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The United Arab Emirates (UAE), the first of the major
petrostates to declare a net-zero target, has vowed to
harness low-carbon business opportunities from the energy
transition underway.
To improve its chance of success, the country is seeking to
build state-owned Masdar into a global clean energy powerhouse with
a large footprint in the renewables and green hydrogen
businesses.
The initial step was taken last December when three entities
owned by the government of UAE capital Abu Dhabi agreed on a major
deal: Abu Dhabi National Oil Company (ADNOC) and Abu Dhabi National
Energy Company (TAQA) would join Mubadala Investment Company to
become shareholders in Masdar.
The agreement, subject to regulatory approval, will combine the
three companies' renewable and green hydrogen assets under Masdar.
And UAE officials promised more expansions at home and abroad are
on the cards.
In this Q&A with Net-Zero Business Daily by S&P
Global Commodity Insights, Fawaz Al Muharrami, executive director
of Masdar's clean energy division, discusses how the company is
positioning itself to become a top low-carbon energy supplier.
Net-Zero Business Daily: Masdar has strong ambitions to
expand its renewable capacity. How does the company plan to reach
the target?
Al Muharrami: We have been pursuing a very
aggressive expansion strategy over the past few years—having
more than tripled the capacity of our renewable energy portfolio to
over 14 GW today—and we aim to continue on this trajectory. We
are looking at a total portfolio capacity exceeding 50 GW and to
potentially reach 100 GW by 2030.
While our growth plans are very ambitious, we believe that they
are in line with global appetite for renewable energy development,
with renewables accounting for 81% of all generation capacity
additions last year, according to the International Renewable
Energy Agency. As more countries look to set net-zero commitments,
we believe this energy transition is only going to accelerate. Our
global offices support our growth to reach this target.
Net-Zero Business Daily: Which renewable sectors will
Masdar focus on, and what are its target markets?
Al Muharrami: Our strategy is essentially
unchanged: we aim to grow assets to meaningful scale in relevant
geographic and technology verticals. While we will double down in
key geographies and technologies we know well, we are also looking
to enter new markets—we will be flexible going forward, and we
don't intend to set strict targets on which countries or regions
are expected to provide the most business.
Today, our portfolio of projects extends to Asia Pacific, the
Americas, Europe, the Commonwealth of Independent States, and
Africa.
Net-Zero Business Daily: How does Masdar plan to
mitigate the supply chain risks in the solar and wind power
industries that are pushing up installation costs?
Al Muharrami: Supply chain issues are not
confined to the solar and wind industries, with almost all
industries and geographies experiencing unprecedented pressures
from a number of factors. The pandemic led to large-scale
disruptions in supply chains, and we are now seeing rising prices
for both raw materials and finished goods, and price volatility in
the manufacturing sector. While we expect these issues to resolve
longer term, these have created cost barriers for clean energy
deployment in the short-term.
At Masdar, we always aim to remain in dialogue with suppliers
and project partners to anticipate and address potential supply
chain issues and ensure projects are delivered on time and to
budget, meeting the expectations of all stakeholders.
Net-Zero Business Daily: Other than solar and wind
energy, does Masdar plan to expand into any other types of
renewable power?
Al Muharrami: In terms of renewable power,
solar and wind form the majority of our portfolio and that includes
both onshore and offshore [facilities] as we see both being
attractive on their own merits—we are also active in
waste-to-energy, both here in the UAE and in Australia, where we
generate clean power by incinerating waste.
As well as renewable energy and sustainable urban development,
we are increasingly active in many other energy transition
businesses, including sustainable utility-scale power storage
solutions, and sustainable seawater reverse osmosis desalination.
Green hydrogen will also be a major focus for us going forward.
Net-Zero Business Daily: Will Masdar's green hydrogen
production be linked to its renewable capacity, or not necessarily?
For instance, would you use electricity from other renewable
developers if the economics work?
Al Muharrami: The development of the green
hydrogen market will inevitably lead to a need to add renewable
capacity to keep pace. Masdar welcomes partnerships with all
companies committed to building a more sustainable future, and we
make our investment and development decisions on a case-by-case
basis. The exact roles and responsibilities of each partner in any
given project development will be determined by leveraging each
partner's capabilities to optimize the economics and mitigate
risk.
Net-Zero Business Daily: Other than production at home
in the UAE, will Masdar seek to develop production facilities in
other countries? If so, where would you prefer?
Al Muharrami: Masdar is already working with
ADNOC and bp to explore the development of clean hydrogen hubs in
both the UAE and UK at an initial scale of at least 2 GW,
comprising 1 GW in the UAE and 1 GW in the UK. More recently, in
April, Masdar signed landmark agreements to develop green hydrogen
production facilities in Egypt with a combined electrolyzer
capacity of 4 GW by 2030, allowing for the production of up to
480,000 [metric] tons of green hydrogen per year. Egypt offers both
abundant solar and wind energy resources and proximity to potential
export markets, so it makes senses for us to target efforts
there.
The above examples show we look at investing internationally as
well as based on the business opportunities available.
Net-Zero Business Daily:Does Masdar
have any production target for green hydrogen?
Al Muharrami: As we said in December, when we
announced that ADNOC and TAQA
will join as shareholders in Masdar, a key priority is to cement
the UAE's leading role in green hydrogen development, and this will
be a key focus area for the new partnership.
While we are working on setting our strategy and target for
green hydrogen, we have announced a strategic alliance with
France's ENGIE to develop projects with
a capacity of at least 2 GW by 2030, and both companies signed a
collaboration agreement with Fertiglobe here in the UAE to explore
co-developing a globally cost-competitive green hydrogen facility
in the UAE, with an electrolyzer capacity of as much as 200 MW.
Net-Zero Business Daily: ADNOC and TAQA are set to
become Masdar's shareholders. How will the partnership help Masdar
expand in the renewables and green hydrogen areas?
Al Muharrami: This is an exciting opportunity
that will further establish Masdar as a global clean energy
powerhouse, one that will be well positioned to lead the industry
on a global scale. While we are still awaiting regulatory approval
on the transaction we can't comment further on specific
details.
Net-Zero Business Daily: With increased appetite from
investors for sustainable development, will Masdar tap into the
green/sustainability debt market to fund its
expansion?
Al Muharrami: Masdar is already a leader in
sustainable financing—sustainability is at the core of our
business and how we finance it. For instance, we signed the first
green revolving credit facility
in the Middle East back in 2018, and more recently, we established
the Masdar Green REIT, the first real
estate investment trust focused on investments in sustainable real
estate assets in the region.
We also work closely with international partners, such as the
International Finance Corporation, the private sector arm of the
World Bank, which has helped us access emerging markets via its Scaling Solar program. This,
along with the support we obtain from other development financial
institutions such as the European Bank for Reconstruction and
Development and Asian Development Bank, helps us by cutting red
tape, simplifying tendering, and helping manage risk and
facilitating credit.
Posted 23 May 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
