January, 2001

Alternative Energy and Economic Development

Nermine Al-Saadany

A series of developments have taken place in the past few years concerning the shaping of a new world system. The most significant of these developments are related to international structures and specifically the consumption of natural resources. The growing need for and scarcity of natural resources, especially those associated with energy, has led to the use of these resources as a tool of political pressure between states, in addition to their being the main constituent of environmental pollution. This report deals with 'alternative energy' - or in other words, energy sources other than oil. It looks at the most important natural resources available today and analyses their effect on both national economies and the consumption of oil.


The oil crisis was triggered by the eruption of the Gulf War. This drew attention to the extent of pollution that results from burning oil and also highlighted the rapid increase in the global dependence on oil. This dependence is an outcome of several factors, including population growth, the worldwide increase of migration from rural to urban areas and the growing role played by machines dependent on oil in industry and the economy in general.


Based on the above aspects, the demand for energy in general, and oil in particular, will continue to rise substantially, resulting in higher oil prices and a decrease in reserves. This will contribute to the wealth of the Arab Gulf nations - which supply 80 per cent of the world's oil - and their political and financial status. Two solutions proposed by developed countries are to either develop new sources of oil outside the Gulf area, or to increase the production of advanced technological techniques to lower the variable cost of extraction. However, these solutions would not lessen the international demand for oil, but rather facilitate the production process, causing more demand and the danger that this demand could not be met. Therefore, it has become necessary to search for alternative sources of energy.


Alternative energy is that produced from natural resources such as water, wind, solar rays or wood. These resources can be used as alternatives to oil to generate electricity or as fuel. Although celebrated as cheaper, cleaner alternatives to oil, the use of such resources is still limited, even in many developed countries. A different definition of alternative energy focuses on energy produced from non-depletable sources - unlike oil, natural gas and coal. However, this definition does not take into account some alternatives that although not depletable, are not necessarily available due to environmental or social pressure such as, for example, the construction of dams or the use of trees.
The most important sources of alternative energy are:


- Hydroelectric: Electrical power can be generated using the momentum of water. Generating energy here is limited by location and is dependent on the speed and momentum of the water.

- Wind: Electrical power can be generated using wind, but is limited to locations where strong wind is available.


- Biomass: Biomass fuel includes mainly wood that can be burned to generate heat and electricity in a clean manner so as not to cause air pollution. These fuels could cover the needs of entire residential and commercial areas.

- Solar Power: Solar rays are collected and directed to generate heat and electricity. This is an essential constituent of electrical power and heat generation today.


There are many economic advantages to the use of alternative energy, not least of which is the creation of new jobs as a result of investment in projects to produce this energy.
Most alternative energy projects need to be located alongside their sources. This means that work opportunities would be distributed geographically. Furthermore, while costly to implement and construct, such projects can increase savings in the long run and result in higher growth rates. Other major advantages include eliminating fuel costs, economic diversity and attracting direct foreign investment and expertise.


Nevertheless, there are a number of limitations with alternative energy sources that diminish reliance on them. Most of these energy sources are under government or private-sector monopolies and this presents obstacles to their widespread use and to their access to markets. Other factors include meeting the demands of consumers and persuading them to change their sources of energy, as well as creating pricing schemes and payment systems. Furthermore, high construction costs may deem the implementation of many projects unfeasible.


In conclusion, there is still some resistance to the idea of finding alternative energy sources. This resistance uses the argument that implementing new alternative energy projects does not actually create new jobs, but merely redirects existing ones. A separate argument is concerned with the global fear of the depletion of natural resources and the continuing discoveries of such sources rendering this fear unnecessary. The actual problem, however, is not the depletion of these resources, but rather the political and economic struggles between states that utilize energy as a strategic weapon. In addition, environmental awareness has developed into a new form of pressure, supporting the transformation to less polluting fuels.


Governments have an important role to play in encouraging alternative energy projects and giving them a chance to prove their effectiveness. However, despite the factors mentioned above and the increase in the frequency of oil crises, governments are reluctant to take any positive measures due to the need to adjust public opinion to accept new 'products' and move from traditional oil and gas fuels to other forms of energy.