12 JAN 2017

MENA is leading the march to sustainable energy

Paddy Padmanathan, President and Chief Executive Officer, ACWA Power

It’s no secret that clean energy has made significant inroads into the global energy market over the past few years. Last year, driven by the sector’s increasing cost-competitiveness and the need to meet new climate change policies, global investments in renewable energy were more than double the amount spent on new coal and gas-fired plants. The result is that the International Energy Agency (IEA) now expects solar energy to account for over five per cent of global power production capacity by 2020.

The MENA region has led this growth by driving cost competitiveness with a number of price-setting projects in recent years, such as the Mohammed bin Rashid Al Maktoum Solar Power Park in Dubai, and the NOORo solar power complex in Morocco. Both will contribute significantly to their respective countries’ renewables ambitions – and the latter, once complete, will become the world’s largest solar complex, supplying electricity to over one million homes and, through a permanent reduction in fossil fuel imports, adding 0.5% GDP to the Moroccan economy.

Another country primed to ride the crest of the renewables wave is the Kingdom of Saudi Arabia. The Kingdom, like most countries in the region, is richly endowed with renewables resources, benefitting from strong sunshine and wind, as well as long daylight hours. It also benefits from vast expanses of open desert seemingly tailor-made for solar-panel arrays and wind farms.

The bold blueprint for the social and economic transformation articulated in Saudi Arabia’s Vision 2030 places renewable energy firmly in the energy mix of the future. The plan identifies renewable energy as not only a component of the fuel mix, but also as one of the country’s key pillars of economic diversification. It plants the goalpost of renewable energy production at an ‘initial target’ of 9.5 gigawatts (GW) and aims to realise a renewable energy industry that spans from technology origination to production of goods and services. The National Transformation Programme 2020, which was announced in early June after the announcement of Vision 2030, was even more ambitious. The program set an initial immediate target of 3.45GW for deployment - four percent of total power consumption - by 2020.

During Abu Dhabi Sustainability Week, the energy industry will gather at the World Future Energy Summit (WFES) to reaffirm the Kingdom’s commitments to these targets. How can they be financed and deployed, and what other unseen opportunities exist in a country so committed to diminishing its carbon emissions and reducing the total cost of electricity through dramatic reductions in solar and wind tariffs?

Given the Kingdom’s plans to procure capacity using an Independent Power Producer (IPP) model of contract, four US cents/KWh would not be an unreasonable expectation for renewable energies. It would be the outcome of a government taking advantage of competitive financing and benefits, from high levels of liquidity and rapid improvements in technology. These are the factors that have allowed for the continuous reductions in key component costs and increasingly more efficient construction methods.

We at ACWA Power—with our well established track record in developing large-scale renewable energy projects via well-executed procurement programmes in South Africa, Morocco and the UAE—consistently set new tariff benchmarks, and we remain ready to bring our first-hand expertise to the development of local content and human resource capacity at the local level. This level of expertise is what’s required to deliver on the ambitious renewable energy deployment programme in the Kingdom.

Saudi Arabia’s overall electricity generating capacity is only 70GW today, but demand is forecasted to continue growing at 7% for the next decade. In light of that, is 9.5GW of renewable energy too small an ambition? No, it is clearly just an initial target, and I for one am convinced that the level of deployment will multiply many times over. Contracted tariffs will become even more competitive, and the sector will begin to deliver on the industrialisation and employment creation agenda, thus adding significantly more value beyond the reduction of carbon emissions and lowering the true cost of energy without subsidy. ACWA Power will proudly participate in this exciting journey.‎

14 JAN 2017

ADSW and Festival at Masdar City Come to the Corniche

It’s been a weekend of family fun on the Abu Dhabi Corniche, as Masdar and Abu Dhabi Municipality teamed up to bring ADSW and Festival at Masdar City to local residents. The past two nights, children have been treated to an activation, or sneak preview, of what’s in store for the 20-21 January Festival at Masdar City. On the East Plaza, where Khallej Al Arabi and Corniche Steets meet, a large Masdar booth greeted guests who were strolling upon the Corniche.

Children can color and design t-shirts with sustainability messages; or have a smoothie, which they would mix themselves by peddling on a stationary bicycle; or assemble, and then race, a model solar-powered car while they learn the basics of renewable energy. Younger children also had a corner where they could color and draw images of solar panels and wind mills. “I’m so glad we came by during our walk this evening,” said Nigel, a United Kingdom national who has lived with his family in Abu Dhabi for three years. “I’ve heard the adverts on radio and have seen some signs, but having this area right in the middle of the Corniche ended up making this an even nicer evening for us.

Now we definitely are keen come to Masdar City next weekend and explore the Festival.” The activation at Masdar City has its final evening tomorrow, 14 January, from 4:00 p.m. to 10:00 p.m. Festival at Masdar City will occur Friday, 20 January, from 10:00 a.m. to 10:00 p.m., and Saturday, 21 January, from 10:00 a.m. to 8:00 p.m. Activities include a do-it-yourself crafts zone, arcades and carnival games, a bazaar selling foods and handicrafts, science experiments as well as arts and entertainment. We look forward to hosting you there!

12 JAN 2017

Practical steps towards decarbonisation

Jonathon Porritt, Founder Director of Forum for the Future and Selection Committee Member of the Zayed Future Energy Prize

The simplest way of capturing today’s overarching imperative on climate change is this: radical decarbonisation. In other words, securing dramatic reductions in emissions of greenhouse gases, per unit of GDP generated across the global economy. There are many, many low-carbon initiatives that feed into that growing wave of decarbonisation efforts, but none matters more than reducing the use of fossil fuels as rapidly and cost-effectively as possible – in energy, transportation, infrastructure, chemicals and so on.

Essentially, this is all about technology, investment and political will. Which, as it happens, is what I’m most looking forward to about attending this year’s Abu Dhabi Sustainability Week: aligning innovation, investment and political leadership.

On the whole, the technology side of things looks more and more encouraging every year, with tumbling prices and increased efficiencies in most renewables and storage technologies, in demand management and grid optimisation.

Nowhere does one see that more clearly than through the lens of the Zayed Future Energy Prize, which I’ve been associated with as a member of its Selection Committee since its inception. It’s now the world’s leading celebration of clean energy endeavour, in both the for-profit and not-for-profit sectors, and a huge inspiration to all those countries trying to work out how best to transition from today’s dependence on fossil fuels to a world driven primarily by renewable energy sources of one kind or another.

The ‘storage story’ is particularly exciting as breakthroughs here (in both cost – down by around 75% since 2008 – and flexibility) are equally significant in energy and transportation. Demand for electric vehicles is rising fast all over the world. China, for example, is offering generous incentives to increase overall market penetration for both electric vehicles and hybrids, and investing in a huge new charging infrastructure.

There will of course be plenty of bumps along that road! Two thousand sixteen, for instance, was a disappointing year in terms of clean energy investment, down from the 2015 high of around $350bn to something closer to $280bn. There are all sorts of reasons for that, but it is now almost universally accepted that the direction of travel towards renewables is irreversible. Investors have really begun to see this – both from a ‘transition risk’ perspective and through burgeoning opportunities to drive new financial value.

We’re dealing here with what the Bank of England Governor, Mark Carney, called the ‘Tragedy of the Horizons’ back in a speech in 2015: “The catastrophic impacts of climate change will be felt far beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix. Once climate change becomes a defining issue for financial stability, it may already be too late.”

And that’s a massive political challenge, where chronic short-termism still reigns supreme. In that regard, things have just gotten a whole lot harder in 2016. As the next President of the United States, Donald Trump has made it very clear that he will reverse the Obama Administration’s commitment to low-carbon prosperity, and promote again the interests of fossil fuel companies at every turn. Worse yet, he continues to characterise the science of climate change as ‘unproven’, and has appointed a number of very prominent ‘climate change denialists’ to his interim Administration.

This raises all sorts of question marks over the agreement struck by 196 governments in Paris at the end of 2015 – and will be hugely disappointing to the vast majority of young people around the world. In celebration of its 10th anniversary, Masdar commissioned an extraordinary online Sustainability Survey of around 4,500 post-millennials (18- to 25-year-olds) in 20 countries, including the UAE, Morocco, Jordan, Saudi Arabia and Egypt. Forty per cent of those surveyed named climate change amongst the biggest challenges facing the world over the next decade, ahead of the state of the global economy (34%), terrorism (32%) and inequality (29%).

The UAE’s rulers have recognised that passionate concern amongst its young people for many years – with the UAE now the highest-rated MENA country amongst clean-tech leaders, just outside the top ten globally. Nobody imagines that the transition from a global economy driven by fossil fuels to one where clean-tech rules is going to be easy – but that transition will happen, one way or another, and the real test of any nation’s leaders today is the insight and vision they bring to bear on that all-important challenge.

12 JAN 2017

Carbon tax can fund the clean energy transition

Dr Nasser Saidi, Chairman of the Clean Energy Business Council

Climate change is a deadly threat to our habitat, animals and people. Current annual emissions of greenhouse gases are about 50 billion tonnes of carbon-dioxide-equivalent, compared with about 41 billion tonnes in 2005. An Intergovernmental Panel on Climate Change report has warned that the world is on a path that could, if left unchecked, deliver a global average temperature rise of 4°C or more by the end of the century – a climate which has not existed on Earth for millions of years! We are in the Anthropocene age.

COP21 was quickly ratified, in 11 months versus eight years for the Kyoto protocol, underscoring the shared global consensus on the social and economic dangers posed by global warming. However, the COP21 government commitments and strategies require international, regional and national cooperation between governments, business, civil society, organisations and households. While US President-elect Donald Trump’s stance on climate change (and his nominee for the Environmental Protection Agency) is likely to make the path towards clean energy more difficult, it also offers emerging giants like China and India the opportunity to take the lead in showcasing their commitments towards green energy and lower carbon emissions.

The recent launch of a US$1 billion clean energy investment fund – Breakthrough Energy Ventures – with Bill Gates, Jack Ma, Mukesh Ambani and others as investors, promises implementation of innovative technologies through the support of research and development. This should challenge and inspire investors, governments and entrepreneurs based in the GCC.

The GCC and other countries from the region have committed to renewable energy initiatives – be they the UAE’s target to generate 24% of its electricity from clean energy sources by 2021, or Morocco’s renewable energy target of 52% by 2030. These ambitious objectives need implementation through decarbonisation strategies and objectives that require deep partnership with the private sector. I will bring the perspective of the Clean Energy Business Council on these strategies at the Abu Dhabi Sustainability Week (ADSW).

Pillar one starts with removing fossil fuel , water, electricity and related subsidies, so that the pricing of such resources and services reflect true economic costs and account for externalities. This would improve energy efficiency in all sectors and generate substantial environmental and health benefits.

Pillar two is the imposition of carbon taxes, rather than emissions trading schemes. Businesses and households respond to price as well as non-price incentives and ‘nudges’. Carbon taxes are taxes based on emissions generated from burning fuels. Introducing carbon taxes would shift the energy mix towards renewables, reduce fuel consumption, increase fuel efficiency and sharply reduce the carbon emissions that are driving global warming. A carbon tax creates incentives for energy consumers (both businesses and households) to use cleaner fuels and adopt new clean technologies, thereby reducing the amount they pay in carbon tax. For businesses, investors, entrepreneurs and researchers, carbon taxes would encourage investment and R&D in renewables and clean-tech.

For the GCC, the institution of a carbon tax would also generate substantial revenues for governments, increase energy efficiency and drive decarbonisation strategies. Revenues could range from as low as US$11 billion in Kuwait to as high as US$80 billion in Saudi Arabia (depending on the tax, consumption, demand elasticity and current price of gasoline). In essence, carbon taxes could raise substantially more revenue than current VAT proposals.

Pillar three of decarbonisation strategies is overarching climate change legal and regulatory frameworks to support implementation. Institutional frameworks are important because they imply wide-based political commitment and support of climate change policies and investments. None of the countries of our region have established such legislation. The GCC can lead by enacting Climate Change Framework Legislation (laws or regulations with equivalent status) serving as a comprehensive, unifying basis for climate change policy. In this regard, the establishment of Climate Change Ministries (e.g. in the UAE) is a step in the right direction.

The fourth pillar is decarbonisation finance. COP21 commitments will unleash more than US$16 trillion of investments in renewable energies and clean technologies. Governments need to set up climate funds – using the proceeds of carbon taxes – for renewables and clean-tech infrastructure and facilitate the financing of renewables R&D and investment through financial markets. For businesses and entrepreneurs, the green and clean economy presents an unprecedented opportunity for innovation, productivity-growth-enhancing investments, along with lower energy costs impacting all activities. There is no trade-off between economic growth and decarbonised economies.
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