In 2004, a South African entrepreneur took a drive into the California desert with his wife and cousin, on their way to the Burning Man cultural festival.
From that drive an idea was hatched for a company selling energy from the sun. Two years later, SolarCity was founded, and it is now a $4 billion firm employing more than 13,000 people. It is also America's largest provider of solar power. And the cousin who sparked the idea during that road-trip? That would be Elon Musk, founder and chairman of Tesla Motors and SpaceX.
This anecdote is especially timely as the World Future Energy Summit takes place this week in Abu Dhabi. Following the COP21 climate agreement, we see the global community, finally, taking more seriously the threat of global warming. Given the seriousness of this threat, governments and businesses are increasingly asking themselves what their role should be in helping to limit global carbon emissions.
The smart governments are the ones realising that this clean-energy revolution need not be a cost to bear, but rather is an opportunity to lead by establishing the policies and conditions to encourage clean- energy technology and business growth. These policies can be set at both the national or local level, something clearly seen in the US by examining the growth of the solar market on a state-by-state basis. The top three solar states – California, Arizona and New Jersey – account for 67 per cent of all installed solar units in the country and are home to more than 3,000 solar businesses that employ a total of more than 70,000 people. These business include some of the largest and most innovative solar companies in the world, including the California-based SolarCity and First Solar, which is headquartered in Arizona. Why are these three states so far ahead of the other 47? Does the sun shine more brightly on these states than on the others?
It certainly helps that California is the most populous state and Arizona is the state with the most sunshine. However, the primary reason these states are so far ahead is the smart policies established in each state to encourage the growth of solar power. The effect of these policies can be seen most clearly in New Jersey, a rainy area that receives less sunshine than the vast majority of US states, and includes 0.2 per cent of US land area and 3 per cent of the country’s population. Despite all of this, New Jersey generates 7 per cent of US solar power, which is largely the result of smart state policy. New Jersey was an early adopter of a consumer-friendly net metering policy and its solar renewable portfolio standard, adopted in 1999, requires the state to generate 4.1 per cent of electricity generation from solar power by 2028.
The clean energy policy path blazed at the local level by these states is being followed in the Mena region by Dubai and Abu Dhabi. And so you see Dubai putting in place its Shams Dubai initiative to encourage the installation of solar PV panels on Dubai rooftops, along with the goal of generating 25 per cent of Dubai energy from the sun by 2030. You also see Abu Dhabi, through Masdar, launching The Catalyst – the region's first technology start-up accelerator focused on sustainability and clean technology.
This evolution is, of course, not limited to solar power. Commercial buildings and industrial plants are huge users of energy, consuming over half of the world’s energy. With this large consumption of energy comes opportunity to consume it more efficiently.
According to the International Energy Agency, energy efficiency investments in the EU and North America saved $550bn in 2014 alone. And so you see the development of the region’s first energy service company (Esco) market in Dubai to help make buildings and industrial facilities more efficient, led by Dubai Electricity and Water Authority (Dewa) through its Etihad SuperEsco subsidiary.
Returning to Mr Musk’s drive in the desert. Without the supportive solar policies established by California, there might not be a SolarCity today, employing more than 13,000 people. It is also important to realise that SolarCity’s initial innovation was not a technology breakthrough, but rather it was its solar-leasing option that enabled everyday homeowners to affordably install solar panels on their roofs.
Smart policies benefit not only clean energy technology companies, but the entire clean energy technology value chain, including manufacturers, contractors/installers, project developers, distributors, and supporting activities in financing, engineering and legal support.
My hope is that our children and grandchildren can look back at the smart policies being established in the UAE as crucial to the effort in fighting climate change. The major burden is now on the clean-energy innovators to take advantage of these policies and emerge as the next global business leaders. Who knows, like Mr Musk and SolarCity, a local innovator’s next drive into the desert could be one that is written about and remembered for years to come.
Ridah Sabouni is managing director, Middle East & North Africa, for the US-based energy consultancy Energetics.
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