Suhail Al Mazroui, the Minister of Energy, stressed the need to slow the UAE’s growth in electricity and water consumption during a forum at the Al Bateen Palace majlis. Rashed Al Mansoori / Crown Prince Court - Abu Dhabi
Suhail Al Mazroui, the Minister of Energy, stressed the need to slow the UAE’s growth in electricity and water consumption during a forum at the Al Bateen Palace majlis. Rashed Al Mansoori / Crown Prince Court - Abu Dhabi
Suhail Al Mazroui, the Minister of Energy, stressed the need to slow the UAE’s growth in electricity and water consumption during a forum at the Al Bateen Palace majlis. Rashed Al Mansoori / Crown Prince Court - Abu Dhabi
Suhail Al Mazroui, the Minister of Energy, stressed the need to slow the UAE’s growth in electricity and water consumption during a forum at the Al Bateen Palace majlis. Rashed Al Mansoori / Crown Pri

New UAE law in the works to curb misuse of energy


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A federal law is being planned aimed at curbing wasteful energy and water use that have resulted from rapid economic development and population expansion.

Last week, Suhail Al Mazroui, the Minister of Energy, told a majlis that included Sheikh Hazza bin Zayed, the National Security Adviser and Vice Chairman of Abu Dhabi Executive Council, that a special committee at the ministry had started to prepare a law that will include measures to prevent inefficient energy use.

It is a concrete step to address a problem that Mr Mazroui has talked about since taking office last year. He stressed the need to slow the UAE’s growth in electricity and water consumption, which has been running at an average of 6 per cent a year over the past decade (sometimes reaching double digits), and with per capita use standing at between two and three times the international average.

The country’s annual bill for electricity and water use stands at Dh35 billion, he said.

In June, Mr Mazroui talked about the need to reduce government subsidies in the energy sector, although there have been no specific initiatives yet on that front at the federal level.

Each emirate sets its own tariff levels for energy.

The latest move is part of a broader strategy aimed at making energy use more efficient and diversifying its sources.

The UAE plans by 2020 to generate 25 per cent of its power from four nuclear plants that are currently under construction. The aim is also to have renewable energy generate about 7 per cent of Abu Dhabi's electricity (1.5 gigawatts) by 2020, mostly from solar power, with Dubai aiming for 5 per cent (1GW) from renewables by 2030. A fully-fledged roadmap to achieve these targets has not yet been set out publicly.

However, on the efficiency side, the ministry is working with the relevant authorities on rules that will ensure a more rational use of energy and change patterns of energy consumption by individual households and commercial premises, which together account for two-thirds of the country’s electricity consumption, Mr Mazroui said.

In a report last year on wasteful energy use in the region, Chatham House, a London-based think tank, noted that the GCC countries used as much primary energy as the whole of Africa, or as Indonesia and Japan combined, although their populations are much smaller by comparison.

The report noted that there was a whole range of initiatives that could reduce wasteful energy use, including “quick wins” from fairly easily achieved changes in behaviour.

“In one case of a large government office building whose management was working with the Estidama programme in Abu Dhabi efforts of just one employee to change staff behaviour resulted in a saving of 30 per cent of the building’s electricity demand.” the report noted..

The Dubai Supreme Council of Energy has set out regulations for government buildings including keeping the temperature at 24°C during working hours and 27°C at other times, and switching the lights off at the end of the day.

At the regional level, the most pressing need is integrated strategic planning.

“If the relevant authorities are not talking to one another, a government cannot formulate a realistic strategy,” the report warned. “Furthermore, if those with the knowledge and capacity to develop energy and water strategies lack the authority to implement their plans, no strategy will achieve its potential at scale.”

For the UAE, the law will shed light on how the government plans to follow through at federal level on the energy roadmap it outlined two years ago.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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