UAE wants to transform from a petrostate to renewable and hydrogen powerhouse
Having declared a net-zero emissions target last October, the first among major petrostates, the United Arab Emirates (UAE) is getting vocal about its ambition in developing decarbonization businesses at home and abroad.
During the Abu Dhabi Sustainability Week (ADSW), 15-19 January, officials from the UAE government and state-owned enterprises expressed their confidence that their country is well positioned to harness the business opportunities from the energy transition to a low-carbon world.
According to the rosy picture they painted, the UAE wants renewables and nuclear facilities to make up for half of its installed power capacity by 2050, which will help decarbonize its grid and boost green hydrogen production. Simultaneously, the country will adopt carbon capture and storage (CCS) technology en-masse to mitigate emissions from continued fossil-fuel production and support blue hydrogen production.
Leveraging on the financial resources, technological expertise, and client base it has amassed from being a top 10 oil exporter in recent decades, the UAE plans to diversify from fossil fuels to supplying renewable energy and clean hydrogen to overseas customers in the coming decades.
"The global energy transition will disrupt the current energy systems on a grand scale," UAE Minister of Energy Suhail Mohamed Al Mazrouei said in a virtual forum. "It will challenge the resilience of economies. It would require politicians to adapt.
"The United Arab Emirates is ready to embrace the challenges and opportunities…We have embarked on an ambitious journey," he added.
Sultan Ahmed Al Jaber, the UAE's Minister of Industry and Advanced Technology, said joining global efforts to achieve net zero later this century provides his country an unique economic development opportunity.
"This opportunity will help us create new industries, new skills, new jobs," he said. "For us, the business of tackling climate change is simply a good business opportunity, and as such we are progressively approaching it."
Birth of a clean energy major
In early December, sovereign fund Mubadala Investment Company agreed to sell stakes in its wholly-owned clean energy subsidiary Masdar to government-owned Abu Dhabi National Oil Company (ADNOC) and Abu Dhabi National Energy Company (TAQA) in exchange for their renewable and green hydrogen assets.
No financial details were disclosed, but the companies said TAQA will own 43% of Masdar's renewable business, Mubadala retain 33%, and ADNOC hold 24% following the transaction. ADNOC will hold a 43% stake in Masdar's green hydrogen business, Mubadala have 33%, and TAQA own 24%.
Their stated ambition is to build Masdar into one of the world's largest clean energy businesses. The company has investments in 14 GW of renewable capacity—mainly in solar and wind farms—across over 35 countries, and it will have 23 GW in 30 countries after the deal is completed.
In another ABSW forum, Mubadala Managing Director Khaldoon Al Mubarak said his company was "essentially doubling down" on clean energy by bringing TAQA and ADNOC into Masdar.
"Investing in the climate change, I think, is a great thing. It's profitable, it's very sustainable, and it's a nice way for any portfolio investor to grow," he added.
Al Jaber, who also serves as chairman of Masdar, CEO of ADNOC as well as the UAE's special envoy for climate change, said in the ABSW's opening ceremony that Masdar has the ambition to have 100 GW of renewable capacity and "ultimately double that…to 200 GW."
He didn't suggest a timeline. Masdar did not respond to requests for clarification. In December, the incoming shareholders said Masdar wants to grow to "well over 50 GW" by 2030.
In a statement issued 18 January, Masdar said it signed a memorandum of understanding (MOU) with Tuas Power, EDF Renewables, and PT Indonesia Power to explore development of up to 1.2 GW in solar photovoltaic (PV) facilities in Indonesia. They envisage that the electricity can be exported to Singapore, which is looking to import as much as 4 GW of low-carbon electricity by 2035.
The company said 19 January it signed a second MOU with Cosmo Energy to explore renewable opportunities in Japan, including offshore wind projects.
Separately, Masdar sealed a collaboration agreement with ENGIE to study on a 200-MW green hydrogen facility, which could come onstream in 2025 to supply Fertiglobe's ammonia facilities at Al Ruwais, Abu Dhabi. This came after the pair pledged to invest $5 billion in green hydrogen production from at least 2-GW electrolysis capacity by 2030 in December.
Masdar also teamed up with TotalEnergies and Siemens Energy to co-develop a demonstration plant at Masdar City, Abu Dhabi that aims to turn green hydrogen into sustainable aviation fuel.
In the Hydrogen Leadership Roadmap unveiled last November, the UAE set a target to conquer 25% of the global low-carbon hydrogen market by 2030 without providing a production target. Industry body Hydrogen Council said the size of hydrogen market needs to reach 75 million metric tons (mt) by 2030 if the world is to avert climate disasters.
"We launched a roadmap to achieve better hydrogen development," UAE's Minister of Climate Change and Environment Mohammed Saeed Hareb Almheiri said in an ADSW forum. "It is a national comprehensive plan to support local Industries and to contribute to the country's pursuit of climate neutrality, and to establish it as a competitive global exporter of hydrogen."
The UAE said it will establish regulations, facilitate finance, and form government-to-government partnerships to develop its hydrogen industry. The country's first green hydrogen project—a 1.2-MW pilot facility in the Mohammed bin Rashid Al Maktoum Solar Park, Dubai—was commissioned last year.
"We can produce electricity at a very low cost from solar power.… We have that right ingredient[s] to push hydrogen into the system and maintain our position as a reliable supplier of energy," said Musabbeh Al Kaabi, head of UAE investments at Mubadala.
Aside from the Dubai Electricity and Water Authority, which operates the pilot project, the government said Mubala, Adnoc, sovereign fund ADQ, and TAQA are also developing clean hydrogen production facilities, but provided little details.
Other known projects in the pipeline include an electrolyzer facility paired with a 2 GW solar PV plat in Khalifa Industrial Zone Abu Dhabi, jointly developed by TAQA and Abu Dhabi Ports.
"With us rolling out more renewable solar projects…we see a lot of potential in green hydrogen [business]," TAQA Group CEP Jasim Thabet said during the ADSW.
UAE officials see hydrogen generated from nuclear-power electrolysis as a type of low-carbon hydrogen. Emirates Nuclear Energy Cooptation (ENEC) is building the 5.6-GW Barakah nuclear power plant, the country's first, in Al Dhafra, and the project is 96% complete as of 19 January.
When the plant is fully operational, the electricity generated would be sufficient to produce 1 million mt of hydrogen per year, according to ENEC CEO Mohamed Al Hammadi.
On the demand side, the UAE has formed partnerships to develop a hydrogen economy with major energy consumers like Japan and Germany, and government officials said the country is discussing with its oil and gas customers over future hydrogen supply.
"We will see to leveraging our vast knowledge and experience of optimizing the hydrocarbon economy to become a globally competitive hydrogen exporter," Al Mazrouei said.
During the ABSW's opening ceremony, South Korea President Moon Jae-in—whose country wants to become a major CCS technology supplier—also announced plans to work with the UAE on a hydrogen supply chain.
"The UAE and Korea are jointly developing blue hydrogen and building a large-scale blue ammonia plant.… Joint research and demonstration projects for hydrogen production and utilization are also being planned," Moon said.
The president did not elaborate on the plans. The only known major blue ammonia project in the country was proposed by ADNOC, which is designing a 1-million-mt/year ammonia plant in Ruwais that feeds on blue hydrogen, with a target start-up date of 2025.
The state-owned company produces over 300,000 mt/year of hydrogen and plans to raise its output to 500,000 mt/year. The current production is mainly grey hydrogen, but ADNOC is promising to shift to green and blue hydrogen.
The Phase I of Adnoc's Al Reyadah CCUS facility with a capacity of 800,000 mt/year was commissioned in 2016. The Phase II, which has a capacity of 2.3 million mt/year, is due by 2025, and the 2 million mt/year-Phase III will come online by 2030. This is designed to capture CO2 from steelmaking and gas processing.
While eyeing business opportunities from the energy transition, the UAE has yet to fully reveal its decarbonization roadmap.
In October, UAE Prime Minister Mohammed bin Rashid Al Maktoum announced the target to achieve climate neutrality by 2050 and promised Dhs 600 billion ($163 billion) renewable investments. But the country has not submitted an updated National Determined Contribution (NDC) and laid out its long-term climate strategy to the UN.
In its last NDC presented in 2020, the UAE aims for a 23% cut in GHG emissions by 2030 from the business-as-usual levels of 310 million mt. Total installed renewables and nuclear capacity will increase from 2.4 GW in 2020 to 14 GW in 2030, the country said.
The bright spot is that the UAE is on track to overshoot its goal. When renewable capacity devoted to producing green hydrogen is excluded, IHS Markit expects the combined solar and nuclear capacity to reach 20 GW in 2030.
But the government has not made any formal pledge to phase out coal power, which accounted for 1.3% of total installed capacity at end-2021. In the Energy Strategy 2050 unveiled in 2017, coal's share is set to rise to 12% by midcentury.
Climate Action Tracker, an online project that reviews government policies, noted the inconsistency in the country's strategies. "The UAE lists renewable and nuclear energy as important components to reach the net zero target—however, it makes no mention of its plans to increase coal-fired power generation," said CAT, managed by nonprofit Climate Analytics and NewClimate Institute.
The UAE shares similar decarbonization proposals to Saudi Arabia, one of the other few Middle Eastern countries with a net-zero commitment. The two countries are vowing to set examples for other petrostates in the low-carbon transition.
Nasser Saidi, chairman of Abu Dhabi-based trade body Clean Energy Business Council, warned of enormous policy challenges for Gulf states during the energy transition. This is because the non-oil sectors in those countries heavily rely on government revenues generated from fossil fuels sales, he added.
Citizens of Middle Eastern petrostates are also used to cheap energy due to heavy subsidies. While the UAE stopped subsidizing auto fuels in 2015, the International Energy Agency estimated the country provided $5.4 billion subsidies for natural gas—the dominant fuel in its power generation mix—in 2020.
"It's not just about changing the energy mix.… [You] need to start by removing subsidies," Saidi said in an ABSW event. "You need to become much more energy efficient."
- Australia’s new government to focus on renewable expansion, carbon market reforms
- Critics say agricultural emissions plans in New Zealand ERP lack ambition
- US CFTC eyes greater voluntary carbon markets scrutiny, to open consultation
- California outlines plan to reach net-zero emissions by 2045
- Key climate goal of 1.5 C increase under threat in next five years
- Russian-war-spurred oil spend could kill Paris Agreement hopes: think tank
- China’s national carbon market hits a roadblock with low liquidity, weak data quality
- Europe needs EV recycling revolution to meet net-zero goals: study
RT @SPGlobal: Essential Intelligence from S&P Global helps you dive below the surface. Because a better, more prosperous world is yours for…
Each year, we commemorate Asian American & Pacific Islander Heritage Month to celebrate the rich, diverse culture a… https://t.co/oOU06vryXV