November 27th, 2011 | Posted by Eswar Mani | Filed under Energy
The current state of the world economy leaves a lot to be desired particularly when it comes to the hunger for new investment opportunities, so conventional wisdom would suggest that investing in the renewable energy technology (or cleantech) sector is a fool’s errand.
With Google last week shutting down its ‘RE<C’ initiative that invested US$850 million in renewable energy and China’s mass production capability driving down solar PV (photovoltaic) prices put significant pressure on the profitability of the solar industry, these are tough times for the cleantech sector; if it wasn’t for the success of First Solar, many investors would still be skeptical of solar as an industry to achieve returns. Nevertheless there’s still plenty of appetite for investing in other sectors of the renewable energy market that have strong growth potential. Yet, we see many opportunities in less capital intensive parts of the cleantech ‘new economy’ (as the sector is too broad to call an ‘industry’), that do solve climate change and regulatory issues without relying on subsidies.
Here in Abu Dhabi, through the investment arm of Masdar, Masdar Capital, we continue to see interesting opportunities for cleantech investing, and a number of worthy renewable energy projects both within the region and around the world. After the financial crisis in 2008, Masdar Capital announced a record intake of external capital for its second fund from investors such as Siemens, GE, and Japanese entities including Development Bank of Japan, Japan Bank for International Cooperation, Inpex Corp, JX Nippon Oil & Energy Group, and Mitsubishi Heavy Industries.
In addition, earlier this year Masdar along with its joint venture partner Spanish engineering company SENER oversaw the start up of the 19.9MW Gemasolar concentrated solar power (CSP) plant in Andalucia, Spain. This $1.4 billion project is no ordinary renewable energy facility, what sets it apart is the fact that it can practically generate baseload power 24 hours a day – the holy grail of renewable energy – using molten salt which operates at a higher temperature (500 °C) than oil to generate higher pressure steam in the turbine for longer. The project is capable of supplying the uninterrupted power to 25,000 homes for most of the year.
I always get asked by potential investors, especially those from Japan who I regularly deal with, why oil-rich Abu Dhabi is pursuing renewable energy so aggressively. The answer, I must point out should not be such an alien concept: Abu Dhabi, like Japan believes that development in renewable energy and sustainability isn’t just good for the environment, it’s the pathway for a nation to develop its human and economic capital. This vision was set in stone by the late Sheikh Zayed Bin Sultan Al Nahyan, founding father of the United Arab Emirates who strongly believed in conservation in every sense of the word and whose vision inspired the Zayed Future Energy Prize to give a chance to the green innovators and leaders of tomorrow to develop and grow.
Groundbreaking projects in renewable energy such as Gemasolar demonstrate that they are not simply ‘eye-candy’ in an industry that can sometimes feel like one long beauty contest trying to win investor appeal. As a member of the high-level Selection Committee for the Zayed Future Energy Prize, I was once again reminded of this. My industry peers and I judged the many outstanding projects and propositions in renewable energy and sustainability particularly from individuals, SMEs and NGOs. I am always amazed by the passion and ingenuity displayed by these groups for improving not only their own communities but those even further afield.
After all, one can easily see that an idea that might be effective in, for example, removing barriers to education for the school children of rural Africa by letting them study in the evening using low-cost rechargeable LED lamps, can be just as helpful to their counterparts in the remote mountain communities of Pakistan. It doesn’t just make good business investment sense to highlight such projects on an international platform such as the Zayed Future Energy Prize, it’s commonsense too.
EswarMani is currently an Investment Manager at Masdar Capital tasked with analysing investment opportunities globally in a wide variety of industries related to clean technologies, in addition to raising funds from Japanese investors.