The regional landscape for renewable energy would look very different today had Abu Dhabi not decided to create a hub for the industry nearly a decade ago.
As Abu Dhabi Sustainability Week welcomes tens of thousands of visitors, the Middle East’s business leaders, policy makers and investors are reaping the rewards of the emirate’s bold vision.
Despite the uncertainty in the global economy, and the instability in the region, the mood at this year’s event is one of optimism and conviction.
There can be no doubt that the planets of policy and economics have aligned where clean energy is concerned, irrespective of what the oil price does or doesn’t do in the future.
For evidence of that one needs look no further than the Middle East & North Africa. In Morocco, wind projects are being realised at three US cents per kilowatt-hour (kWh). In the UAE, solar photovoltaic developments are coming in at less than six cents per kWh. These are prices that easily compete with conventional power sources, giving policy makers the incentive and the confidence to diversify their energy mix.
Significantly, the regulatory environment for clean energy in the Middle East has caught up with the political and economic will to invest. That is why, at Masdar, after pursuing many successful projects overseas, we are now shifting our focus to opportunities in the region.
But demand also needs to be matched by the availability of capital, particularly in the clean energy sector, where utility projects tend to rely heavily on borrowing. While regional financial institutions are starting to recognise the potential of lending to clean energy assets, they can do more to throw their weight behind the industry.
The manageable upfront costs of construction and operation, and the predictability of an asset class detached from the fluctuations of commodity markets, make renewable power generation an attractive risk compared to standard utilities. That won’t change even in the event that higher US interest rates drive up the price of local debt.
The compelling economic case for renewables means banks can afford to avoid passing on the burden of higher margins to developers.
It is a sign of a maturing industry when future growth depends on financial innovation, not only further technological progress. Much of the technical know-how in fact exists. Today, more sophisticated financial engineering is needed.
Of course, energy storage remains the biggest technical hurdle, for both solar and wind power. But storage technology tends to be a step behind in a number of industries, such as the automotive and smart phone sectors, not only renewable energy.
With effective storage technology in place (and here in Abu Dhabi we are researching a number of options), renewable energy will evolve from its traditional peak-shaving role to providing reliable base-load capacity, enabling electricity grids able to absorb even more clean power.
Despite the technical growing pains, renewable energy has now passed the inflection point. Investment makes sound business as well as environmental sense, and the cost efficiency of sustainability is not only being seen in energy, but also in the related domains of water, food production and urban development.
A decade ago, regional developers were reluctant to adopt sustainable building practices. Today, it is widely understood that sustainability doesn’t have to cost more — thanks in part to initiatives such as Future Build, Masdar’s online platform designed to help architects, engineers and contractors source more environmentally friendly products and materials.
But there is still a gap in public awareness, a challenge Abu Dhabi Sustainability Week aims to address through its focus on youth education and engagement. We have all seen our water and electricity bills increase in the last year, along with the price of petrol. Simple changes in consumer behaviour, however, can offset the impact of higher prices. Education has an important role to play.
There is no single answer to the challenges of sustainable development, but the economic opportunities involved are greater than ever and bring with them tangible improvements in our quality of life.
Abu Dhabi’s bold vision established the foundations for renewable energy to thrive in the region. We should seize the opportunity with both hands in 2016.
— Dr Ahmad Belhoul is chief executive officer of Masdar