x Abu Dhabi, UAEWednesday 17 January 2018

DIFC wants to become clean, green finance hub

DIFC hopes to become a global hub for "cleantec" financing, which includes renewable energy.

The Dubai International Finance Centre (DIFC) wants to make its mark in the world of sustainability as well as business by becoming a global hub for clean technology financing within five years.

The initiative will bring investment into renewable energy, and create jobs in an expanding power generation and manufacturing sector. This ambitious target could in the long term be complemented by establishing a carbon exchange.

"Our objective over the next five years is to develop the DIFC so it can become the centre for clean-tech finance," said Nasser Saidi, the chief economist at DIFC, using the shorthand term for clean technology. "There is no centre that has developed as a clean energy cluster. It is spread across the world, and doesn't have a particular location."

Mr Saidi believes that the key components for the hub are already in place, citing the 330 financial institutions that have a presence in the DIFC free zone.

In a first step to facilitate the investment in renewable energy, the Clean Energy Business Council (CEBC), a not-for-profit organisation comprised of the DIFC and firms ranging from General Electric of the US to Saudi Arabia's ACWA Power, will hold workshops to connect investors with companies seeking finance.

Providing ready access to finance will create the conditions for a domestic boom in renewable energy production as well as a manufacturing industry for production equipment, said Mr Saidi, who pointed to the research and development capabilities and other expertise provided by Masdar, a clean energy company, and the International Renewable Energy Agency (Irena), based in Abu Dhabi.

An industry will only develop if the government implements the regulatory framework that allows for renewable energy to become profitable, said Mr Saidi.

Across the world, countries that have solar or wind power capacity have created incentives in the form of so-called feed-in tariffs, which top up the payments received by renewables producers.

Together with a scaling down of subsidies for fossil fuels, feed-in tariffs could lay the groundwork for a domestic industry by creating demand for equipment in the domestic market.

"What you have to do is create demand first," Frank Wouters, the director of Masdar, told the Clean Energy Finance Conference in Dubai yesterday. "Unless you have a home market it doesn't really make a lot of sense, unless you're China and you're going with a very strong and aggressive industrialisation policy."

In Germany, the tariff has made the country the leading producer of solar panels.

"The feed-in tariff created an industry that made money through exports," Alexios Pantelias, of the International Finance Corporation, the project finance arm of the World Bank, told the conference.

Germany's position is now being challenged by China, which is ramping up production of photovoltaic panels.

Competition from the industrial powerhouse China, or even from low-cost India, might limit the development of a clean technology industry in the Emirates, some experts say.

But even the large-scale use of renewable energy would be more effective in creating jobs, one of the main objectives of Abu Dhabi's Economic Vision 2030.

Mr Saidi eventually envisages a carbon exchange in Dubai. "That will be somewhere down the line. Basically, east of London there is no carbon exchange," he said.


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