The latest renewable energy agreement between the UAE and India will further increase co-operation between the two countries in areas such as clean energy, electricity grid connectivity and green hydrogen, experts and officials have said.
Earlier this week, both countries signed initial agreementsto expand bilateral investments in renewable energy, food processing and healthcare sectors.
The agreement aims to invest in renewable energy projects in India, potentially reaching a total capacity of 60 gigawatts.
India’s Foreign Secretary Vinay Kwatra said one of the pacts was on renewable energy, which also includes green hydrogen and solar.
“There is an inherent thought of possible grid connectivity between India and the UAE in that space,” Mr Kwatra told reporters at a summit in India’s Gujarat state.
The preliminary agreement between the two countries would focus on combining new areas of technology with renewable energy, Navdeep Suri, former ambassador of India to the UAE, said.
“There are some really ambitious ideas that are being discussed, particularly in terms of trying to connect grids in the two countries [and] there’s a fair bit of discussion on green hydrogen,” Mr Suri told The National.
He also said the latest round of agreements could support the goals of the India-Middle East-Europe Economic Corridor and the I2U2 economic co-operation grouping. The I2U2 group is a grouping of India, Israel, the UAE and the US.
The trade corridor, which was announced at the G20 Summit in India in September, will originate in India, connect the UAE, Saudi Arabia, Jordan, and Israel, and terminate in the EU.
It has called for the development of a mix of rail and sea links for physical connectivity and includes plans for pipelines to transport hydrogen produced in Saudi Arabia and the UAE.
I2U2 was formed in 2021 following the Abraham Accords between Israel and the UAE, to deal with issues concerning maritime security, infrastructure and transport in the region.
Less than a year after the group’s creation, the countries announced a partnership to advance a 300-megawatt wind-solar hybrid project complemented by a battery energy storage system in Gujarat.
At the Cop28 climate conference last month, the UAE said it would develop 6.6 gigawatts of clean energy capacity in India, including the construction of 1,200 megawatts of wind and solar projects.
The projects are expected to be financed using the Emirates’ $30 billion climate fund Alterra, which is backed by major institutional investors such as BlackRock, Brookfield and TPG.
"It is a great sign to see both countries furthering their co-operation on the implementation front as well,” said Gauri Singh, deputy director general at the International Renewable Energy Agency.
“India possesses an incredibly attractive renewable energy market, thanks to its well-defined policies and clearly outlined targets, while the UAE continues to demonstrate its commitment to becoming a renewable energy leader,” Ms Singh told The National.
Attractive market
India, the world’s fifth-largest economy, aims to achieve net-zero emissions by 2070 and meet 50 per cent of its electricity requirements from renewable energy sources by the end of this decade.
The Indian government has estimated that the country’s shift to a low-carbon path will require more than $10 trillion of new investments by 2070.
“Given its economic growth, demographics [and] size, [India] offers probably the best return on investment,” Mr Suri said.
“When you look at the trajectories of the major countries in the region … India is outperforming most of the others at this point of time and is projected to continue to outperform for the next several years,” he added.
New Delhi has forecast annual gross domestic product growth of 7.3 per cent in the fiscal year ending in March, the highest rate among the major economies, despite a global slowdown.
Even with the economic momentum, the country’s renewables ambitions are challenging.
India, the fourth-largest country in terms of installed renewable energy capacity, will need 40 gigawatts of wind and solar capacity to be added annually to reach its 450-gigawatt target by 2030, according to Wood Mackenzie.
That would require an annual investment of $35 billion a year, the US-based consultancy said in a report last year.
India’s power ministry has projected renewable energy investments of about $16.5 billion for this year.
"With solar and wind at grid parity, these technologies will scale up and constitute 80 per cent of the new capacity additions in India, with demand coming from not only electric utilities, but also from [the] industrial sector," Ankita Chauhan, associate director at S&P Global Commodity Insights, told The National.
The signing of the initial agreement is in line with the past relationship between the two countries, where the UAE's sovereign wealth fund, the Abu Dhabi Investment Authority (Adia), has invested in several renewable energy assets and holds stakes in leading renewable companies in India, Ms Chauhan said.
Adia has invested in two of India's largest renewable energy companies – ReNew and Greeenko Group.
However, coal, which accounted for nearly 75 per cent of India’s electricity in 2022, will continue to play a significant role in the country’s energy mix as power demand soars.
India added an annual average of five gigawatts of coal-based electricity generation capacity from 2017 to 2022.
Connected power grids
India and the UAE have been in talks to connect their grids through undersea cables, according to media reports.
New Delhi has already signed an initial agreement with Saudi Arabia to co-operate in the areas of electrical grid interconnection, clean hydrogen and supply chains.
Both countries will set up a general framework for co-operation in electrical interconnection and electricity exchange during peak times and emergencies.
When it comes to connecting the power grids of India and the UAE, “you just have to negotiate a relatively small stretch of the Arabian Sea”, Mr Suri said.
For the Emirates, that is more technologically and financially feasible than a grid connected with China or other emerging economies, he added.
Integrating regional power systems boosts energy security, expands access to clean, affordable electricity, and allows diverse generation capacities to meet demand and maintain stability.
“If you can connect grids efficiently, then you don't need to invest that [much] in [energy] storage,” Mr Suri said.
“You can get over the hump of having plenty of power during the day but not enough at night,” he said.
The UAE, Opec's third-largest producer, has been investing heavily in clean energy projects, ranging from nuclear to solar, to achieve net-zero emissions by 2050.
The growing number of renewable energy projects also presented a favourable environment for project financing, sustainable bonds, and other investment tools that promote environmental, social and governance (ESG) principles, Vikas Lakhwani, chief revenue officer at CPT Markets, said.
“The financial implications [of the UAE-India agreement] are far-reaching, creating exciting opportunities for investors, developers, and financial institutions across the spectrum,” he said.
