The electric cars quite literally drive themselves in Masdar City, a carbon-neutral village designed to show off the United Arab Emirates' commitment to renewable energy. The "personal rapid transit" vehicles have glass doors that slide back with a quiet whoosh as you enter. Then they ask, in English, where you want to go. No driver required.
Emirati officials love to bring visiting politicians, business leaders, and journalists to Masdar, which the oil-rich UAE sees as a blueprint for cities of the energy-starved future. Masdar's narrow streets are shaded by angled black solar panels that soak up the country's unforgiving midday sun and cool the roads below. The city center has a multistory wind tower that can be used to either push hot air up and out or funnel cool breezes down through Masdar's central plaza. The city carefully collects, filters, and reuses its water. Its solar-power systems can meet all of its energy needs while feeding excess capacity back into Abu Dhabi's grid.
In truth, Masdar is an Emirati Epcot Center. Its technologies may never come into wide use. Just a few hundred people live here, and experts estimate that the village must have cost several billion dollars to build. (The government refuses to say.) Even the name is a bit of a misnomer: Masdar officials have ambitious plans to construct apartment buildings, roads, and offices, but most remain on the drawing board, giving the Potemkin "city" the feel of a small college campus.
But the UAE's commitment to renewable energy is very real. Emirati leaders accept the concept of "peak oil," in which global petroleum output will soon begin a slow decline. They believe they have between 50 and 200 more years of oil riches beneath their sands, but they recognize the inexorable trend. Renewable energy gives the country a chance to dominate new forms of power just as it currently dominates oil exports. With prices hovering above $120 per barrel, the Emirates and other Persian Gulf nations also want to use less oil and sell more. So the Gulf nations see a huge financial incentive to launch large-scale, government-funded, solar, wind, and nuclear projects that are almost unthinkable in the U.S.
Abu Dhabi, the richest of the seven Emirates, is building the region's first civilian nuclear plants.(See "The Choice," NJ, 2/4/12, p. 12.) It aims to get 7 percent of its power from renewable sources by 2030. Neighboring Dubai is building a massive, 1-gigawatt solar array that will be the largest in the world. Officials say that renewables will account for 5 percent of Dubai's energy needs by 2030.
Like many of their neighbors, Emirati leaders are willing to splurge for those goals. Abu Dhabi has spent $20 billion on nuclear plants and billions more on Masdar City (not to mention a host of affiliated investment companies charged with funding clean-energy projects around the world). Dubai is investing $3.7 billion in the solar array and pledges more for additional plants. Saudi Arabia, the region's biggest oil producer, plans to spend roughly $80 billion in coming years on a network of 16 nuclear plants. By 2030, the kingdom expects renewables to fill 20 percent of its energy needs. Egypt and Morocco are spending billions of dollars on wind farms and solar arrays. They, like the Palestinian Authority, have established government targets for alternative-energy production.
The situation in the United States couldn't be more different. President Obama's ambitious plan to wean the U.S. off fossil fuel ran up against Republican opposition in Congress, solidified by the high-profile failure of solar-energy start-up Solyndra. The United States has no national clean-energy target. Last year, Obama proposed that the country aim to get 80 percent of its electricity from clean sources by 2035; a Senate bill to codify that goal has stalled. A monarchy such as the UAE can establish a goal by diktat, but in gridlocked Washington, Obama alone can't do much to change the energy economy. The numbers tell the story. The Energy Department's fiscal 2013 budget devotes less than $3 billion to efficiency and renewable projects. The Pentagon will spend about $841 million more. That means Dubai (population 2 million) will devote more money to renewable energy than the United States (population 350 million).
Those policies add up to two very different futures. Persian Gulf countries, which sell more oil than any other nation in the world, are preparing for the changes they'll have to make. The United States, which buys more oil than any other nation in the world, is doing next to nothing to prepare for the decline of fossil fuels. The U.S. spent the 20th century importing oil because it failed to create any viable domestic alternatives. In the 21st century, Washington seems likely to perpetuate that mistake.
A DIFFERENT TACK
GOP Rep. Ed Whitfield of Kentucky, the chairman of the House Energy and Power Subcommittee, has a simple answer when asked what the United States should do to prepare for the post-oil future: nothing, because there won't be one. "We've got a 250-year reserve of coal in this country, and my understanding is that we have about the same length of time in oil—and maybe even more in natural gas," he says. "I, for one, am not concerned at all about running out of fossil fuels."
Whitfield represents the GOP mainstream on peak oil (and even human contributions to climate change, which most Republicans dismiss). Partly, that's because of the party's increased reliance on fossil-fuel dollars. Since 1999, the oil, coal, and gas industries have shelled out more than $93 million in campaign contributions to members of Congress, according to data tracked by Oil Change International's Dirty Energy Money Campaign. In 2009 and 2010 alone, members took in more than $25 million, according to public data made available by the Center for Responsive Politics. Even non-carbon sources of campaign money push lawmakers in this direction: Americans for Prosperity, a tea party group that helped flip the House in 2010, was founded by David and Charles Koch, the principal owners of Koch Industries, a major U.S. oil conglomerate.
Republicans also believe that the free market is already overregulated, and they strongly oppose government attempts to jump-start the renewable-energy sector, which they see as "picking winners and losers." Many Democrats, meanwhile, concede that large untapped domestic oil and gas reserves give the U.S. more time to wean itself off oil and to develop clean technology. In a recent interview, Deputy Energy Secretary Daniel Poneman said that historically high levels of oil production mean that the United States can adequately meet its oil needs "for the next several decades."
The fossil-fuel forces have thwarted what Obama had hoped to count among his signature achievements. During the 2008 campaign, he said that his administration would work to spur a domestic renewable-industry market by showering innovators with tens of billions of dollars of subsidies and tax breaks. That capital would allow them to scale up, produce more, and lower prices so that consumers could start using renewable technologies. The goal, Obama said, would be for renewable sources to provide 25 percent of the nation's energy supply by 2025. "Now is the time to confront this challenge once and for all," he said after his election. "Delay is no longer an option."
Four years later, these ideas have gotten nowhere, because they require congressional approval. Obama tried to push through a sweeping climate-change bill when Democrats controlled Congress in 2010, but the legislation died, and he never proposed it again. The administration managed to significantly boost automotive fuel-economy standards, a move that will reduce American reliance on oil by about 12 percent. But its only real effort to create a domestic renewable-energy industry was the 2009 economic-stimulus package, which included a one-shot $45 billion injection: The Energy Department received $35.2 billion for clean-energy programs, and the Treasury Department got $13 billion to dispense as grants and tax credits to alternative-energy companies. The stimulus set aside another $2.4 billion to pay for loan guarantees in case a loan recipient defaulted.
The government money was a lifeline for renewable innovation that might have competed with Emirati investments. Banks have been reluctant to lend to renewable-energy businesses because the lack of clear federal standards leaves no guarantee of a market for their products. First Solar, a manufacturer of thin-film solar panels based in Tempe, Ariz., is building three large solar arrays for utilities such as Exelon. Those projects wouldn't have gotten off the ground without the Energy Department's loan guarantees, because private financing was scarce. "It would have been difficult to execute all our large projects without the DOE," said Thomas Plagemann, First Solar's vice president of project finance. "The DOE program created financial certainty during a time of uncertainty in the capital markets."
But government backing for clean-energy firms is rapidly disappearing. The failure of Solyndra—whose loan guarantee was $535 million—torpedoed any remaining congressional enthusiasm for that program. Stimulus money had allowed Treasury to subsidize up to 30 percent of alternative-energy firms' development and construction costs, but that initiative expired last year. Without new government support, clean-energy companies are putting expansion plans on hold, laying off workers, and facing the possibility of bankruptcy.
Take Illinois-based Leeco Steel, which makes 3-inch-thick steel plates for the towers of wind turbines. The company moved into the field in 2005, taking advantage of a federal tax deduction for wind-power companies based on the kilowatts of electricity they produce. Although the credit—worth about $1.5 billion per year—has been extended several times since, it expires at the end of the year, and lawmakers appear ready to let it die this time. The company expects to survive, but only as a shell of its former self. "Unfortunately, it's what we live off of," said John Purcell, who runs Leeco's wind-power division. "It's definitely going to impact us in an enormous way financially."
Pushing for a one-year extension, Purcell and other wind-power firms sent executives to lobby lawmakers in February. The overwhelming response: We want to help you, but we can't. Wind-industry advocates had hoped to roll a tax-credit extension into the payroll-tax-cut bill or the surface-transportation legislation, yet they failed on both fronts. If the credit expires, many analysts expect clean-energy firms to shrink dramatically or close down. That would put the U.S. at a steep competitive disadvantage in relation to China, the UAE, and other nations that use government money to ignite their clean-tech sector.
A rare bright spot for the United States is the solar-power industry. A 30 percent federal tax incentive to subsidize the installation of residential and commercial solar systems will continue through the end of 2016. But the money for the program—less than $50 million per year—is so small that it merits only a footnote in the federal budget (the Joint Committee on Taxation doesn't even bother fully scoring it). And even that tiny credit has an uncertain future. "Solar incentives are temporary. Even those that are longer term are set to expire," said Susan Wise, who works for San Francisco-based residential solar-energy company SunRun. "Other energy industries, like fossil fuels, enjoy permanent subsidies that offer the industry a greater sense of stability."
The differences are stark. A 2011 report by Management Information Services, a consulting firm, found that U.S. fossil-fuel firms received $594 billion in government tax credits, research money, and other incentives over the past 60 years, with roughly two-thirds of that going to the oil industry. (Clean-tech companies got $244 billion; excluding nuclear, just $171 billion.) Those kinds of built-in advantages aren't going away any time soon. Several presidents, including Obama, have asked Congress to end oil and gas subsidies, to no avail.
Persian Gulf countries face no such political or financial constraints on their alternative-energy ambitions. The UAE and its neighbors take in hundreds of billions of dollars per year from oil sales, so they can easily afford to fund clean-energy programs. Because they are monarchies, their policies don't need public or legislative support. And they have a long history of direct state investment in, and ownership of, the energy economy—something that is anathema to many laissez-faire Americans.
Yet an even more fundamental difference underlies the contrasting approaches taken by the United States and the Gulf nations: sheer need. The economies of the UAE and its neighbors depend solely on petroleum and other fossil-fuel exports, but ours does not. The U.S. would certainly benefit by replacing expensive foreign oil with cheaper renewable energy, but our future isn't as tightly bound to oil. The Gulf's Arabs got religion because they had to; Americans haven't.
SEEING THE LIGHT
Thousands of miles from Washington, in his heavily air-conditioned office here, Sultan al-Jaber would politely beg to differ with those clinging to the status quo. Jaber, the managing director and CEO of the entire Masdar initiative, says that climate change is real and that the oil-consuming world has to face up to the fact that it will eventually tap out petroleum supplies. Jaber earned his Ph.D. in England and his M.B.A. at the University of Southern California. He believes that his country's oil reserves will last for decades and are in no immediate danger of running out. Still, he said, his government is preparing for the day when it will have no more oil to sell. "Oil is the only source of energy that will decrease over time," Jaber said. "Renewable energy is the only source of energy which will increase over time."
Masdar, which is owned and funded by the Abu Dhabi government, is the nerve center for the UAE's push into renewable energy. The Masdar Institute located here has partnered with the Massachusetts Institute of Technology to offer graduate programs in alternative energy; some of its 200 students, mostly from Gulf and Asian countries, spend up to a year in Boston as part of their academic work. Fred Moavenzadeh, who has taught at MIT for decades, runs Masdar's educational programming. He says that the institute's resources allow him to do research that would be nearly impossible in the United States. "Let's say you wanted to test how smart grids work in small cities," Moavenzadeh says, leaning over the desk in his cavernous office. "In the U.S., it would take five years to line up funding and get regulatory permission. Here, you can do it in five months."
Masdar also runs a pair of government-backed private-equity funds devoted to clean-energy projects around the world. To date, one has invested $250 million, including direct cash infusions to businesses in the United States and Europe. A second $290 million fund focuses on companies working in areas such as water conservation, waste management, and power-grid efficiency. Through the funds, the UAE purchased a 20 percent stake in a giant wind farm under construction near London, the largest such project in the world. Masdar has also teamed with a Spanish firm to build an innovative system that stores solar energy in batteries during the day so it can provide uninterrupted power through the night. A framed picture in Jaber's office shows the Masdar CEO standing next to Spain's King Juan Carlos at the power plant's dedication.
The Gulf region's alternative-energy push isn't just about an oil-free future; it's also about a cost-effect present. Nations such as Saudi Arabia generate roughly half of their electricity by burning their own oil. (The average Saudi consumes twice as much energy per day as the average American.) With oil trading at more than $123 a barrel—and poised to spike higher if Israel attacks Iran's nuclear facilities—the Gulf monarchies could save tens of billions of dollars a year by cutting their own energy use and ramping up their sales to thirsty nations such as the United States and China. "Fuel supply is one of the major challenges facing the power sector and the nation," Saleh al-Awaji, a senior official in the Saudi water ministry, said at a conference last spring. "The policy is to work intensely on saving energy and making sure every barrel of oil that can be saved is, and is made available for export."
Arab leaders—the people most dependent on oil money—also talk of fossil fuels in language that is hard to conceive of coming from Republican lawmakers or presidential candidates. "The oil era is definitely dwindling and coming to an end," Khaled Toukan, Jordan's minister for Energy and Mineral Resources, told the ClimateWire news service last year. "All countries of the world are now seeking alternative sources of energy."
Arab officials believe their renewable efforts offer the world a rare bit of good news from a region primarily known for political instability and violence. The UAE was recently chosen to host the International Renewable Energy Agency, an independent body whose mission accords with its name. The agency is building an energy-efficient headquarters to house 350 employees in Abu Dhabi, which also hosts a high-profile annual summit devoted to renewable energy; this year's speakers included Chinese Premier Wen Jiabao and U.N. Secretary-General Ban Ki-moon. Abu Dhabi's ruler, Sheik Mohamed bin Zayed al-Nahyan, told the summit that the UAE was committed to developing "clean technologies" and "renewable natural sources."
The United States offers another story. The Obama administration believes, rightly, that its move to increase vehicle fuel-economy standards will reduce American dependence on foreign oil. In July, the administration cut a deal with automakers to ramp up fuel efficiency from the current goal of 35.5 mpg by 2016 to 54.5 mpg by 2025. That could reduce U.S. oil consumption by some 12 percent and cut greenhouse-gas emissions by about 14 percent per year. But it hardly represents a transformation of the energy economy.
The Masdar private-equity funds, meanwhile, have invested tens of millions of dollars in U.S. firms such as HaloSource, a Seattle-based clean-water firm, and Solargenix, a North Carolina company that builds integrated solar-energy systems capable of cooling, heating, and powering homes and offices. Masdar had even invested in Solyndra. "I still believe their technology was sound and the company could have succeeded," Jaber said, shaking his head. But it's getting harder and harder to find firms worthy of Masdar capital, he says. He works with Deutsche Bank in New York City to scour for new American firms to fund. The United States has the world's biggest economy, ostensibly full of clean-tech investment opportunities. But so far this year, Jaber says, Masdar has found only one.