Green investment: The emirate looks to renewable energy both at home and abroad

While fossil fuels remain the mainstay of Abu Dhabi’s economy, in recent years the emirate’s authorities have nonetheless expended considerable efforts to place it at the forefront of global initiatives to advance renewable energy. The culmination of these efforts occurred in June 2015, when Abu Dhabi’s Masdar City played host to the opening of the global headquarters of the International Renewable Energy Agency (IRENA). The opening of the organisation’s new purpose-built offices, in what has been described as the greenest office building in the UAE, came six years after the UAE beat off strong competition from Germany and Austria to host the international body. The decision in 2009 marked the first occasion that a Middle Eastern nation had been chosen to headquarter an international, charter-based organisation. IRENA, which has more than 170 countries either as members or applicants, sets out voluntary renewable targets through the Global Renewable Energy Roadmap. Its current overall goal is to double the global share of renewable energy to 36% by 2030.

Setting Goals

According to a January 2016 report from Abu Dhabi-based daily The National, the UAE federal government increased its target for clean energy from 10% of the total mix by 2030 to 30%. This goal is alongside targets already announced by individual emirates. Dubai, for instance, recently tripled its own renewables target to 15% by 2030. Meanwhile, Abu Dhabi, which was among the first to announce its own target in 2009, is currently committed to the more immediate goal of 7% of power generation capacity by 2020.

Yet Abu Dhabi’s ambitions for renewable energy do not stop its own doorstep. Since 2006 Masdar, a fully owned subsidiary of Abu Dhabi-based investment and development company Mubadala Development Company, has been investing in clean energy around the world. The company’s two clean-tech funds have a total of $540m in assets under management, according to news site Trade Arabia, while Masdar has invested substantial sums in a number of renewable power projects both in the UAE and abroad. Masdar’s flagship power project in Abu Dhabi is the Shams 1 concentrated solar plant, located at Madinat Zayed in Al Gharbia. The project was originally built as a joint venture between Masdar (60%), Total (20%) and Spain’s Abengoa Solar (20%) in a 25-year build-own-operate deal. In February 2016 Masdar acquired Abengoa’s stake and now own 80% The site consists of a 2.5-sq-km solar field containing 258,048 parabolic trough mirrors. These mirrors, along with a booster heater that runs on natural gas, are used to generate steam that powers a turbine.

Wind Power

Beyond Abu Dhabi, Masdar has invested in a number of substantial wind projects in Europe and the Middle East. In the UK, Masdar holds a 20% share in the 630-MW London Array – the world’s largest offshore wind farm – for which it secured funding of $424m in 2013 as part of a refinancing deal. In 2014 the UK government announced that Masdar had agreed to invest a further $795m for a 35% stake in the planned 402-MW Dudgeon offshore array. Masdar’s partners in the Dudgeon project will be Norway’s Statoil and Statkraft. Further afield, Masdar is also investing in smaller projects in the Pacific region. In October 2015 The National reported that the company had completed a 1-MW solar power project for the islands of Tuvalu and Kiribati, while the same month it was announced that Masdar would be partnering with the New Zealand government to provide a 1-MW solar plant in the Solomon Islands.

Closer to home, Masdar has also been investing in wind power in the MENA region. In December 2015 Jordan’s King Abdullah II formally inaugurated the 117-MW Tafilah wind farm and it is now the first utility-scale renewables project to begin producing power in Jordan. Masdar holds a 31% stake in the project, which will represent 3% of Jordan’s generation capacity. Meanwhile, in October 2014 Masdar signed a joint agreement with the Rural Areas Electricity Company of Oman (RAECO) to build the GCC’s first large-scale wind farm, a 50-MW facility to be located at Harweel. The project is anticipated to cost $125m. Speaking at the Oman Energy and Waters Exhibition and Conference in May 2015, Khalil Al Mantheri, head of RAECO’s renewable energy section, said that the station is planned to be commissioned in 2017.

New Horizons

Masdar’s positive experiences in the UK and Jordan have encouraged it to branch out into other destinations in the MENA region. In September 2015 Daily News Egypt reported that Masdar was set to partner with Saudi Arabia-based developer ACWA Power on large-scale renewable projects in Egypt. The companies signed an agreement earlier in 2015 with the Egyptian Electricity Holding Company to develop 2 GW of renewable capacity, including 1.5 GW of solar power and 500 MW of wind. The Egyptian government has an ambitious plan to achieve a 20% renewables target by 2020, having launched a feed-in tariff to encourage wind and solar. In October 2015 SeeNews Renewables, a news site for the renewable energy industry, reported that Masdar is also looking at investment opportunities in Morocco – which has set an even more ambitious total of 42% renewables by 2020 – with a total capacity of 2 GW each of solar power and wind power. Masdar is reported to be looking into the possibility of a 70% joint venture to develop three solar plants in Ouarzazate, as well as wind projects in partnership with Spain’s Acciona Energia. Mohamed Jameel Al Ramahi, CEO of Masdar, clearly believes renewables have reached the point where they make a viable proposition in the Middle East. “Wherever you look across the region, Egypt, Jordan or across the Arab Peninsula, the technology is constantly attracting interest,” he told OBG. “People are aware that we are blessed to have an environment and renewable technology that co-exist so harmoniously, which is certainly not the case in a lot of geographies. For me, it is a no-brainer. Everybody is excited and confident that renewable energy is the way to go. We can see that from the tangible interest we have been receiving from Abu Dhabi, from government authorities in other emirates and from the rest of the Middle East.”

On The Home Front

While Masdar has an estimated 1.5 GW of renewable power projects installed or under development worldwide, at home progress has been slower. John Hurst, head of business development at Masdar, told OBG that though the 7% target remains achievable in the time available, “there is a lot of debate on how the target should be implemented”. He added, “But the majority is likely to be with solar photovoltaic (PV), which can be installed relatively rapidly. A 200-300-MW plant can be installed in 12-18 months.”

Peak demand in the Abu Dhabi system is currently around 9 GW, which would require renewable capacity of at least 630 MW to meet the target. With 100 MW of concentrated solar power already installed at Masdar’s $600m Shams 1 plant – operational since March 2013 – the emirate would need to commission around a further half gigawatt of renewable power within the next four years to meet the deadline.

As it currently stands, the only significant PV capacity installed in Abu Dhabi is the 10-MW facility supplying power to Masdar City. In lieu of further large-scale tenders from the government, one option to increase solar generation would be to encourage the installation of rooftop PV panels. A pilot scheme conducted in 2014 by the emirate’s Regulation and Supervision Bureau (RSB) resulted in around a dozen sites, mostly schools, installing rooftop PV. In March 2014 the RSB issued a licence form, costing around Dh500 ($136.10), that would allow households to apply to install solar PV; however, in the absence of a feed-in tariff and with electricity prices remaining low by international standards, there is currently little incentive for homeowners or businesses to invest in the technology. Nonetheless, in late 2013 the RSB suggested up to 500 MW of power could be generated in the emirate through rooftop PV, were the right feed-in tariff to be put in place. According to Raed Bkayrat, research director at the Middle East Solar Energy Association, a further difficulty in encouraging rooftop solar is financing. “For the larger plants, in terms of regulatory framework and availability of funds, there are no real issues,” he told OBG. “The gap is for funding at the micro level for household and industrial installations. If I can buy a car with finance, why not a solar panel? The banks will say they are not structured for these kinds of loans, but there is a big opportunity here, particularly for industry.”

“From a regulatory position, if you want to increase adoption you need to take into account the home systems, the export capacity in buildings, plus the utilities,” Al Ramahi told OBG. “The scale is there in utilities, but the regulation around net metering and selling batteries is still not yet sufficiently developed.”