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Executive Perspectives

EXECUTIVE PERSPECTIVE: Sustainable economic development combines the old and new

Tim Nixon

03 Jan 2019

In this interview, the CEO of Masdar, Mohamed Jameel Al Ramahi, describes how next generation renewable energy and sustainability can provide an example for both how to live and how to develop economically.  At a time when claims are being made about “sustainability” being too expensive, this model finds only opportunity and resilience in its adoption.  It will be crucially important to see how the proposed “balance” between old and new economies alters with the acceleration of climate change.  Tim Nixon, Managing Editor, Thomson Reuters Sustainability.


Sustainability: With Masdar just over a decade old now, how would you describe the evolution of your vision and mission?

Mr. Al Ramahi: Since Masdar was established in 2006, the company’s mission and vision have remained constant. Our aim is essentially two-fold: to reinforce the leadership of Abu Dhabi and the UAE in the global energy sector, and to support the diversification of the UAE economy, and its energy sources, to create additional sources of revenue for the benefit of future generations.

Masdar is fundamentally a business. However, helping the UAE deliver on its sustainability targets and the implementation of the UN Sustainable Development Goals is also a key part of our mandate. Abu Dhabi Sustainability Week, today one of the world’s largest sustainability gatherings and an event we host, plays a critically important role in this regard.

Sustainability: With increasingly dire warnings on the direction of climate change, where do you see the most potential for scalable renewable energy solutions?

Mr. Al Ramahi: Climate change is real and it is the responsibility of all stakeholders to work together in an ecosystem to deliver the sustainable, affordable energy our growing global economy needs.

The opportunity in renewables is global. At Masdar, we are present in more than 20 countries. Our primary markets remain the Middle East & North Africa and Europe, but we are exploring new geographies, including in the Americas and Asia.

From an investment standpoint, our focus continues to be on utility-scale solar and wind power, to help meet new demand and replace retiring conventional power plants. But at the same time, our activities are expanding into areas such as battery storage, waste-to-energy, energy services, mobility, sustainable farming, and materials R&D. This evolution reflects a growing trend in which more and more industries are becoming active in sustainability. Sustainable development is no longer the job of renewable energy alone, a key theme of ADSW 2019.

Meanwhile, the combination of solar PV and electric batteries has the most potential to connect the hundreds of millions of people living off-grid and without access to sustainable, modern energy services. Closing this critical energy gap with the help of clean technologies has major implications for successfully mitigating climate change. It is a field in which we are increasingly active; for example, through our solar home-systems programme in Morocco and rural Egypt.

We have launched an energy services division to offer consultancy, financing and project management expertise, building on our experience developing Masdar City. At the same time, we are exploring opportunities to help reduce carbon emissions in the industrial sector, such as through the reinjection of waste heat back into the steelmaking process, or the conversion of such heat into a power source for cooling. These opportunities represent a significant and growing market.

Finally, Masdar has been at the forefront of the commercialization of carbon capture, utilization and storage (CCUS) technology through its involvement in Al Reyadah, an Abu Dhabi-based enterprise that unveiled the first commercial-scale CCUS project in the MENA region in November 2016. Masdar in fact started this project with Abu Dhabi National Oil Company, which is now the owner and operator. Here, carbon dioxide is captured from a major steel producer before being treated and transferred via pipeline for reinjection into oil reservoirs. As much as 800,000 metric tons of carbon dioxide is sequestered annually.

With the ever more pressing need to act on climate change, CCUS technology is likely to become an essential tool in reducing industrial carbon emissions. The UAE is well positioned to take the lead.

Sustainability: How should we think about the future of fossil fuels?

Mr. Al Ramahi: Without question, hydrocarbons will remain part of our energy future for many years to come. When one considers the size of global primary energy demand, it’s clear that no single technology or energy source can deliver on our requirements alone.

According to the IEA, global primary energy demand is expected to rise 25% by 2040. That’s about the same as adding another China and India to our existing demand. So the priority must be to create a diversified energy mix, in which every source of energy supply can play its optimum role. Indeed, in many ways, hydrocarbons and renewables can complement one another. That is the strategy of the UAE, with which we are fully aligned at Masdar.

It is also important to note that the demand for hydrocarbons will be driven by the need for petrochemicals as well as more primary energy – for plastics, chemicals and other petroleum products. Recycling these products and minimizing their carbon content are also priorities for the sustainability sector.

Sustainability: How do you measure progress on the transition to a lower carbon economy?

Mr. Al Ramahi: Investment is certainly one measure. More than 80 per cent of the estimated US$11.5 trillion that will be spent on new power generation infrastructure globally between 2017 and 2050 will be invested in renewables; that’s US$9.3 trillion. Investment appetite in the MENA region has also grown markedly on the back of large-scale projects. Today, banks and the wider investment community are comfortable with the technology and risk-profile of renewable energy.

Capacity growth is another criterion. Around 80-90 gigawatts of new solar power capacity alone is being added to the energy mix annually. National targets for renewable energy are behind this growth, as well as the compelling economics of renewables. The UAE was the first country in the GCC to set a target for renewable energy, and today, ambitious targets are the norm across the MENA region. Against this backdrop, Masdar aspires to double the size of its renewables portfolio within the next five years.

Awareness is another critically important consideration. Here, the annual Abu Dhabi Sustainability Week plays a significant role in engaging stakeholders on the broadest range of sustainability issues, particularly those in the UAE community, and in promoting more responsible attitudes and behaviour.

Further to this point, progress on energy efficiency and the demand-side of the energy equation is also key. This entails a combination of approaches, such as the scaling back of subsidies, guidelines and regulations aimed at new and existing buildings to ensure they are more power- and water-efficient, and effective consumer awareness and education. Without question, Masdar City, our home in Abu Dhabi, has helped to raise the profile of sustainable urban development in general, and energy efficiency in particular. And perhaps most importantly of all, it also has demonstrated the fact that they make good business sense.

Sustainability: We hear a lot about “green investors”. How would you characterize the importance of this trend?

Mr. Al Ramahi: Green investors are extremely important and influential. And as we heard at COP24, institutional investors, in particular, are becoming more and more vocal in their demands for cuts in carbon emissions.

The green investment trend explains why Abu Dhabi Global Market (ADGM) has decided to host its first Abu Dhabi Sustainable Finance Forum at ADSW 2019. The event, which reflects Abu Dhabi’s long-term goal to become a regional hub for sustainable finance, will examine strategies to direct increasing capital flows towards investments with positive economic, social and environmental impacts.

Since being established in 2006, Masdar has played a leading role in attracting project finance to the renewable energy sector, which has helped to pave the way for more ambitious projects.

In September, we signed the region’s first green revolving credit facility with local and international banks based on the Loan Market Association’s Green Loan Principles, reflecting the increasing profile of investment instruments that incorporate environmentally responsible characteristics.

Today, all of the renewable energy projects underway in the MENA region require financing. And it is this demand that is helping to drive the growth in sustainable finance.

Sustainability: WWF recently reported that our natural ecosystems are under unsustainable stress. How does the Masdar model integrate and support scalable preservation of natural ecosystems?

Mr. Al Ramahi: Sheikh Zayed, the founding father of the UAE, was committed to environmental conservation. At Masdar, we are striving to build on his vision and legacy.

Our philosophy is based on the three pillars of economic, social and environmental sustainability, because nothing is truly sustainable unless it is commercially viable.

In terms of operations, we are working in four main areas: the development of renewable energy projects, with a focus on solar and wind power plants; leadership in sustainable real estate through Masdar City; the advancement of clean technologies through their deployment at scale; and the delivery of industry and knowledge platforms promoting collaboration and business opportunity, the prime example being Abu Dhabi Sustainability Week. All four areas complement the UAE’s commitment to accelerate sustainable development.

Cities account for the significant majority of global carbon emissions. Urbanisation is an acute challenge in the MENA region, which has a young population and a very high electricity demand for cooling in the summer. Urban sprawl, combined with the disposal of municipal waste in landfill sites, is another threat to natural eco-systems. Masdar City continues to be a benchmark for low-carbon urban development, home to one of the largest clusters of green buildings, and a showcase for new technology in sustainable mobility, power generation, storage, and now sustainable farming.

We are also investing in the UAE’s first waste-to-energy project in partnership with Bee’ah of Sharjah, which will treat more than 300,000 tonnes of municipal solid waste per year when operational.

By investing in the latest technologies at scale, we are helping to encourage their wider adoption and commercialization. A case in point is Hywind Scotland, the world’s first commercial-scale floating wind farm. We are also the principal investor in the newly opened Graphene Engineering Innovation Centre at the University of Manchester. Two-dimensional materials like graphene could have profound impacts on sustainable development in the future.

Sustainability: On a personal level, what gives you hope that sustainability will prevail over short-termism?

Mr. Al Ramahi: The strong business case for clean technologies is certainly cause for optimism. A key factor here is the astonishing pace of technological progress, which has brought a number of potentially transformative solutions onto the market at the same time – such as battery technology that is making commercially viable electric transport a reality; two-dimensional materials like graphene that have an array of potential industry applications; and highly efficient solar panels which have led to the solar power sector achieving grid parity with conventional power generation based on fossil fuels much faster than many people expected.

The positive example being set by our youth is also extremely encouraging. Developing the next generation of future energy leaders is a priority at Masdar, and its importance explains our involvement in ADSW and initiatives such as the Youth 4 Sustainability Hub, and the Women in Sustainability, Environment and Renewable Energy (WiSER) initiative.

To mark our tenth anniversary in 2016, Masdar commissioned the first global survey of post-millennial attitudes towards sustainability, renewable energy and climate change, interviewing 5,000 youth aged 18-25 in 20 countries. One of the key findings was that nearly three-quarters of respondents (73%) see it as the responsibility of the generation aged 18-35 to find solutions to climate change. The fact that our youth are willing to take the lead in promoting sustainable development is a hopeful development which all stakeholders have a duty to support.

 

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