Mohamed Jameel Al Ramahi, CEO, Masdar: Interview

Interview: Mohamed Jameel Al Ramahi

How would you characterise the mindset of financial institutions in terms of their comfort with funding renewable energy projects?

MOHAMED JAMEEL AL RAMAHI: Financing is a obviously a key element of utility and infrastructure projects considering the sums involved. Historically, at Masdar, we have sought collaborations with international commercial and development banks. But there is plenty of room to accommodate local financial institutions now that the regulatory environment for renewables in MENA is catching up with developed markets, and domestic demand to diversify the energy mix is steadily increasing. We are seeing more and more interest from local and regional banks, and this is a healthy sign.

What further advancements in regulatory policy or support schemes are required to encourage investment and increase clean energy capacity?

AL RAMAHI: The UAE, and indeed the region as a whole, has historically been reliant on hydrocarbons. Abu Dhabi, however, was the first to specifically set targets related to the utilisation of renewable energy. In a relatively short period it has delivered a number of initiatives to support the diversification of its energy mix. Many countries in the region are also doing this as a result of growing demand, which has boosted investment in solar and wind power ventures.

The creation of Masdar City – a free zone dedicated to the clustering of clean technology, renewable energy and a collective focus on innovation – was a very important step in further encouraging investment and attracting technology leaders to the region. However, one important criteria going forward is the development of a clear strategy that integrates the efforts of key stakeholders within Abu Dhabi’s energy sector. The creation of the Energy Authority, acting as an umbrella entity, is an extremely important development as it will certainly bring greater clarity, coordination and long-term strategic planning to the sector. This will ensure sustainable growth and encourage large-scale investment programmes further afield. More specifically, regulation addressing technology incentive schemes to encourage greater utilisation of renewable energy sources, for example roof-top solar panels, needs to be further developed in order to create a domestic market.

How do you respond to those who claim that low oil prices have reduced the appetite for investment in renewable energy?

AL RAMAHI: Oil is a commodity and thus is vulnerable to price volatility. But the cost of renewable energy is predictable and provides a hedge against this volatility. In addition, renewable energy is a technology, which means its cost will steadily decline and its performance will continue to improve. It is for this reason that we should be investing in renewable energy sources right now. It has security of supply, cost transparency and is totally free from exposure to unpredictable commodity markets, making it incredibly attractive to investors. When you build a solar plant, the unit cost of power is guaranteed over the life cycle of that facility, and no other energy source can make that claim. Additionally, technology had advanced significantly over the past several years, resulting in a 70-80% drop in cost.

Solar energy is now cheaper to produce than power from coal and natural gas, making it more commercially viable than ever before. The issue is that technology is improving so rapidly that investors are holding off and opting to wait for start-up prices to drop even further. That being said, renewables still only represent 3% of global energy consumption, and there is tremendous room to grow. We are confident that a noticeable shift in government policies – in both developed and emerging markets – embracing clean energy will occur, and that despite the drop in oil prices, the appetite of investors will not be dissuaded.