emissions within the next few years. Technology-enabled initiatives were vital to boosting decarbonizing efforts in sectors like transportation and buildings – and heavy industries will follow a similar approach. Indeed, as a result of increasing digital transformation, carbon-heavy sectors will be able to utilize advanced technologies, like AI and machine learning, using real-time, high-fidelity data from billions of connected devices to efficiently and proactively reduce harmful emissions and decrease carbon footprints.
Despite the accelerating regulatory environments we’ve seen surface in recent years, we are now just seeing the tip of the privacy iceberg, both from a regulatory and consumer standpoint. Five years from now, privacy and data-centric security will have reached commodity status – and the ability for consumers to protect and control sensitive data assets will be viewed as the rule rather than the exception. As awareness and understanding continue to build, so will the prevalence of privacy preserving and enhancing capabilities, namely privacy-enhancing technologies (PET). By 2025, PET as a technology category will become mainstream. They will be a foundational element of enterprise privacy and security strategies rather than an added-on component integrated only meet a minimum compliance threshold. While the world will still lack a global privacy standard, organizations will embrace a data-centric approach to security that provides the flexibility necessary to adapt to regional regulations and consumer expectations. These efforts will be led by cross-functional teams representing the data, privacy and security interests within an organization.
How will technology change the world in the next five years?
It is very exciting to see the pace and transformative potential of today’s innovative technologies being applied to solve the world’s most pressing problems, such as feeding a global and growing population; improving access to and quality of healthcare; and significantly reducing carbon emissions to arrest the negative effects of climate change. The next five years will see profound improvements in addressing these challenges as entrepreneurs, the investment community and the world’s largest enterprise R&D organizations focus on developing and deploying solutions that will deliver tangible results.
While the COVID-19 pandemic has provided a difficult lesson in just how susceptible our world is today to human and economic turmoil, it has also – perhaps for the first time in history – necessitated global collaboration, data transparency and speed at the highest levels of government in order to minimize an immediate threat to human life. History will be our judge, but despite the heroic resolve and resiliency on a country by country basis, as a world we have underperformed. As a global community and through platforms like the World Economic Forum, we must continue to bring visibility to these issues while recognizing and supporting the opportunities for technology and innovation that can best and most rapidly address them.
The Massachusetts Institute of Technology asking Why the Mediterranean is a climate change hotspot came up with A new analysis uncovers the basis of the severe rainfall declines predicted by many models.
17 June 2020
Although global climate models vary in many ways, they agree on this: The Mediterranean region will be significantly drier in coming decades, potentially seeing 40 percent less precipitation during the winter rainy season.
An analysis by researchers at MIT has now found the underlying mechanisms that explain the anomalous effects in this region, especially in the Middle East and in northwest Africa. The analysis could help refine the models and add certainty to their projections, which have significant implications for the management of water resources and agriculture in the region.
The study, published last week in the Journal of Climate, was carried out by MIT graduate student Alexandre Tuel and professor of civil and environmental engineering Elfatih Eltahir.
The different global circulation models of the Earth’s changing climate agree that temperatures virtually everywhere will increase, and in most places so will rainfall, in part because warmer air can carry more water vapor. However, “There is one major exception, and that is the Mediterranean area,” Eltahir says, which shows the greatest decline of projected rainfall of any landmass on Earth.
“With all their differences, the models all seem to agree that this is going to happen,” he says, although they differ on the amount of the decline, ranging from 10 percent to 60 percent. But nobody had previously been able to explain why.
Tuel and Eltahir found that this projected drying of the Mediterranean region is a result of the confluence of two different effects of a warming climate: a change in the dynamics of upper atmosphere circulation and a reduction in the temperature difference between land and sea. Neither factor by itself would be sufficient to account for the anomalous reduction in rainfall, but in combination the two phenomena can fully account for the unique drying trend seen in the models.
The first effect is a large-scale phenomenon, related to powerful high-altitude winds called the midlatitude jet stream, which drive a strong, steady west-to-east weather pattern across Europe, Asia, and North America. Tuel says the models show that “one of the robust things that happens with climate change is that as you increase the global temperature, you’re going to increase the strength of these midlatitude jets.”
But in the Northern Hemisphere, those winds run into obstacles, with mountain ranges including the Rockies, Alps, and Himalayas, and these collectively impart a kind of wave pattern onto this steady circulation, resulting in alternating zones of higher and lower air pressure. High pressure is associated with clear, dry air, and low pressure with wetter air and storm systems. But as the air gets warmer, this wave pattern gets altered.
“It just happened that the geography of where the Mediterranean is, and where the mountains are, impacts the pattern of air flow high in the atmosphere in a way that creates a high pressure area over the Mediterranean,” Tuel explains. That high-pressure area creates a dry zone with little precipitation.
However, that effect alone can’t account for the projected Mediterranean drying. That requires the addition of a second mechanism, the reduction of the temperature difference between land and sea. That difference, which helps to drive winds, will also be greatly reduced by climate change, because the land is warming up much faster than the seas.
“What’s really different about the Mediterranean compared to other regions is the geography,” Tuel says. “Basically, you have a big sea enclosed by continents, which doesn’t really occur anywhere else in the world.” While models show the surrounding landmasses warming by 3 to 4 degrees Celsius over the coming century, the sea itself will only warm by about 2 degrees or so. “Basically, the difference between the water and the land becomes a smaller with time,” he says.
That, in turn, amplifies the pressure differential, adding to the high-pressure area that drives a clockwise circulation pattern of winds surrounding the Mediterranean basin. And because of the specifics of local topography, projections show the two areas hardest hit by the drying trend will be the northwest Africa, including Morocco, and the eastern Mediterranean region, including Turkey and the Levant.
That trend is not just a projection, but has already become apparent in recent climate trends across the Middle East and western North Africa, the researchers say. “These are areas where we already detect declines in precipitation,” Eltahir says. It’s possible that these rainfall declines in an already parched region may even have contributed to the political unrest in the region, he says.
“We document from the observed record of precipitation that this eastern part has already experienced a significant decline of precipitation,” Eltahir says. The fact that the underlying physical processes are now understood will help to ensure that these projections should be taken seriously by planners in the region, he says. It will provide much greater confidence, he says, by enabling them “to understand the exact mechanisms by which that change is going to happen.”
Eltahir has been working with government agencies in Morocco to help them translate this information into concrete planning. “We are trying to take these projections and see what would be the impacts on availability of water,” he says. “That potentially will have a lot of impact on how Morocco plans its water resources, and also how they could develop technologies that could help them alleviate those impacts through better management of water at the field scale, or maybe through precision agriculture using higher technology.”
The work was supported by the collaborative research program between Université Mohamed VI Polytechnique in Morocco and MIT.
Imagine a clean alternative to fossil fuels, one that leaves no greenhouse gas residues and even, unlike solar and wind renewables, can be used at any moment of the day or night, whatever the weather conditions.
Imagine that using it instead of fossil fuels sharply reins in the harmful emissions raising global temperatures, helping the world to solve the climate crisis.
This is not a fairy story. This gas exists. It’s called green hydrogen, and is made by using clean electricity from renewable energy technologies to electrolyse water (H2O), separating the hydrogen atom within it from its molecular twin oxygen.
The catch has always been that the cost of making green hydrogen prices it out of competition with fossil fuels, because, even if it is carbon-free, it is energy-intensive. But that is changing, because, for the past two years, improvements in renewable energy technology have seen renewable electricity costs plummet.
Now, as the world plans economic recovery efforts after the coronavirus pandemic, and trillions of dollars and euro are readied to invest in build-back-better approaches, an increasing number of scientists and policymakers are saying green hydrogen’s time has come to be brought fully into the energy mix of the future.
They’re advocating investing in stimulating production, both to tackle the economic fallout of this year’s pandemic and to build a future without fear of climate cataclysm.
“Important emerging elements of clean energy progress – hydrogen electrolysers and lithium-ion batteries – are on the verge of becoming the decade’s breakout technologies. These technologies should play a key role in bolstering Europe’s transport and industry as the continent emerges from the crisis and looks to develop new advanced manufacturing for export,” the International Energy Agency’s executive director Fatih Birol and Frans Timmermans, executive vice-president of the European Commission, wrote in May.
“If the EU seizes this opportunity, it will give itself a cutting edge on global markets,” Birol and Timmerman concluded.
Their editorial – as well as reported comments by Birol that green hydrogen technology was “ready for the big time” and that governments should channel investments into the field – came as the European Union prepared to publish its own hydrogen strategy while implementing the European Green Deal plan to reduce net emissions to zero by 2050.
The pace of discussion on green hydrogen has picked up, especially since the outbreak of coronavirus.
Governments including those of Germany, Britain, Australia and Japan are working on or have announced hydrogen strategies. Australia has set aside A$300 million ($191 million) to jumpstart hydrogen projects. Portugal plans a new solar-powered hydrogen plant which will produce hydrogen by electrolysis by 2023. The Netherlands unveiled a hydrogen strategy in late March, outlining plans for 500 megawatts (MW) of green electrolyser capacity by 2025.
“We could use these circumstances, where loads of public money are going to be needed into the energy system, to jump forward towards a hydrogen economy,” said Diederik Samsom, who heads the European Commission’s climate cabinet. This could result in hydrogen use scaling up faster than was expected before the pandemic, he was quoted by Reuters as saying.
Most of the hydrogen produced today is not green. The gas is colour-coded according to the way it is produced, says the EBRD’s Christian Carraretto.
“The hydrogen that the world uses today is made from either coal or natural gas. This hydrogen is carbon-intensive, it’s not a green fuel. It’s called grey hydrogen if it comes from gas, while the hydrogen produced from coal is called black. Then there is blue hydrogen, an upgrade of the grey, where the CO2 emitted is captured upstream, so the system doesn’t emit CO2 in the atmosphere.”
The European Commission has earmarked clean hydrogen – a loose term which can include gas-based hydrogen, if fitted with technology to capture the resulting emissions, as well as green hydrogen – as a “priority area” for industry in its Green Deal.
If clean hydrogen does start to play a bigger part in the world’s energy mix, incorporating it will be technically relatively easy, Mr Carraretto said, as the infrastructure already built to carry natural gas can also carry hydrogen.
He said a recent study had shown 70 per cent of Italy’s gas network would be hydrogen-ready if there were enough hydrogen being produced to be carried down its pipes. It could be used in both homes and industry without radical change.
“Clean hydrogen is what the EU think is the solution to deliver on decarbonised fuels. And the reason why it’s important is that not all economic activities can move to renewables only. There are some sectors that are typically hard to decarbonise – sectors like steel, or chemical industries, or to some extent aviation – which will still use fuels in their systems.
“So either they are stuck with the cleanest of the fossil fuels or they switch to decarbonised fuels like hydrogen or biogas. Biogas is a mainstream technology and it hasn’t really picked up a lot because there is an issue with availability of organic wastes. So hydrogen is what we see as the most promising option at this moment.”
There remains the question of prices. Today, hydrogen made from fossil fuels costs between $1-$1.8/kg. Green hydrogen can cost around $3-$6/kg, making it significantly more expensive than the fossil fuel alternatives.
However, increased demand could reduce the cost of electrolysis. Coupled with falling renewable energy costs, green hydrogen could fall to $1.5/kg by 2050 and possibly sub-$1/kg, making it competitive with natural gas. Higher carbon prices would also encourage the shift.
Mr Carraretto said: “Here we are probably in the same situation as we were a decade or two ago with renewable energy, where this solution is still more expensive than the alternatives. But even today it’s only two or three times more expensive, it’s not 100 times more expensive, so if things keep going and if there is policy push going forward, our expectation that it will become really cost-competitive soon.
“And that’s why we see a lot of big players looking at it, pilot projects happening everywhere.”
“What is also exciting is that with the recent dramatic fall in renewable energy prices – particularly in the southern and eastern Mediterranean countries where we work, and potentially with offshore wind being developed in countries from Turkey to Poland and Greece, too – these countries could become sources of production of green hydrogen, with projects we could consider investing in, within a few years,” Mr Carraretto added. “This is really on the edge of becoming a game-changer”.
The image above is of the Mongu-Kalabo Road crossing the Barotse Floodplain in western Zambia. Charis Enns, Author provided
Kenyan President Uhuru Kenyatta fumed at construction delays on the Lamu Port-South Sudan-Ethiopia Transport Corridor in 2019 – a US$22 billion (£18 billion) transport network that includes a 32-berth port, highways, railways and pipelines. But these delays, caused by financing gaps, afforded fishers, pastoral farmers and conservationists time to challenge the project in court, and push for amended plans that better protect local habitats and migratory routes used by people, livestock and wildlife.
While major road and rail projects often break up wilderness and grazing lands, a sudden pause in construction can offer a lifeline to people fighting to protect these areas.
Lockdown restrictions and the uncertainty caused by COVID-19 have made sourcing labour and materials more difficult, increasing construction costs. The result is that infrastructure building has slowed globally, creating a unique opportunity to redesign road and rail projects around the world so that they benefit the people and environments they share the landscape with.
Barriers to travel
Dozens of new roads, railways and pipelines are under construction in sub-Saharan Africa due to a surge in investment in recent years. Although they are promised to bolster economic growth, our research shows that many of these new mega-highways and high-speed rail lines were approved without meaningful consultation between planners and local people. As a result, they tend to become new barriers that are difficult and dangerous to traverse, forcing people to travel long distances to reach safe crossing points.
In dry regions, this can make it difficult to reach vital water sources. Amid farmland and forests, construction can push people from their land or force them to travel further to reach it. Deforestation usually comes before construction too, which encourages people to migrate further into woodland, building new settlements that drive more forest clearing.
Poorly designed roads and rail lines can take a heavy toll on human and animal life. During our research between 2017 and 2019, we found too few safe crossing points, inadequate signage and lax speed enforcement along new highways and railways in Kenya and Tanzania, resulting in numerous road accidents.
Conservationists are particularly worried by growing roadkill sightings along a new highway in northern Kenya. Endemic and endangered species like the Grevy’s zebra are often killed in collisions with cars and lorries after wandering onto roads that now criss-cross their range. As one pastoral farmer living alongside the new highway exclaimed
How many animals have died? Uncountable.
Fortunately, there are lots of proven strategies for preventing transport projects from fragmenting habitats, such as building passages across new highways and railways that migratory species can use. Repairing environmental damage caused by construction, by filling in quarries that produce construction materials, for example, can also help restore grazing land for livestock and wildlife.
The Mongu-Kalabo road constructed over the Barotse floodplain in western Zambia shows these ideas in action. Completed in 2016, the road was built with 26 bridges over the floodplains and regular culverts between bridges, allowing water and wildlife to move across the floodplain without impeding road traffic and trade, even during seasonal floods.
The road was also planned with local cultures in mind. Wetland livelihoods, such as fishing and floodplain farming, aren’t affected by the road since the regular movement of fish and water remains largely undisturbed. By maintaining these flows across the floodplain, cultural traditions have been protected. The annual Kuomboka ceremony that takes place at the end of the rainy season can continue, when the Litunda (king of the Lozi people) moves from his compound in the Barotse floodplain to higher ground.
There is no single blueprint for building roads and railways that allow humans and nature to thrive. Wherever construction is planned, public participation is vital. Gathering the knowledge local people have of their environment can improve the design of these projects, but this insight cannot come from rushed consultations or impact assessments conducted from a distance. Only meaningful and ongoing engagement with local communities and environmental authorities will do.
Major infrastructure investment will likely be key to pulling the global economy out of recession. The opportunity to mould upcoming projects won’t last forever, so let’s ensure any new road and rail project is designed with respect to the rights of people and nature.
Business Maverick tells us the Expats are leaving Dubai and that’s bad news for the economy
It’s a choice facing millions of foreigners across the Gulf as the fallout from the pandemic and a plunge in energy prices forces economic adjustments.
“Dubai is home for me,” said Sissons, who owned a small cafe and worked as a freelance human resources consultant. But “it’s expensive here and there’s no safety for expats. If I take the same money to Australia and we run out of everything, at least we’ll have medical insurance and free schooling.”It’s a choice facing millions of foreigners across the Gulf as the fallout from the pandemic and a plunge in energy prices forces economic adjustments. Wealthy Gulf Arab monarchies have, for decades, depended on foreign workers to transform sleepy villages into cosmopolitan cities. Many grew up or raised families here, but with no formal route to citizenship or permanent residency and no benefits to bridge the hard times, it’s a precarious existence.
The impact is starkest in Dubai, whose economic model is built on the presence of foreign residents who comprise about 90% of the population.
Oxford Economics estimates the United Arab Emirates, of which Dubai is a part, could lose 900,000 jobs — eye-watering for a country of 9.6 million — and see 10% of its residents uproot. Newspapers are filled with reports of Indian, Pakistani and Afghan blue-collar workers leaving on repatriation flights, but it’s the loss of higher earners that will have painful knock-on effects on an emirate geared toward continuous growth.
“An exodus of middle-class residents could create a death spiral for the economy,” said Ryan Bohl, a Middle East analyst at Stratfor. “Sectors that relied on those professionals and their families such as restaurants, luxury goods, schools and clinics will all suffer as people leave. Without government support, those services could then lay off people who would then leave the country and create more waves of exodus.”
With the global economy in turmoil, the decision to leave isn’t straightforward. Dubai residents who can scrape by will likely stay rather than compete with the newly unemployed back home. The International Labor Organization says more than 1 billion workers globally are at high risk of pay cuts or job losses because of the coronavirus.
Some Gulf leaders, like Kuwait’s prime minister, are encouraging foreigners to leave as they fret about providing new jobs for locals. But the calculation for Dubai, whose economy depends on its role as a global trade, tourism and business hub, is different.
The crisis will likely accelerate the UAE’s efforts to allow residents to remain permanently, balanced against the status of citizens accustomed to receiving extensive benefits since the discovery of oil. For now, the UAE is granting automatic extensions to people with expiring residence permits and has suspended work-permit fees and some fines. It’s encouraging local recruitment from the pool of recently unemployed and has pushed banks to provide interest-free loans and repayment breaks to struggling families and businesses.
A Dubai government spokesperson said authorities were studying more help for the private sector: “Dubai is considered home to many individuals and will always strive to do the necessary to welcome them back.”
Dubai’s main challenge is affordability. The city that built its reputation as a free-wheeling tax haven has become an increasingly costly base for businesses and residents. In 2013, Dubai ranked as the 90th most expensive place for expatriates, according to New York-based consultant Mercer. It’s now 23rd, making it the priciest city in the Middle East, though it slipped from 21st place in 2019 as rents declined due to oversupply.
Education is emerging as a deciding factor for families, especially as more employers phase out packages that cover tuition. Though there’s now a wider choice of schools at different price points, Dubai had the region’s highest median school cost last year at $11,402, according to the International Schools Database.
That will likely lead parents to switch to cheaper schools and prompt cuts in fees, according to Mahdi Mattar, managing partner at MMK Capital, an advisory firm to private equity funds and Dubai school investors. He estimates enrollments may drop 10%-15%.
Sarah Azba, a teacher, lost her job when social distancing measures forced schools online. That deprived her of an important benefit; a free education for her son. So she and the children are returning to the U.S., where her 14-year-old son will go to public school and her daughter to college. Her husband will stay and move to a smaller, cheaper home.“Separating our family wasn’t an easy decision but we had to make this compromise,” Azba said.
For decades, Dubai has thought big, building some of the world’s most expansive malls and tallest buildings. From the desert sprang neighborhoods lined with villas designed for expat families lured by sun and turbo-boosted, tax-free salaries. New entertainment strips popped up and world-class chefs catered to an international crowd. But the stress was building long before 2020. Malls were busy but shoppers weren’t spending as much. Residential properties were being built but there were fewer buyers. New restaurants seemed to cannibalize business from old.
The economy never returned to the frenetic pace it enjoyed before the 2008 global credit crunch prompted the last bout of expatriate departures. Then, just as it turned a corner, the 2014 plunge in oil prices set growth back again. The Expo 2020, a six-month exhibition expected to attract 25 million visitors, was supposed to be a reset; it’s now been delayed due to Covid-19.
Weak demand means recovery will take time. Unlike some Middle Eastern countries, the UAE isn’t seeing a resurgence in Covid-19 infections as it reopens, but its reliance on international flows of people and goods means it’s vulnerable to global disruptions.
Emirates Group, the world’s largest long-haul carrier, is laying off employees as it weighs slashing some 30,000 jobs, one of the deepest culls in an industry that was forced into near-hibernation. Dubai hotels will likely cut 30% of staff. Developers of Dubai’s man-made islands and tallest tower have reduced pay. Uber’s Middle East ride-hailing unit Careem eliminated nearly a third of jobs in May but said this week business was recovering.
Dubai-based Move it Cargo and Packaging said it’s receiving around seven calls a day from residents wanting to ship their belongings abroad. That compares with two or three a week this time last year. Back then, the same number of people were moving in too. Now, it’s all outward bound.
Marc Halabi, 42, spent the past week reluctantly sorting belongings accumulated over 11 years in Dubai. Boxes line the rooms as he, his wife and two daughters decide what to ship back to Canada. An advertising executive, Halabi lost his job in March. He’s been looking for work that would allow the family to remain but says he can’t afford to hold out any longer.
“I’m upset we’re leaving,” Halabi said. “Dubai feels like home and has given me many opportunities, but when you fall on hard times, there isn’t much help and all you’re left with is a month or two to pick up and move.”
A rather meaningful piece of energy news went almost unnoticed in recent weeks. The Abu Dhabi Power Corporation announced the lowest tariff for solar energy in the world. The new record came as the winning bid for the upcoming 2 GW solar power plant, the Al Dhafra Solar PV project, set the world’s most cost-competitive tariff for solar PV energy, at USD 1.35 cents/kWh (AED 4.97 fils/kWh in local currency). This is approximately 44% lower than the tariff set just three years ago for the ‘Noor Abu Dhabi’ project – Abu Dhabi’s first large-scale solar 1.2GW PV project and a world record tariff-setter at the time – which commenced its commercial operation back in April 2019.
The gigantic photovoltaic power plant is scheduled to come online in mid-2022. Expected to cover an area of 20 square kilometers, it will almost triple Abu Dhabi’s solar power generation to 3.2 GW and help the Emirate state achieve its 2030 goal to reduce carbon intensity by 70% compared to 2015. This single addition could on its own supply almost 3% of the entire United Arab Emirates annual electricity demand (~127 TWh in 2018). The Al Dhafra and Noor projects firmly position Abu Dhabi among the leading regions of the world for solar power adoption and price benchmark. To better appreciate the competitiveness of this bid, it’s worth noting that even old and fully depreciated coal power plants have LCOE values around USD 3.3 cents/kWh (see Lazard’s Levelized Cost of Energy 2019).
But why would this piece of news matter? Surely this is a geographical exception, a sunny oasis in a world otherwise dominated by cheap fossil fuels, a result that cannot be replicated worldwide. Well, not really. While the Middle East is naturally bound to become a solar powerhouse in the coming years – its wide desert areas and sunny climate result in typical PV load factors above 1800 kWh/kWp installed – high levels of solar irradiance are actually available throughout the world within a broad range of latitudes. A beautiful map from Global Solar Atlas is worth a thousand words.
As global data show, a vast portion of the planet is in fact ripe for exploitation with ultra-cheap solar power. And the news from the Emirates are indeed echoed by comparable prices set elsewhere over the past year, from Europe to America. The previous solar tariff record belonged to Portugal: the southern European country claimed the spot in July 2019, at about USD 1.64 cents/kWh for a 150 MW project. 211 MW of PV capacity were signed at USD 1.75 cents/kWh in Brazil just weeks before that, while a sub-2 cents/kWh bid was also presented in the same period for the Los Angeles Eland Solar & Storage Center project in Kern County, California (the final version of the project will in fact be a 300 MW / 1.2 GWh energy storage installation – with an aggregate price of USD 3.962 cents/kWh for dispatchable power).
At the levels being reached by utility-scale solar, even northern, rainy countries such as the UK – with half the solar irradiance of the Emirates – could soon see projects achieve LCOEs below USD 3 cents/kWh (if they are not beat by cheaper wind power at those latitudes). We are now at a point where economics alone is the main factor driving the energy transition towards sustainability. With an annual global growth hovering around the 100 GW mark before the coronavirus crisis, solar power is now poised for a long-term additional boost through favourable economic recovery policies planned by most governments around the world. The unfolding economic crisis, likely to push down solar capital costs even further, will only make the PV market even more attractive. Cheap large-scale battery storage, whether coupled to these projects or as stand-alone peaker plants replacement, will be the natural ally.
With the global financial community increasing its focus on fossil fuel divestment and sustainability, we can expect the booming utility-scale solar market to mark its presence in all continents at increasing pace. Investors with deep pockets, looking for stable and predictable returns at a time of increasing uncertainty and change, will safely bet on massive renewable energy developments for reliable returns on their portfolios, while avoiding the volatility and risk involved with projects in the incumbent sources of energy.
The young and educated population of the Gulf countries surfing on a raft of significant infrastructure projects seems to have found its way through this worldwide thin patch in its development ground. The Rising Need for Smart Grids gives a pertinent view of how, in the recent past, new setups are taking shape for a durable and sustainable future. A future where the Middle East moves towards a Smart Cities model of development.
The Middle East moves towards a Smart Cities FutureThe ongoing coronavirus crisis has underscored our deep dependence on digitization and modern technologies. Under the COVID-19 lockdown, smart technologies have enabled us to continue to work, learn and shop from the safety of our home. The coronavirus pandemic changed consumers’ energy profiles overnight and amplified the importance of continuous, uninterrupted electric supply for essential services and for nearly every business sector to keep running.
The utilities sector is still on the periphery of digitization that has disrupted other sectors, such as telecommunications and banking. Utilities have historically under-invested in information technology (IT), focusing instead on the operations technologies that enable their core business of generating, transmitting and distributing power.
The change has been slow in coming, but utilities are now waking up to consumers’ demand for smart, interactive services. Along the way, they are identifying many potential benefits of smart technology, not just to the increasingly sophisticated customer, but to their own business. Enter: the smart grid.
While there is much progress still to be made until smart grids and utilities reach their potential across the MENA region, the opportunity is just as large.
Investment on the up
Investment in smart grids is rising globally, spurred by an increasing acknowledgement amongst utilities of smart grid benefits, along with government mandates for energy efficiency and grid reliability. According to market research and consultancy firm, Navigant Research, smart grid IT software and services are expected to generate US$17.1 billion in revenue in 2024 up from US$8.5 billion a decade earlier. With rising investments in the field, several fundamental smart grid building blocks stand to gain. Here, the key focus areas include transmission upgrades, substation automation, distribution automation, smart metering and utility enterprise IT.
The increased investment in smart technologies is enabling the smart grid to evolve and advance. Emerging innovations are promising to benefit consumers, utilities and countries world-wide. Some of these innovations include micro grids, energy storage devices such as Li-Ion batteries, smart homes that adjust consumption according to utility rates, Demand Response (DR) Management Systems that predict peak usage times and mitigate outages and Electric Vehicle (EV) Charging Stations. These technological innovations are just one sign that commitment to the smart grid is growing stronger, as its role in satisfying and engaging customers becomes more apparent.
While the true impact of emerging smart grid trends remains to be seen, existing innovations are already delivering tangible and wide-ranging benefits, not just to consumers and companies, but to entire nations, too.
Smart grids provide a wide range of automation features, differentiating them from traditional grids; these features are vital for business continuity.
In view of social distancing requirements currently in place to protect public health, Remote Firmware Upgrade allows a utility company to push firmware patches and revisions to clients without the need to mobilize Operation and Maintenance (O&M) personnel. Remote reading, connection and disconnection can all be conducted with an Advanced Metering Infrastructure (AMI) minimizing the need for field personnel to be deployed.
Moreover, AMI can be easily integrated with other Customer Relationship Management (CRM) and billing solutions to streamline entire meter-to-cash processes and reduce client visits to a service centre. When customers change their daily routines, to work from home for instance, they can evaluate the impact of their new behaviour on their utility bills and make appropriate changes. The smart grid arms today’s consumers with a wealth of information, allowing them to stay informed of their consumption and to explore and compare pricing plans and options to buy and sell. Furthermore, a utility company’s Meter Data Management (MDM) solution provides the company with analytical tools to analyse these evolving patterns and to improve network planning in response.
Smart grids’ Demand Response techniques such as real-time pricing can enable utilities to limit/manage customers’ consumption to account for distribution shortages or emergencies. As consumers’ energy profiles change leading to a shift in demand patterns geographically (e.g., closure of an industrial zone, shutdown of a shopping area), Distribution Automation technologies allow a utility company to monitor and analyse these demand variations and devise and execute appropriate distribution changes in response.
The unparalleled integration provided by the smart grid facilitates critical connectivity between intelligence and asset management applications, increasing operational efficiency across the grid. Meanwhile, integration provides different power generation types, both continuous and intermittent. The smart grid also introduces new storage options, such as fuel cells, and paves the way for greater integration of alternative and intermittent energy sources, including wind and solar energy. Distributed generation enabled by the smart grid benefits existing, mature electricity markets, while also developing new ones.
While there are challenges associated with smart grid design, implementation and deployment, the paradigm shift that is underway also heralds the arrival of complex technical challenges, with cybersecurity prime amongst them. Deploying a smart grid without adequate security could result in serious consequences such as utility fraud, loss of user information and grid instability. The smart grid’s complexity and multiple entry points—from smart meters to distributed energy resources (DER)—create significant vulnerabilities that leave the grid open to breaches and attacks that can target customer data and inflict damage. The implementation of system-wide cyber security that stretches to end-user devices, is a crucial first step in combating the challenge.
Big data and analytics also have a critical role to play in enabling the value of smart grids, yet they, too, present new and growing challenges to utilities with smart grid ambitions. The sheer size of the smart grid means that handling and processing the vast amount of data generated is problematic.
Converting this deluge of information into meaningful intelligence requires a complete overhaul of IT and analytics infrastructure. The information now at utilities’ fingertips poses a challenge not just for data management, but for communications systems, too. Where different vendors and service providers work independently, it is crucial that utilities develop interoperable systems with capacity to exchange large amounts of data between multiple systems.
The Way Forward
Large utilities across the MENA region can build on existing global knowledge and experience to accelerate their own smart grid initiatives, for the benefit of all stakeholders. At the regional level, particularly for the GCC countries, the smart grid is in sync with national missions to increase energy generation from renewable sources such as solar and provides the opportunity to diversify economies away from non-renewables.
Smart grids are the future of utilities. Indeed, it is no longer a matter of if, but when, they begin to roll out smart grid infrastructure, irreversibly changing the utilities landscape as they go. To reap the rewards, each utility must draw up its own path and carefully consider objectives, situation, capabilities and risk appetite, recognizing that there is no one-size-fits-all approach. While needs and circumstances may vary, utilities face one common reality: the smart grid rewards are bigger than ever for those who plan diligently and who stay plugged-in and switched-on to the smart evolution now shaping our world.
‘The immediate issue for all businesses, in whichever industry they’re in, is survival’ – Shehab Gargash by Bernd Debusmann Jr who on 30 May 2020 reports that Gargash Group managing director and CEO Shehab Gargash has a grim short-term forecast for the coronavirus-era economy. But out of the ashes, opportunity will arise. 10 Scenarios for the MENA region in the year 2050 elaborated by @Eubulletin amongst many others predicted similar outcome, even though the world was not going through the same exceptional circumstances.
Like most globetrotting travellers and businessmen, Shehab Gargash’s office has souvenirs of his trips. But these souvenirs aren’t postcards, fridge magnets or cheap trinkets. Gargash collects boarding passes – hundreds of which are kept in a massive glass display case in his office, atop of which sits a silver and red aircraft wing.
“Oh! I have slipped the surly bonds of earth,” reads a sonnet on the case, written by American poet and pilot John Gillespie Magee Jr, killed flying a Spitfire over England during the Second World War. “And danced the skies on laughter-silvered wings.”
This, I think to myself when I see it, is a man who really loves his travel. His Instagram account proves it.
From India and China to Barcelona, Monaco and the Maldives, Gargash gets around – and that’s just in the last year alone.
But like the rest of us, Covid-19 has put a damper on Gargash’s travel plans.
“When will I travel again? That’s a good question,” he tells me, chuckling through the grainy screen of our video teleconference meeting.
“If I’m going on holiday, I want to enjoy it. So I’m not itching to get back on a plane. I don’t think we’ll be there anytime soon.”
In the current climate, an Instagram-worthy trip is the least of Gargash’s concerns. At the moment, he’s preoccupied with facing the impact of the coronavirus pandemic, both on Gargash Group – of which he is managing director and CEO – and on the wider economies of the UAE and GCC.
Some estimates – such as that of the International Monetary Fund (IMF) – forecast that the GCC economies will collectively record negative real GDP growth in 2020, with the UAE slipping to -3.5 percent from 1.3 percent growth last year.
When it comes to the crisis, Gargash’s warm smile and friendly banter come to a stop. This isn’t a situation he minces words about.
“The immediate issue for all businesses, in whichever industry they’re in, is survival,” he tells me. “I think we are facing worldwide, industry-wide, existential issues that a lot of us have never even dreamed of. It’s all-encompassing and covers all sorts of areas of the economy.”
Hard times ahead
When it comes to the pandemic-related issues that the UAE’s economy faces, few are in a better position to comment than Gargash. A scion of one of the country’s most prominent Emirati families, Gargash leads the Gargash Group, which has diverse interests including automotive, real estate, hospitality and financial services. He’s also the founding chairman of Daman Investments – not to mention a long-time banking industry and prolific socio-economic commentator.
Gargash Enterprises is the authorised distributor for Mercedes-Benz in Dubai, Sharjah and the Northern Emirates
In the short-term, he says with startling matter-of-factness, the forecast is grim. He predicts that many businesses will not last.
“People aren’t looking at their strategies, or their plans. They’re looking at the daily details of expenses, revenue, cash in the bag. The immediate oxygen for the business to live through this,” he says. “Many businesses will not appreciate the impact of what they thought were very small elements, like levels of leverage and borrowing that seemed manageable a few weeks ago. These will deal a fatal blow to a lot of businesses.”
Perhaps more alarmingly, Gargash believes that most businesses are “nowhere near” a stage in which they can even think of what the future holds. What businesses will look like, and how they can adapt to new realities, are still unknowns.
“We haven’t even considered that future yet. A lot of businesses, through no fault of their own in many cases, will not survive simply because they have underappreciated the need to have that safety cushion,” he adds.
According to Gargash, the businesses that do survive the immediate impact of the pandemic over the coming weeks and months will soon have to start thinking of their next moves.
“You can’t afford to be firefighting too long. Over the weeks and months, [companies will] regain their balance. Subsequent to that, strategy kicks back in,” he explains. “Where am I going as a business? What are my priorities? What are new opportunities, and what’s a dying, sunset industry?
“It’s time we ask ourselves these questions as businesses, as they’ll define how we act, post the shock-therapy. Once we do that, our priorities are better defined, and actions put together accordingly,” Gargash adds. “That’s the kind of soul searching that will occupy our minds this year, and possibly into next year.”
The company has diverse operations in financial investment and real estate
Gargash Group is far larger than most businesses that operate in the country. For the average resident, the company is most readily associated with the automotive sector, being the authorised distributor for Mercedes-Benz in Dubai, Sharjah and the Northern Emirates. It is, however, much more than that, offering a wide range of financial, investment and real estate services in various sectors.
But the company’s size and status did not spare it from the impact of the coronavirus. “We went through shock and panic, and saw revenues tumble to extremely low levels, and like everyone had to grapple with a 24-hour lockdown,” Gargash recalls. “Those were the issues that we dealt with as a group in the early days of the pandemic. Nobody knew how to deal with Covid-19.”
And although Gargash says it is “far too early” for decisions to be made on the company’s future, it has already begun a soul-searching process he advises for companies across the wider economy.
“That’s where we are at right now. Let’s say I have 10 lines of business. Which ones are still valid propositions? The ones that aren’t, do I adjust them? Do I integrate them into something else? Or do I just cut the rope and let them sink?,” he says. “Those kinds of questions are still being tackled.”
While it may be too early to determine what the group’s focus will be going forward and what it may need to be cut loose, Gargash says he isn’t particularly worried. The group’s core businesses – automotive, real estate, and financial services – will form a key part of the post-Covid economy in some form.
In fact, he adds, the shock of the pandemic may end up being a blessing in disguise that forced the company to become “more daring in its implementation.”
Businesses that will survive the impact of the pandemic over the coming months will soon have to start thinking of their next moves, Gargash believes
“We’ll try new ideas, new thoughts, concepts and industries that in the past I dismissed,” he explains. “Let’s imagine, for a second, potato farming. Potato farming has been proven to be a strategic source of nourishment. That’s a silly example, but understand, I’m obliged to become a more entrepreneurial business, and regardless of how ‘classic’ I’ve been in the past. I must investigate new avenues. I have the same eagerness to survive as a brand new start-up.”
A new GCC?
Gargash is undoubtedly an optimist. Even while speaking about the challenges of the economy, he peppers his comments with reminders that, sooner or later, things will return to something resembling normality. As he puts it, the masks will fall off, and the glove won’t be a necessity – even if the “trauma” of the event stays with us.
Even widespread job losses, he says, will eventually lead to something better. “In the longer term, jobs will be replaced, rather than lost. We still [in the UAE] have an economy serving 10 million people, and a broader GCC economy with 50 million or so. Jobs will be created, possibly in new industries and in new roles.”
These new roles – which Gargash admits he isn’t sure what will be, exactly – will require many employees, from blue-collar workers to managers, re-skill themselves, or learn entire new professions. Although challenging, he is confident the region’s youth in particular will manage.
“This [trend] will disproportionally [benefit] young people,” he says. “They’re more adept and more able to align themselves with industry trends.”
These ‘new roles’ don’t just apply to employees. The pandemic, he believes, may ultimately change the UAE’s economy as a whole by encouraging more home-grown entrepreneurs to step up with fresh new ideas.
“Most of the businesses that are set up in the UAE are in the ‘last-mile’ economy: the delivery of a product or service that has evolved somewhere else, or was manufactured somewhere else. Your control over what your supplier gives you is fairly limited. I can’t invent a better wheel, so to say. I’m just distributing the wheel that was manufactured somewhere else.”
Young people could align themselves with industry trends, says Gargash
What we’ll see instead, Gargash hopes, is an opportunity for motivated entrepreneurs to try and forecast where the future is headed and where they can step in with an idea.
“In a post Covid-reality, we’ll be asking what is going to drive businesses, and what those businesses will look like,” he says. “There needs to be a proper reading of what demands will need to be fulfilled. Businesses will need to alter their offerings to suit the new realities.”
He adds, “It’s by no means an easy task. There’s still a lot of projection and reading into the future that is required.”
Once that’s done, he says, the UAE’s economy will be able to take off – as will he, on his next trip abroad. For Gargash, that day will be welcome news.
“I have a fear of losing my frequent flyer miles,” he laughs. “But that’s another story.”
Advice for investors
When asked what advice he’s given to would-be UAE investors in the pandemic, Gargash responds without hesitation: “hold on to it and watch what happens.”
“Do not rush into investments today. I do not think there will be an imminent, overnight bounce back of growth and activity,” he says. “It’s going to come back, but it will be more deliberate.
“It’ll take more time. If I was an investor with AED1m, I’d hold back and watch and observe. I’d make a convinced decision before I take that plunge and go into one asset class.”
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