By Neil Halligan
Masdar may have initially been known for its eco-friendly 'smart city' on the edge of Abu Dhabi. But, today, it is a fully-fledged renewables development company pioneering new technologies around the world, according to its CEO Mohamed Jameel Al Ramahi
For a company with a history of being an early adopter of new technologies, it is not too often that Masdar looks back. But when it does, it can boast a rich track record of being an industry leader, and in some instances, of creating a new business altogether.
It is now 11 years since Masdar was formed in 2006. This was at a time when Abu Dhabi, and the whole UAE, was about to embark on its biggest period of growth. The price of oil had just increased 21 percent and was heading on a sharp, sustained upward curve. The UAE economy was booming, achieving record figures of GDP growth.
It was just at that moment, however, that Abu Dhabi decided to establish renewable energy company Masdar (Abu Dhabi Future Energy Company), to explore clean energy research, technologies and commercialisation, with a view to developing renewable energy and sustainable urban development projects. The name Masdar comes from the Arabic word ‘source’, which goes some way towards explaining the ultimate vision: to harness the UAE’s own natural resources, while diversifying away from its use of fossil fuels.
Masdar – a subsidiary of Mubadala Development Company – unveiled its masterplan to develop the world’s most sustainable eco-city in 2008, including the goal to use 50 percent less power and water than, but at a cost comparable to conventional buildings.
The Masdar City plan came on the back of a $15bn support from Abu Dhabi government, but like the renewables industry in the years since then, the cost has reduced significantly.
The clean-tech cluster, business free zone, and residential neighbourhood is now one of the largest developments of low-carbon buildings in the world. It has evolved from an entirely self-funded initiative into one primarily driven by third party investment.
The “bold vision” of the emirate’s leadership to embark on an ambitious plan at a time of such prosperity has been reaping rewards, says Mohamed Jameel Al Ramahi, CEO of Masdar in an interview with Arabian Business.
“When we started, Abu Dhabi initiated this bold vision to get into future technology, renewable energy, and sustainable development,” says Al Ramahi, recalling the starting point of the now huge operation. “Everybody was asking, ‘Why is a government that is very wealthy, blessed with fossil fuels, actually investing in this?’ It’s because we have visionary leadership; this is the key,” he says, pausing as if to underline the point.
He outlines the “ten years of a lot of hard work” to implement that strategy, which he insists is based on something very important: how will the world look 20 years from now, and 50 years from now?
“That’s why Masdar will always continue assessing future technologies; not only the technologies that we have right now, because we will always strive to see what the future will potentially look like.”
The quest for renewable energy
The key thing to know about Masdar is that it is not just a physical site, constructed to showcase Abu Dhabi’s commitment to environmentally friendly practices. What it really is now, is a development company for renewable technology, from conception through to operations. And in recent years, the relevance of what Masdar has been developing in solar and wind technologies has come sharply into focus.
Ever-decreasing oil revenues have seen governments in the region look to move away from fossil fuels for power generation, to more cost effective alternatives. Masdar’s research has helped solar and wind energy to become more cost effective, and sooner or later, cheaper than oil or gas.
Last June, a Masdar-led consortium won a bid to develop the 800 megawatt (MW) third phase of the Mohammed Bin Rashid Al Maktoum Solar Park in Dubai for what was then a world record low of 2.99 US cents per kilowatt hour.
“It’s a game-changer,” says Al Ramahi. “The price we tendered in Dubai not only changed the way people look at Masdar, it changed the whole industry. Everybody was talking about it, worldwide.”
With the power purchase agreement signed, construction has started on phase one and is due to be completed by April next year, with the project expected to complete by April 2020. And, thanks to the government of Dubai having committed to a strategy of generating 75 percent of its electricity from clean energy by 2050, along with similar commitments from Abu Dhabi, there are plenty of opportunities for developers like Masdar in the renewable energy industry.
The real business game-changer in the region’s renewable energy industry, however, has been Saudi Arabia’s $50bn renewable energy push, as the world’s top crude exporter turns to solar and wind power to temper domestic oil use in meeting growing energy demand.
Masdar is bidding for Saudi projects as they’re issued, but competition is tough. A total of 27 companies qualified for a 300MW solar PV project, worth around $600m, and 24 companies bid for a 400MW wind farm, worth around $700m.
As to whether it will achieve a similar low price again, Al Ramahi is coy, and says many factors have to be considered. “With renewable energy, it’s a bit tricky. It’s not like electricity generation from gas or coal, or even liquid fuels, because renewables depend, particularly solar and wind, on source.”
It also depends on a consistent supply of that source.
“Sometimes you have clouds and sometimes the wind doesn’t blow, but generally speaking on average, you know and you can forecast the output of your plant based on the historical data.”
And it’s not just Mother Nature who makes or breaks the validity of renewables. Al Ramahi says regulations and policies in each country are also important to give investors and developers the transparency required.
“Some countries have restrictions over dividend payments, and taxes that investors need to pay. Currency fluctuation issues are important in other countries. These are all potential risks that you as an investor need to mitigate, and could force you to raise your price,” he says.
He explains how the clearly defined system in the UAE benefits companies like Masdar. “The policy is clear, the taxes are clear, the dividend restrictions are clear. You have an ‘off-taker’ like DEWA, ADWEA (Abu Dhabi), FEWA (federal) – double A-rated, banked, long-term purchasers of power. All of these things make a huge difference.”
As does the fact that the land is free to developers, he adds. “Land here [in the UAE] is free because the government says ‘this is the land for renewable development’ and they provide the land for a nominal lease. This allows developers like us to give competitive tariffs.”
Saudi Arabia could see a price that is equally competitive. While he refuses to be drawn on a price estimate, Al Ramahi says the amount of time that the kingdom’s authorities have invested in analysing and studying renewables means that it will be extremely well planned and executed.
“The ingredients applicable here are the same in Saudi Arabia,” he says, before explaining that the kingdom is even better suited to renewables. “We don’t have wind here that is consistent like Saudi Arabia. It has excellent locations for wind. They have the capability to develop wind farms at large scale; the land is there, the sources are there. Saudi Arabia, in my view, is one of the best locations for solar and wind, not only in the region, but all over the world.”
That doesn’t mean it will be an easy market to crack, of course. “In terms of pricing, I think it will be very competitive. We’ll have to see what will happen.”
Al Ramahi says he is sanguine about who wins individual contracts, reasoning that the adoption of renewable energy in the region, no matter who develops the plants, is a major success for Masdar. “Masdar paved the way for a new sector to be created, not only in the UAE but in the region,” he says.
“Because we were created, we were able to demonstrate that these technologies are not only good for the environment and will help [reduce] climate change, but they also make commercial sense. Our main challenge from day one was to prove it – how do we build a sustainable city?”
While Masdar had that initial commitment of $15bn from the Abu Dhabi government when Masdar City was launched, the funding commitment was just that – financial backing to get the project off the ground, at a time when costs were substantially different.
“If you built a 100MW power plant ten years back, and fast forward to today, with the same money you could build ten power plants,” Al Ramahi notes.
These investments and major contracts have helped Masdar build a total renewable energy portfolio of $8.5bn. Its share of that portfolio is $2.7bn, which mainly focusses on MENA and Europe. The impressive portfolio includes the world’s largest offshore wind farm, London Array, of which Masdar owns 20 percent. It is also a 35 percenpartner in Dudgeon offshore wind farm, a 402MW project located off the coast of East Anglia.
Masdar is also about to launch the world’s first floating offshore wind farm in Hywind, Scotland, in which it has a 25 percent stake. Those are just a few of the projects that Al Ramahi says will sustain its growth in the industry.
“Our growth will continue to be focussed on this region. We are growing our portfolio at double-digit growth and hopefully this will continue for the next five years, at least,” he says.
For all these undeniably impressive achievements, Masdar has, at times, had some explaining to do about an apparent lack of progress in its own backyard. During its first few years of existence, Masdar City struggled to match the impressive projections for growth that it had set itself.
Quietly, however, it has been overturning those perceptions. According to the latest figures, a total of 176,000 square metres of completed buildings are fully leased and occupied; a further 741,000 sq m of projects at Masdar City have firm development agreements in place. These include schools, offices, hotels, shops, restaurants and private homes.
Around 2,000 apartments are either built, under construction or in design, through Masdar or third-party investors, which will bring the residential population to more than 3,500 in the near term.
The working population at the city is also set to grow – from around 2,000 today to more than 5,000 by 2018/2019. In 2022, the first residential community of private villas and townhouses is scheduled for completion.
“Masdar City is growing. We have a lot of activities in terms of construction,” says Al Ramahi. “We have third party investors coming in – Majid Al Futtaim announced that its first move into Abu Dhabi will be in Masdar City.”
It also has its own power generation facility – a 10MW solar array plus 1MW of rooftop solar panels. The total clean energy capacity of Masdar projects in Abu Dhabi is enough to power Masdar City six times over.
The keenness to develop new technologies and become early adopters continues, according to Al Ramahi. He explains how his teams have studied supply and demand, in terms of power, water, transportation and storage technologies, all of which could significantly change how individual households save and generate power.
“We are investing a lot in future technologies. It’s very important that not only do we demonstrate that these technologies can be bankable, and commercially make sense, but also that we’re thinking about what could happen in the future,” he says.
In the same way Masdar was able to prove that buildings require half the power, Al Ramahi says the cost of desalination is set to tumble due to technology being developed in Abu Dhabi by using power from renewable energy.
“We were able to demonstrate that it can be done, with this building, this city, our power plants, everything. We are doing the same thing in water desalination. We will demonstrate that we can reduce the cost of water desalinisation. That’s coming in the future,” he reveals.
Masdar introduced the country’s first ever autonomous transport system – Masdar City Personal Rapid Transit (PRT) system – which uses the company’s internal routes to transfer people from the main building to its car parking facilities via driverless pods. Introduced in 2010, they have carried well over 2 million passengers and covered close to one million kilometres.
“Now we are trying to expand autonomous mobility throughout Masdar City. It doesn’t have to be the same technology, but the concept is something we have committed to,” he says.
Al Ramahi is quick to point out that with these types of initiatives Masdar is an “integrator” rather than a manufacturer. “We don’t build [vehicles], obviously, but we care about mobility and sustainable mobility, like we care about renewable energy production, and energy efficiency in buildings.”
He explains that Masdar is assessing different technologies in mobility and has launched a competition with different providers to see who will give them the best proposal from a technological perspective.
The company also collaborates with Masdar Institute of Science and Technology in research and development (R&D) and investment.
Masdar Institute, a separate entity to Masdar, has to date received 14 US patents, with a further 90 US patent applications pending. It has made more than 140 invention disclosures since its inception. Five technology-based start-ups have been launched by Masdar Institute graduates to date, and seven “pre-spin off” companies are being developed.
“We are partnering with a local manufacturer on the first electric bus that is fully designed and integrated in Abu Dhabi,” he says.
“We are going to launch the first pilot in January [at Abu Dhabi Sustainability Week].”
He says the institute is assessing technologies in water, storage, and integration of building materials, as well as looking at developing technologies in power generation, transportation and water desalination. The company will also work with Saudi Aramco – which is about to invest in clean technologies – on R&D into future technologies, and sharing knowledge. It is an ambitious programme that is every bit as forward thinking as it was back in 2006 when the company launched, Al Ramaihi argues.
“The UAE has stayed true to the visionary leadership and pioneering spirit which was behind the foundation of Masdar in 2006. This is why the UAE is now one of the world’s leaders in renewable energy, and the level of progress is incredible, especially in solar,” he says, of the driving force behind the concept both then and now.
The CEO finishes by restating how Masdar will continue to evolve in the coming years, as new technologies emerge, keeping focussed on the future-thinking envisioned by the country’s leaders.
“Just look at the major projects under development in Dubai and Abu Dhabi – they are constantly setting new global benchmarks, and are very clear examples of the UAE’s boldness and determination to drive the industry forward.”
The world’s first floating offshore wind farm, located off the coast of Aberdeenshire, consists of five colossal wind turbines (each with a capacity of 6MW) built on floating foundations anchored to the seafloor at depths of up to 120 metres.
Hywind will provide electricity to 6,600 homes, displacing 63,000 tonnes of carbon emissions each year in the process. The announcement of Masdar’s acquisition of a 25 percent stake in the project came during Abu Dhabi Sustainability Week 2017, with the remaining 75 percent held by Statoil.
Dudgeon offshore wind farm
Located off the English coast of North Norfolk, the 402MW wind farm will be one of the largest of its kind in Europe. Once again, Masdar is working with Statoil, owning a 35 percent stake in the project; the Norwegian utility company Statkraft is also a partner.
A fixed offshore wind farm, Dudgeon will be situated in water depths of between 18 and 25 metres and will generate enough electricity to power more than 410,000 British homes, producing 1.73 terawatt hours (TWh) each year. Upon completion, Dudgeon and Hywind Scotland will bring Masdar’s gross installed power capacity in the UK to more than 1,000MW.
Both Hywind and Dudgeon wind farms are scheduled for completion from early this month. According to Bader Al Lamki, Masdar’s executive director for clean energy, there are plenty more to come.
“We’re showing that the technology is commercially viable and can be applied anywhere where sea depths are too great for conventional fixed offshore wind power. This potentially opens up a number of new geographies, such as offshore United States, Japan, and France. The market potential is significant, and we will be looking beyond Hywind at future opportunities with our partners Statoil.”
Masdar, Al Lamki says, already has a large presence in wind energy, with assets in the UK, mainland Europe, Africa, the Middle East and parts of Asia.
“Such a network, backed by our proven operational experience, opens a variety of doors for us. We’re actively pursuing commercial opportunities in both fixed and floating offshore wind energy. Western Europe will always be an important market for Masdar, but having a track record in floating wind technology potentially takes us into a number of new markets.”
Masdar’s renewable energy projects are also present in countries including Mauritania, Egypt, Morocco, Serbia and Spain.