Coal’s Coming Renaissance in the Middle East
Egypt’s President Abdel Fatah el-Sissi faces little opposition as he begins his second term, but the former field marshal has an immediate challenge coming in just a few weeks’ time. The Egyptian government budget that will be unveiled in July is pushing ahead with cuts to fuel and electricity subsidies that could see prices for both rise by 60 percent and 55 percent respectively.
A growing population and underequipped power sector have left Egypt with a continual energy shortage, with summer blackouts and regular shortfalls a fact of life since 2011. As part of its response, Egypt plans to build a major new coal plant at Hamrawein on the Red Sea. The government announced last month that it had received three competing offers from international consortiums including companies from China, Japan, and the United States to build the 6 gigawatt facility.
Hamrawein is one of several coal-fired power stations under consideration as Egypt gradually embraces coal-fired energy. Platts, a consultancy, estimates those projects could collectively add 14.64 GW of capacity to the Egyptian grid.
Coal currently accounts for less than 1 percent of primary energy production throughout the Middle East, but that is expected to change over the next decade as other countries join Egypt in reshaping the energy landscape. While Israel aims to fully expel coal from its energy mix by 2030, the United Arab Emirates, Oman, Jordan, Turkey and Iran all have plans for new coal capacity. With coal the bugbear in most energy debates, why is it unexpectedly gaining popularity throughout a region rich in oil, gas, and solar power?
Turkey is the region’s largest consumer of coal. The Energy and Natural Resources Ministry has already announced plans to add 7.2 GW of capacity on top of the 9.9 GW already generated through coal. Turkey has also declared that domestic production will exceed 100 million tons by the end of this year, with Ankara’s emphasizing a decreased share for imports of coal and an increased utilization of domestic coal production.
While the United Arab Emirates goes to great lengths to advertise its commitment to renewables, Dubai and other emirates are also looking to coal. Currently under construction in Dubai, the ultra-supercritical 2.4 GW Hassyanpower plant will be the first coal plant in the Gulf Cooperation Council once it becomes operational in 2023. Another such facility is under consideration in the northern emirates of Umm al-Quwain or Ras al-Khaimah. According to the UAE national energy strategy, Emirati coal plants will generate 11.2 GW by 2050, accounting for 12 percent of electricity production.
What’s feeding all of this demand? Concerns over energy security, but also a broader need to power growth. Dubai, as the Gulf region’s most innovative hub, is reluctant to spend on importing energy from other emirates. Egypt sees a need to manage demand for natural gas; the recently announced deal to import $15 billion-worth of gas from Israel’s Leviathan and Tamar fields is another. Ankara is understandably reluctant to continue depending on Russia’s supply of fully half of Turkey’s natural gas. In each case, coal is seen as driving sustained energy diversification.
For all of these governments, the risks to the environment and the global fight against climate change are outweighed by the imperative of reducing exposure to supply shocks and the threat they pose to regimes. In countries such as Egypt, the gradual recovery from post-revolutionary havoc is contending with population growth and the need for reliable and stable energy supplies.
Outside suppliers are perfectly aware of that demand. Where multilateral financing institutions like the World Bank are unwilling to back new fossil fuel projects, countries such as China provide both expertise and low-cost financing instead. Chinese power and engineering companies are spearheading the construction of coal factories such as Hamrawein, where the Chinese consortium produced the lowest bid. Chinese companies have until recently faced little to no serious competition from Russia or the United States, although General Electric is part of the Hamrawein bidding.
That may be changing with the Trump administration’s advocacy for a "Clean and Advanced Fossil Fuel Alliance."According to the document, Trump wants to reverse the American coal industry’s struggling fortunes and "explore the vast potential of clean and advanced fossil fuels, specifically clean coal and natural gas.”The Trump administration sees coal exports (including to longtime allies like Egypt and the United Arab Emirates) as a way of keeping its promises to key domestic constituencies.
None of this, of course, is good news to environmentalists. With the future of the fight against climate change resting in the balance, the question remains: Is there an alternative to coal in today’s Middle East?
Not really. In Abu Dhabi, despite a commitment to clean energy and low carbon emissions, energy costs remain high. Even though renewables are widely utilized across the Emirates, there are concerns about their capacity to power fast-tracked infrastructure development. If even wealthy Gulf emirates struggle to carry out the energy revolution, other countries of more modest means face even greater difficulties.
As Turkey, Egypt, and the United Arab Emirates make long-term plans to use coal, they must also account for emissions in line with their COP21 commitments. That could mean joining the global effort to develop carbon capture technologies that mitigate CO2 emissions. Oil companies are already one of carbon capture’s most enthusiastic backers. It should come as no surprise that major figures in the region’s energy politics such as Saudi Aramco’s CEO Amin Nasser and the International Energy Agency’s Turkish executive director Fatih Birol are strong advocates of carbon capture.
Could carbon capture solutions be the missing link that allows projects like Hamrawein to fit into a wider context of reduced emissions? With the region’s appetite for coal clearly strong, any technology that helps blunt its impact is worth serious consideration.
Dmitriy Frolovskiy is a consultant on policy and strategy in the Middle East and Central Asia with private entities, and has written about Russia’s foreign policy toward the Gulf Cooperation Council states and former Soviet territories. Follow him on Facebook. The views expressed are the author's own.