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Q&A: Fawaz Al Muharrami discusses Masdar’s ambitions for its renewables, green hydrogen businesses

23 May 2022 Max Tingyao Lin

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.


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