Investing in renewables for a long-term impact
Early-stage investments in clean energy made more than a decade ago has given Masdar a head start in a fast-growing sector
At the opening of this year’s Abu Dhabi Sustainability Week, it was humbling to see such a diverse, global group taking part.
Abu Dhabi, under the leadership of Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, has long been an advocate and convener for addressing global challenges, whether on the issue of a warming planet, eradicating deadly diseases, creating safe and secure food and water supplies for the future or the development of a peaceful framework for the use of nuclear energy.
But let's be clear about why we were meeting: There is no doubt that our planet is facing a crisis, caused by dramatic changes in the world's climate.
There is also no doubt that global action on climate and sustainability are the most critical priorities of our time. As business, government, academia and civil society, we need to honestly reflect on what more we can and must be doing to address the omnipresent risks of climate change.
Climate change is as much a threat to the UAE as everywhere else on the planet; and as a globally-engaged and responsible nation, we have to be part of the solution. Our country's founder, the late Sheikh Zayed, encouraged us to think and look ahead.
That’s why in 2006, Mubadala established Masdar as a pioneering renewable energy and sustainability innovator, investor and developer. At the time, it was seen as an unusual move for a nation whose economy was predominantly hydrocarbon-based. People wondered why an oil-and-gas fuelled economy would invest in renewables when costs were uncompetitive compared with other forms of energy.
But as a long-term investor, we could see a trajectory when renewables would become price competitive. And our investment thesis has come to pass. Today, Masdar has projects in more than 25 countries across the globe. It is active in solar power, wind energy, power storage, waste-to-energy, sustainable energy desalination, and sustainable real estate.
Just as importantly, research centres at the Masdar Institute in the Khalifa University in Abu Dhabi, continue to lead innovation in renewable energy and provides the ecosystem for Young Future Energy Leaders.
And the future looks bright for expanded renewable investment. Renewable energy sources make up over 25 per cent of the world's energy today, and the International Energy Agency suggests that wind, solar, and hydro are rolling out at their fastest rate in four years.
This context creates two key observations.
First, while there is no shortage of capital, global investors and sovereign wealth funds like Mubadala can place big bets on clean energy and renewables, at competitive rates of return. If we are investing for the long-term, it is mission-critical to connect capital with the innovators that are having the biggest impact in this field.
Second, we cannot predict the future clearly – and there will be twists and turns in the road. Like the technology sector, the renewable energy space will have breakthrough innovations as well as those that fall short.
When we began our journey in 2006, we envisioned dramatic changes in how people would live. For example, Masdar City was a prototype of how we might live in the future. And the future, like all great efforts of imagination, turned out to be unpredictable.
Some innovation – more sustainable building materials and better management of energy consumption, for example – have become more commonplace. Others – such as dramatic evolutions in automobiles and individualised personal mobility – have yet to reach every household.
But that doesn't mean we should stop our efforts to experiment and innovate. With the climate stakes so high, we must give everyone committed to this cause the freedom to learn, experience setbacks, and eventually succeed.
Just as Silicon Valley set out to experiment and innovate, it is now at the cusp of global mass production of electric vehicles, technology-empowered ride-sharing and driverless cars. Globally, we need to continue to apply that same mindset to the sustainability challenge; and we are committed to that here in Abu Dhabi.
The UAE knew the global importance of climate action in 2008 when we held the first Abu Dhabi Sustainability Week. And the global community recognised our leadership in 2009 when Abu Dhabi was proudly voted as home to the International Renewable Energy Agency headquarters. Today, we host close to 80 per cent of the installed solar energy capacity in the GCC.
Here in the UAE, our goal is clear: to build an economy that protects the environment while supporting a growing economy. Over two-thirds of our economy is now comprised of non-petroleum sectors - a big transition for a nation whose economy was almost entirely hydrocarbon-based at our formation in 1971.
Masdar, as part of a consortium, is developing the third phase of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai. Phase 3 comprises 800 megawatts and is part of what will be the largest single-site solar park in the world.
But when speaking to innovators in this space, it’s clear that there are three key areas that enable new ideas to scale for the future; the infrastructure, policy frameworks, and funding. Underpinning this, of course, is an approach to partnership that Abu Dhabi and the UAE is well known for. Fostering long-term collaboration between government and business is therefore vital in enabling pioneering sustainability work, including Public Private Partnerships.
Through the leadership of Dr Sultan Al Jaber, Masdar's chairman, and Mohamed Al Ramahi, Masdar's chief executive, significant progress has been made in building these pillars. Their commitment to a sustainable future has enabled Abu Dhabi Sustainability Week to become an influential global catalyst and for Masdar to lead the conversation.
Looking ahead, I am optimistic about the solutions we can build. The commercial rationale is strong, the long-term strategy is paying off and innovations are having real impact. This week is a key pillar in advancing this transformational thinking, driving new partnerships, ideas, and long-term investments to enable further progress.
Khaldoon Al Mubarak is group chief executive and managing director of Mubadala Investment Company
Updated: January 15, 2020 09:28 AM