Gulf renewables race hots up

By James Drummond and Robin Wigglesworth in Abu Dhabi
Published: January 21 2009 18:33

It may have been overshadowed by events in Gaza and by the US presidential accession ceremony in Washington, but there was no disputing the seriousness of purpose at Abu Dhabi’s second world energy summit (pictured above) this week.
Abu Dhabi announced the recipient of a $1.5m prize for sustainability, which went to a subsidiary of a Bangladeshi micro-finance house. The city also committed itself to having 7 per cent of its energy coming from renewable sources by 2020. And a subsidiary of Mubadala, the owner of Abu Dhabi’s Masdar development, announced an environmental research and development tie-up with General Electric of the US
The centrepiece of the country’s claims to leadership in sustainability, though, centre on the Masdar initiative.

Masdar City is a $22bn project that is due to accommodate 40,000 residents and 50,000 commuters in a carbon-neutral environment. The project, which includes a raft of international joint ventures and a research institute, has caught the world’s imagination. More than 90 per cent of references to Abu Dhabi in the world media include a reference to Masdar, say officials.
This week a 10MW power plant fuelled solely by solar energy, which will supply Masdar, was unveiled.
Sultan al-Jaber, Masdar’s chief executive, underlines the emirate’s commitment to sounder environmental policies in spite of sliding hydrocarbon prices and a global economic slowdown.
“The fundamental reasons behind the initiative are very clear and robust. When Masdar was established oil was at $44 a barrel. There is no clear link or correlation with a variable like oil. It’s a long-term journey,” Mr Jaber tells the Financial Times.
“We believe this [Masdar] is a logical step for Abu Dhabi. Through our substantial financial resources we can always insist that Abu Dhabi will be known as a leader in renewable energy. We’re hoping it will become the Silicon Valley of renewable energy,” he says.
Countries across the region have naturally pounced on solar power as their best bet for renewable energy. “If you’re Denmark, it makes sense to concentrate on wind, and if you’re a Gulf country, it makes sense to focus on solar,” says Steve Fludder, vice-president of GE Ecomagination, GE’s “green” technology arm.
Caio Koch-Weser, vice-chairman of Deutsche Bank and a former World Bank vice-president, says Middle East countries need to focus on providing solar energy to power energy-intensive water desalination plants. Water is the scarcest of resources in the region and states should try to increase efficiency of usage, he says.
“[This is] a traditional hydrocarbon producer that is thinking strategically about climate change and renewable energy as a complementary industry rather than a competitive one,” Mr Koch-Weser says.
Abu Dhabi and the rest of the region have started on the path towards renewable energy later than many, according to experts. Recycling and even public transport are in their infancy in most Gulf states.
“The region is setting itself up for the future, but it has started this later than other parts of the world. They definitely have to catch up,” says Frank Mastiaux, chief executive of E.on climate and renewables.
And there are wider concerns about the willingness of the Abu Dhabi government and the United Arab Emirates to confront deeply held attachments to air-conditioning, to cheap water and to large four-wheel drive vehicles – all of which require large subsidies. The World Wildlife Fund for Nature has branded the UAE as the world’s single largest consumer of energy per head.
The UAE ratified the Kyoto protocol on carbon emissions in 2005 but was not obliged to reduce its emissions. However, the country will be under pressure to sign a successor to Kyoto, which is due to be discussed in Copenhagen later this year, observers say.
Rajendra Pachauri, head of the inter-governmental panel on climate change and a Nobel prize laureate, says that raising the charges for heavily subsidised fuel and water would make the most difference to the UAE’s environmental footprint.
“I really think they have to have some fiscal measures [to curb carbon emissions], such as taxing the extensive use of cars . . . It would make an enormous difference,” Mr Pachauri says.
Valerie Marcel, an associate fellow at Chatham House who is based in Dubai, says Abu Dhabi and the other Gulf states will have no choice but to act to limit energy demand.
The Gulf is bizarrely facing its own energy shortfall because of rapid industrialisation and heavy subsidy, she notes. Ras al-Khaimah, one of the UAE’s northern emirates, is even planning to build a coal-fired power station because it wants to create a long-term alternative to reliance on oil and gas.
Ms Marcel says: “They [the Gulf states] are going to work as hard as they can to create diversified sources of supply to meet energy supply. And, when there are shortages in spite of that, they are going to have to work on demand.
“And I think that is what they really want to avoid because there is a legitimacy concern. If people start paying international market prices for their energy it could create discontent.”
Mr Jaber admits that “there has to be a change in behaviour” in the UAE and adds that he sees fiscal measures to curb carbon emissions “coming in the future”.
Copyright The Financial Times Limited 2009