UAE gov’t approves national strategies for renewables, hydrogen, and EVs

Good morning, friends. It’s another busy morning in the region with lots of big news emerging from the UAE. Let’s dive right in.

THE BIG CLIMATE STORY- The UAE government has approved its updated National Energy Strategy to increase the country’s 2030 renewable capacity goal to 14 GW from 9.2 GW, tripling the currently installed renewable energy capacity. The Emirates also stamped approvals on the country’s hydrogen and electric vehicles strategies.

^^ We have the details on this story and much more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- Japan’s plan to discharge treated radioactive water from the tsunami-hit Fukushima into the ocean has earned the International Atomic Energy Agency’s (IAEA) approval despite fierce opposition by neighboring countries like China and the public over the move’s environmental impact. The UN watchdog determined that the plan for “controlled, gradual discharges of the treated water” into the Pacific Ocean “would have a negligible radiological impact on people and the environment.” The approval by the IAEA comes following a two-year review as Japan sought to ensure that the process is safe as it has conducted a treatment of the water, which is enough to fill 500 Olympic-sized swimming pools. Most radioactive elements in the water have been filtered except for tritium, with Japan stressing that the treated water would be diluted to well below internationally approved levels of the hydrogen isotope before its release into the ocean.

The dump just isn’t sinking in for some: China is one of the main vocal opponents of the plan, arguing that the move would threaten marine environment and public health. Yesterday, China’s Foreign Ministry described the plan as “risky, immoral and illegal.” The proposal is also receiving opposition at home, with Japanese fishing unions saying that it would harm reputations of the country’s fishing industry. Such concerns have led South Koreans to stock up on salt before the release of the treated water with authorities banning seafood from the waters near Fukushima.

The story is grabbing headlines in the international press: Bloomberg | Reuters | BBC | The Guardian | The Financial Times | The Associated Press | The Washington Post | The New York Times | The Wall Street Journal

MARK YOUR CALENDARS- The Enterprise Finance Forum is taking place on 18-19 September at the St. Regis Hotel in Cairo. This flagship forum is the latest in our must-attend series of invitation-only, C-suite-level gatherings that allow senior members of our community to openly and frankly discuss critical issues in key sectors of the economy.

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MISSED THE ENTERPRISE EXPORTS AND FDI FORUM? Tune in to the Enterprise Podcast to hear what went down: The Enterprise Podcast is back with another installment of our forum series, where we bring you audio recordings of what was said on stage at the Enterprise Exports and FDI Forum, which took place last May.

IN THIS WEEK’S EPISODE- We looked at how Egyptian companies can identify and pitch foreign partners and how they can identify them. We asked how do companies figure out what they’re looking for — and whether that dovetails with what they want or need. We were joined on that panel by Hossam Abou Moussa, partner at PE firm Apis, Cheick-Oumar Sylla, director for North Africa and Horn of Africa at the International Finance Corporation, and Hassan Massoud, associate director and head of private equity (Southern Mediterranean) at the European Bank for Reconstruction and Development.

Expect us to drop an episode every Sunday morning. You can listen to the Enterprise Podcast where ever you get your podcasts including: Apple Podcast | Spotify | Google Podcast | Anghami.

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WATCH THIS SPACE #1- Israel is planning to build an underwater electric cable to line up exports of solar energy to Cyprus and Greece, Reuters reports. An underwater 150 km transmission cable across the Mediterranean will link Europe’s electricity grid with the Negev solar farm. The project is part of a broader plan to link Israel’s electricity grid with Egypt, Jordan, and the Gulf’s, Energy Minister Israel Katz said, according to the newswire.

REMEMBER- Subsea cables, they’re so in right now: The World Bank Group signed off on a USD 268.4 mn loan last month to help Tunisia finance its planned electrical interconnection project with Italy. The EUR 850 mn, 600 MW subsea interconnector project will link Tunisian and EU power grids, enabling the trade in renewable energy between Tunisia and Europe.

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WATCH THIS SPACE #2- An exit clause in ESG-linked bonds is ringing alarm bells: Issuers of the USD 6.4 tn ESG debt market are establishing clauses that would allow them to dodge financial penalties, Bloomberg reported earlier this week, citing BloombergNEF analysis. A quarter of sustainability-linked bonds (SLBs) can be redeemed before any penalty is imposed, allowing issuers an “exit route if it expects to miss its target.” The study also found other flaws such as clauses that allow companies to adjust their ESG targets after the bond has been issued.

Once bitten, twice shy? The study comes as investors steer away from the SLBs market, with the market seeing a downturn after almost a tenfold increase in sales between 2020 and 2021. Between the start of the year and May, sales of SLB were down by c. 28% y-o-y, according to Bloomberg Intelligence data. SLBs are “riddled with exit clauses, toothless terms and conditions, vague timelines and opaque targets — all designed to protect issuers,” said Maia Godemer, a sustainable finance analyst at BNEF, “but correcting course could unlock tns of USD of investment, shepherding decarbonization in ways no other financial instrument can.”

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THE DANGER ZONE- Ecological collapse is likely to begin sooner than previously expected, the Guardian reported, citing a study published in Nature that models how tipping points can “amplify and accelerate one another.” The researchers warn that “more than a fifth of ecosystems worldwide, including the Amazon rainforest, are at risk of a catastrophic breakdown within a human lifetime,” according to the news outlet. The study concludes that “even if one part of an ecosystem is managed sustainably, new stresses such as global warming and extreme weather events could tip the balance towards a collapse,” the Guardian said.

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CIRCLE YOUR CALENDAR-

Morocco will host the International Conference on Water and Climate tomorrow and Friday in Fez. The conference will bring together state representatives, relevant stakeholders, and UN agencies to discuss water resource management and governance in a five-session programme.

Thailand will host the second workshop on addressing loss and damage from Saturday, 15 July to Sunday, 16 July in Bangkok. The workshop will see discussions on pathways to increasing funding for climate-induced loss and damage. The workshop is being held in preparation for the third meeting of the COP27 Transitional Committee in August. The committee is tasked with operationalizing the Loss and Damage Fund, to be approved during the fourth transitional meeting in October.

Egypt will host the Egypt Mining Forum from Tuesday, 18 July to Wednesday, 19 July in Cairo. The event — organized by the country’s Petroleum and Mineral Resources Ministry — will gather regional players as well as global mining firms in a bid to attract regional and foreign direct investments in the country’s mining industry.

Check out our full calendar on the web for a comprehensive listing of upcoming news events and news triggers.

UAE signs off on National Energy Strategy update: The UAE government has approved its updated National Energy Strategy increasing the country’s 2030 renewable capacity goal to 14 GW from 9.2 GW, according to a statement. The new goal represents triple the currently installed renewable energy capacity and will require AED 150-200 bn (around USD 41-55 bn) in funding. The strategy also outlines a goal to have 30% of the country’s energy generated from renewables by 2031, and net AED 100 bn (USD 27 bn) in financial savings by 2030.

Lofty hydrogen goals: The country approved a hydrogen strategy with a goal to transform the nation into a global top 10 hydrogen producer by 2031, the statement notes. The country hopes to produce 14-22 mn tons of hydrogen per year by 2050, according to Argus.

What we know about the hydrogen strategy: “The [hydrogen] strategy aims to promote the UAE's position as a producer and exporter of low-emission hydrogen over the next 8 years through the development of supply chains, the establishment of hydrogen oases and a national research and development center,” Prime Minister Mohammed bin Rashid Al Maktoum said, according to the statement. No further details of the strategy are publicly available at this time.

And there are a lot of developers waiting in the wings: As of October 2022, USD 10.3 bn worth of agreements for green hydrogen and ammonia plants were signed, while a 2022 summary report found that the UAE has signed a total of 10 preliminary low-carbon hydrogen agreements. The UAE plans to hold a 25% share of the global hydrogen market by 2030.

A large volume is earmarked for export: The UAE’s Adnoc signed an agreement with Japanese manufacturing giant Kawasaki in April to explore joint production, liquefaction, and transport mechanisms for low-carbon hydrogen for delivery to international markets. UAE’s Al Fattan Energy signed an agreement with South Korea’s LTechUVC in February to build a USD 400 mn, 200 MW green hydrogen and ammonia facility to produce green hydrogen for export by 2027. Finally, German oil and gas company Hydrogenious LOHC Technologies is working on establishing a UAE-Europe hydrogen pipeline with Adnoc.

Ramping up the country’s EV network is a priority: The cabinet also approved the National Electric Vehicles Policy, which aims to “build a national network of electric vehicle chargers, organize the market of electric vehicles, promote associated industries to ensure lower emissions, lower energy consumption, and maintain the quality of roads,” Al Maktoum said. The policy will contribute to reducing energy consumption in the transport sector by 20% through its Green Mobility Project. No further details of the strategy are publicly available at this time.

Carbon trading ahead of COP28: Dubai’s biggest lender, Emirates NBD, is introducing compliant carbon market trading to help businesses manage their carbon emissions, according to a statement. The carbon contract trading facility would allow clients to access a growing asset class with an estimated value of USD 850 bn along six global emission trading schemes, it added.

How does it work? The facility will follow systems set by the European Union’s Emission Trading System (ETS) and the UK’s Emission Trading Scheme. The ETS’ scheme adheres to the “cap and trade” system, where corporations are given a cap on the amount of carbon emissions they can emit. If this cap is exceeded, they are obliged to buy allowances from other businesses that have released less emissions.

All part of a bigger plan: The UAE plans to launch regulating carbon credit trading exchanges and clearing houses ahead of COP28, the statement notes. The UAE Independent Climate Change Accelerators launched the UAE Carbon Alliance in June in partnership with Singapore-based carbon trading exchange AirCarbon Exchange (ACX) in a bid to establish a framework for carbon markets. The alliance was launched a year after the Abu Dhabi Global Market said it was working with ACX on launching the world’s first fully regulated carbon trading exchange.

Carbon trading is the new cool in MENA: Saudi Arabia’s Regional Voluntary Carbon Market Company (RVCMC) — established by the Saudi sovereign wealth fund and the Saudi Tadawul Group — plans to launch a carbon trading exchange early next year. The announcement came as the RVCMC sold 2 mn tons of carbon credits last month in what the company described as the largest-ever voluntary carbon credit auction. A carbon market in Egypt is also in the works, with the Financial Regulatory Authority forming in April a committee to supervise and regulate the country’s soon-to-be launched voluntary carbon market.

Dubai inaugurates 220 MW WtE plant: Crown Prince of Dubai Hamdan bin Mohammed Al Maktoum inaugurated yesterday a AED 4 bn (USD 1.1 bn) waste-to-energy (WtE) plant in Warsan that will generate 220 MW of clean energy, the Dubai Media Office said.

What we know: The 400k sqm plant will process and convert 2 mn tons of waste annually, providing clean electricity to power some 135k residential units. The facility, which is expected to be operational next year, is reportedly the world’s “largest and most efficient” WtE plant, Al Maktoum said on Linkedin.

Not the only WtE facility in Warsan: Earlier in May, Dubai finished constructing a 6 MW WtE biogas production facility at the Warsan Wastewater Treatment Plant. The biogas will be retrieved from the waste emitted by the water treatment process before being converted to energy and used to treat more water. The facility can generate some 44k MWh of electricity annually — enough to cover 50% of the treatment plant’s entire operational needs — and will lower operational costs by AED 320 mn over 25 years while reducing carbon emissions by 31k tons. Out of the 57k cubic meters of biogas waste produced per day, almost 55k can be retrieved to produce energy.

And there’s more coming: Two international consortiums — one led by Japan’s Marubeni and the other by France’s water utility and waste recycling company Suez — submitted proposals to the Emirates Water and Electricity Company (Ewec) and the Abu Dhabi Waste Management Company (Tadweer) last May for the development of a 900k ton capacity greenfield Waste-to-Energy (WtE) IPP facility in Abu Dhabi.

Egypt’s EV landscape is getting some charge: Egypt’s Elsewedy Electric subsidiary Elsewedy Plug and Ikarus Electric have received a one-year license to build EV charging stations from the Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egyptera), Al Borsa reports, citing a copy of the decision document it obtained. The number and locations of the charging stations have not been disclosed.

We knew this was coming: EGX-listed MB Engineering's EV charging subsidiary Sha7en signed an initial partnership agreement with Elsewedy Electric earlier this year to install, operate, and maintain EV charging stations over the coming three years. The agreement came shortly after Sha7en received its license to start operating EV charging stations.

Infinity dominates Egypt’s EV charging market: Our friends at Infinity have built at least 190 charging stations so far nationwide with plans to up that number to 300 by 2024, as part of a wider plan with the Egyptian government to eventually set up 6k vehicle charging points at 3k stations across the country. Last February, Misr Helwan Automotive began construction of EV charging stations in Greater Cairo.

The country’s EV ambitions are high: While Egypt’s industry is still nascent, two auto firms and distributors — Misr Helwan Automotive and Abou Ghaly Motors — have introduced EVs to the country’s car market this year. In February, Misr Helwan Automotive introduced Chinese auto firm Dongfeng’s E70 500 Pro electric vehicles, while Abou Ghaly Motors brought Chinese automaker Geely’s Geometry C electric car to the local market.

And plans to assemble cars in Egypt are on the table: Egypt is supporting Abou Ghaly and other private sector players with incentives to get a homegrown EV industry off the ground, with the country’s environment minister expecting the first locally-assembled EVs to roll off production lines in 2024. Stellantis, Nissan and Al Mansour Automotive expressed interest in investing a total of USD 145 mn in the nation’s auto industry over the next three years to produce a total of 60k-70k EVs and combustion engine vehicles every year.

Exports are also in the cards: Abou Ghaly is in talks with Geely to use Egypt as an export hub for the Chinese automaker’s EVs to Africa. Hinduja Group’s International Operation CEO Amandeep Singh said his company is currently exploring the possibility of establishing a factory in Egypt to serve as a manufacturing and export hub in the Middle East and Africa.

Vulcan Steel is drumming up funds for green steel plant: India’s Vulcan Steel is currently in talks with undisclosed export credit agencies (ECAs) to seal USD 2.5 bn in funding for its green steel plant in Oman’s port city of Duqm, The Economic Times reports, citing sources it says have knowledge of the matter. The plant will reportedly be built through funds from non-bank sources, with the ECAs helping fund the procurement of imported capital goods required for the plant.

What we know: The USD 3 bn green steel plant is expected to have a production capacity of 5 mn tons per annum once completed in 2026, company officials said last year. The plant’s output will be primarily directed towards export to the Middle East, Europe, and Japan, with some 30-40% earmarked for consumption in Oman and the wider GCC region, they added. It is set to be a part of Jindal Shadeed Iron and Steel (JSPL), which was acquired by Vulcan Steel in 2020 for USD 1 bn in enterprise value. JSPL has decided to divest from its Oman arm and assets it had acquired for USD 464 mn in 2010.

Vulcan is spending big as it crosses fingers on demand: Vulcan Steel plans to pour in over USD 3 bn in the project, a senior official at the company said in an earlier interview with The Economic Times. The plant is being modeled on Europe’s steel markets, which are currently transitioning to low-emissions raw materials under a decarbonization push.

REMEMBER- Green steel is gaining traction in the region: Brazilian mining firm Vale finalized a land reservation agreement with the Port of Duqm Company for three production plants in May that will source materials essential for Oman’s low-carbon steel making industry. India’s Jindal Steel Power said it is exploring the potential of setting up a green steel production plant in the SCZone last month. The UAE’s Emirates Steel Arkan plans to partner with two Japanese firms to look at setting up an iron ore processing facility in Abu Dhabi that could be partly powered by green hydrogen, due to begin production in 2H 2025. Saudi Arabia is reportedly looking to invest some USD 266 bn in a host of green hydrogen-focused areas — including the creation of industrial centers for green steel and aluminum.

China’s Hohhot could be an ideal green computing hub: The China Academy of Information and Communications Technology is setting into motion a development framework for establishing clean energy data centers in the Chinese city of Hohhot, Chinese state-owned news channel CGTN reports. The city is an ideal spot for the construction of green data centers given that it holds 57% of the country’s wind energy sources and 21% of its solar capacity, Deputy Mayor of Hohhot Zhang Jifei is quoted as saying. In 2022, the use of energy-efficient green computing data centers mitigated some 16 mn tons of CO2 equivalent in the country and saved c. 19.5 GW of energy that year, the news outlet notes.

Why is this important? Data centers — facilities composed of networked computers, computing infrastructure, and storage systems — are energy guzzlers, using up some 200 TWh of energy annually, and the sector generated some 300 metric tons of CO2 equivalent globally in 2020, according to International Energy Agency research.

We have a record breaking one in our region: The UAE’s 16 sqkm solar-powered data center Moro Hub nabbed a Guinness World Record for being the largest data hub in the world last year.

Lucid and Aston Martin partner up for EVs: Aston Martin and Saudi PIF-backed EV maker Lucid Group are joining forces to make the British ultra-luxury car maker’s future electric vehicles, the two companies said in statements last week (here and here). The companies have signed contracts worth over USD 450 mn, and the agreement paves the way for Lucid to grab a 3.7% stake in Aston Martin in return for its access to “high performance” technology, Reuters reported. The agreement is still subject to the approval of Aston Martin’s shareholders and necessary regulatory approvals and other customary conditions, according to Lucid.

All part of a wide EV strategy by Aston Martin: Aston Martin plans to invest over GBP 2 bn in advanced technologies over the next five years in its transition to electric and plug-in hybrid models. It plans to unroll its first EV range in 2025 and deliver its first plug-in hybrid Valhalla in 2024, and all its new model lines will feature an electrified powertrain option in 2026. The company aims to have its core range fully electrified by 2030.

PIF is on both sides of the fence: Both companies have Saudi Arabia’s Public Investment Fund (PIF) as a common shareholder, with PIF becoming Aston Martin’s second-largest shareholder with a c. 17% stake last year. PIF owns a 60.46% stake in Lucid, and in June it provided the majority of the funds for a USD 3 bn stock offering by the US EV maker. The funds are proving necessary, as the company struggled last quarter on the back of high costs, production hurdles, and EV competition. The disappointing quarterly performance has pushed the EV manufacturer to revise its annual production plan this year to manufacture over 10k of its luxury EV sedans, down from a previous production plan of up to 14k.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The UAE’s Ras Al Khaimah Economic Zone and the Indian Chamber of Food and Agriculture signed a knowledge transfer, investment, and research and development cooperation agreement that will see both parties partner in areas including sustainable farming. (Wam)
• Bahrain is set to invest GBP 1 bn in Britain to boost joint cooperation in clean tech, business services, and manufacturing. (Statement)

Portugal has doubled its green hydrogen and solar targets for 2030, Reuters reports. The new goals — presented before a deadline for EU countries to submit revamped clean energy plans — will see the country generate 21 GW in solar energy by 2030 instead of its previous target of 9.3 GW. The country is also aiming to increase its green hydrogen production capacity to 5.5 GW, over double its previous target of 2.5 GW. The targets — which will also see the country adjust its wind power target from 9 GW to 10.4 GW — will require some EUR 75 bn in investments, mostly from private sector financiers, the newswire adds, citing government forecasts.

Net zero hopes for 2045: The new plan — due to be reviewed and finalized by June 2024 — is part of the country’s new ambitions to slash its carbon emissions by 55% from 2005 levels by the end of the decade, decommission gas-fired plants by 2040, and potentially become carbon-neutral by 2045, the news outlet notes. The Iberian country has increased its greenhouse gas reduction goals from 45-55% from 2005 levels by 2030 to a solid 55%, and has a target to source 85% of its electricity from renewables by 2030. Portugal has increased its target of power generated from renewables to 42.8 GW by 2030, up from its previous target of 27.4 GW.

ALSO- Italy also has a new clean energy plan in place: Italy also submitted a new updated clean energy plan to Brussels over the weekend which aims to produce 250 tons of clean hydrogen and increase the country’s renewable energy share to 40% by 2030, Reuters reports. The revised plan will see Italy raise its renewables targets from solar to 79.9 MW, its wind power generation to 28.1 MW, and produce 19.1 MW from hydroelectric power by 2030. The country hopes to push down carbon emissions by 35-37% in the transport, housing, agriculture, waste, services, and the energy-light industries, as well as slash emissions by 62% in the power and energy-intensive industry under the new plan, the newswire notes.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Netherlands-based automaker Stellantis NV will invest at least EUR 100 mn to push down CO2 emissions from its Mirafiori plant in Italy. (Bloomberg)
• South Korean steelmaker Posco Group announced plans to earmark c. USD 93 bn to scale its hydrogen, battery materials, and steel production sectors. (Reuters)

Mining black gold above ground: Norwegian aluminum giant Norsk Hydro and Swedish electric battery maker Northvolt are producing mineral powder essential for the energy transition from used and defective EV batteries, AFP reported. The powder produced — dubbed “black gold” — is made up of nickel, manganese, cobalt, lithium and graphite, in a “mine above ground.” The pair’s Norwegian Hydrovolt plant is expected to process 25k electric car batteries within the next months, making it the largest battery recycling plant in Europe.

The lithium-ion battery packs are taken apart to recover up to 95% of the materials, the news outlet writes. The aluminum is recycled by Norsk Hydro, while the “black mass” powder is sold to battery makers in China and South Korea where the metals are first extracted from the powder before being used to make new batteries.

Northvolt is eyeing markets where EVs are booming: The company is looking to expand in Germany, France and the US where the rate of EV demand is growing, especially after the EU parliament recently adopted regulations making batteries more recyclable. Recycling old batteries could cover between 8-12% of Europe's critical mineral needs by 2030, and between 12-14% by 2035, AFP reports, citing Transport & Environment.

It may take a while for the EV battery recycling market to take off: While some carmakers have already set up their own recycling operations, the market for old EV batteries is currently non-existent, Reuters reports. However, a “tsunami” of used batteries will hit the market in 5 years, especially as the lifetime of batteries used for grid storage comes to an end. While the capacity of EV batteries fall below 80-85% after 8-to-10 years of use, car users can keep their cars for over 12 years without replacing the battery, squeezing demand for recycling even further, according to the newswire.