Goals bigger than Abu Dhabi

When it comes to the world's energy stage, Masdar, the renewable energy company, wants to play a starring role.

When it comes to the world's energy stage, Masdar, the government-owned renewable energy company, wants to play a starring role and it is counting on its international investments to land the part. "Abu Dhabi is a small market and Masdar's ambition is bigger," said Ziad Tassabehji, the director of the company's utilities and asset management unit.

In the past three years, Masdar has committed billions of dirhams to projects, partnerships and early-stage technology ventures in western Europe and North America. There is the company's US$250 million (Dh918.3m) Clean Tech Fund, a venture capital investment vehicle launched in 2006 with $100m in government funding, a matching endowment from Credit Suisse and $50m from the Consensus Business Group. Now fully invested, the fund holds stakes in German and US developers of solar energy technology, Dutch and American waste-to-energy processors, and a US developer of portable water treatment products.

But that is just the beginning. During the past year, following the Abu Dhabi Government's pledge last January to invest $15 billion in alternative energy and clean technology, Masdar has made a string of larger financial commitments to international wind and solar energy joint ventures. "We usually go to markets that have clear incentives to develop renewable energy, and to countries that have special relationships with the UAE," Mr Tassabehji said.

Those have included Britain, an early supporter of the UAE's nuclear programme, Germany, with which the UAE has a joint business council, and Spain, with which it has a military co-operation agreement. Masdar also chose to focus its resources on wind power, as the biggest emerging renewable energy market globally, and solar energy, as the most promising new market, Mr Tassabehji said. Credit Suisse is among a number of alternative energy proponents projecting that wind and solar power's share of the total renewable energy market - which also includes hydro-electricity, tidal power and biofuels - could increase to more than 25 per cent by 2030, from 7.3 per cent today. "Alternative energy is a long-term theme. Driven by rising energy costs and regulatory mandates in many countries, it is rapidly gaining share in the global energy supply," said Miroslav Durana, the bank's head of alternative energy research.

An abundance of sunlight in the UAE was an obvious reason for Masdar to invest in solar technology as it became increasingly clear that Abu Dhabi would need to diversify its electricity supply beyond oil and gas-fired power plants. "We need to learn from the best and bring the resources back home," Mr Tassabehji said of the company's plan to use overseas investments to kick-start development of a domestic alternative energy industry.

In solar energy, Masdar and the Spanish company, Sener, launched a joint venture last March to develop "concentrating" solar power plants, which use parabolic mirrors to concentrate the sun's rays. As well as Spain and the UAE, target countries in the world's "sunbelt" regions include various North African states. In May, Masdar announced it would commit $2 billion to investment in photovoltaic solar energy, which uses advanced semiconductor materials to convert sunlight into electricity. In August, it broke ground on a photovoltaic factory in Germany that will make components for solar panels.

The company is also building solar plants in Abu Dhabi, including one to power its Masdar City carbon-neutral urban development. Mr Tassabehji hopes that Masdar's ventures in European jurisdictions providing incentives for solar development will enable it to make the technology cost-effective in his company's home country. "It is one of the most expensive technologies, but the cost has started to come down."

On the wind energy side, Masdar in September invested ?120m (Dh584.7m) in the Finnish turbine manufacturer, WinWinD. In October, it took a 20 per cent stake in the UK's London Array wind project, joining the German utility, E.On, and Denmark's Dong Energy in a plan to build the world's biggest offshore wind farm. Mr Tassabehji said Masdar would soon announce a further wind energy deal that would use WinWinD's equipment in the Gulf.

But the pace of investments would slow this year, he predicted. "We have taken on board a lot of commitments in 2008, so 2009 is a year of execution." Alex O'Cinneide, of Masdar's innovation and investment unit, expects the company to soon be reaping practical benefits from some of its Clean Tech Fund investments. For instance, it plans to use the sludge-to-fuel sewage treatment system developed in California by the US company, EnerTech, at Masdar City.

Some outside experts have been impressed by Masdar's efforts. "This is the first oil-producing state that has accepted and agreed with the concept that oil may not be the only source of energy in the future," said Fred Moavenzadeh, the director of the technology development programme at the Massachusetts Institute of Technology. "The initiative contributes to the economic diversification of the Gulf region," Jeffery Culpepper, a Credit Suisse investment banking department head, said of the Clean Tech Fund. [e-mail]