Dubai’s first-of-its-kind hydroelectric power plant has a launch date

Good morning, nice people. We had a jam-packed issue for you yesterday, but this morning is proof that the new year lull is still in full swing as the region prepares to dive into 2023. The dearth of climate news is instead giving way to a look ahead at what the year is expected to bring in climate finance trends and developments.

THE BIG CLIMATE STORY- It’s quiet out there, with the exception of a couple of updates on renewable energy projects in the UAE to note. The UAE’s first-of-its-kind hydroelectric project has a completion date and will be fully powered by renewable energy, and Emirati renewable energy firm Masdar will partner with Germany’s Uniper to develop a green hydrogen plant powered by 1.3 GW of solar energy.

^^ We have chapter and verse on this story and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- Europe is once again experiencing a climate change-driven “extreme weather event,” with record-breaking warm weather seen across an estimated 15 countries in recent days, according to the Guardian. Berlin reached 16°C on New Year’s Day in a January record, Czechia recorded its warmest ever New Year’s Eve, and Spain’s Bilbao hit 24.9°C in its hottest-ever January day. Snow is also “notably lacking at lower altitudes in the northern Alps and across the Pyrenees,” the Associated Press notes Meteo France saying. “The most worrying thing about this is that — such is the speed of global heating — it simply isn’t a surprise any longer,” the outlet quotes climate professor Bill McGuire as saying.

The story is attracting widespread coverage in the international press: Bloomberg | EuroNews | New Scientist | Independent.

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WORTH READING- Plastic manufacturing could emit 2.5 bn tons of GHG by 2050: Plastic manufacturing accounted for 1.8 bn tons of greenhouse gas emissions in 2019 — 3.4% of total global emissions that year — and if current manufacturing levels remain on track, levels will increase by 0.7 bn tons by 2050, according to research from the Center for Environmental Law. Global plastic production totaled 400 mn tons in 2019 and is set to increase to 1.1 bn tons by 2050 if left unabated, according to UN Environment Programme projections.

WATCH THIS SPACE- World Bank Group aims to increase climate-focused lending capacity: The World Bank Group (WGB) wants to remodel its lending programs to expand the lending capacity to climate change and other global crises by negotiating proposals including a capital increase and new lending tools, Reuters reports, citing a document it has seen. The shift signals a radical change from the bank’s model of working from project and country-specific loans. WBG management will broach the topic with shareholders in April, discussing specific proposals to change its mission, operating model and financial capacity to ready a document for approval by the joint World Bank and International Monetary Fund Development by October, the newswire notes.

What are these new proposals? WBG’s new approach would include lower equity-to-loan prerequisites, an increase in lending caps, and the use of redeemable funding — capital that was pledged by member countries, but never disbursed. The new lending mechanisms would not compromise the Bank’s credit-rating to boost lending capacity, however, the newswire notes.

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CIRCLE YOUR CALENDAR- Saudi Arabia will host The Future Minerals Forum from Tuesday, 10 January to Thursday, 12 January at the King Abdul Aziz International Conference Center in Riyadh. The event will gather 200 industry leaders and over 50 ministers to discuss attracting investments to the mining industry and decarbonizing mining projects globally. You can register for the event here.

UAE renewable energy firm Masdar will host Abu Dhabi Sustainability Week from Saturday, 14 January to Saturday, 21 January. The event will gather eight presidents and prime ministers and 30k participants in a series of conferences and summits including the Atlantic Council’s Global Energy Forum, the World Future Energy Summit, Masdar’s Green Hydrogen Summit, The International Renewable Energy Agency’s Youth Forum, and the Abu Dhabi Sustainable Finance Forum.

The UAE is hosting the Atlantic Council’s Global Energy Forum on Saturday, 14 January and Sunday, 15 January in Abu Dhabi. The forum will discuss the ongoing global energy crisis and its impact on the green transition, energy security, and decarbonization.

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

UAE’s Masdar partners with Uniper to build a green hydrogen plant: Emirati renewable energy firm Masdar will partner with Germany’s Uniper to develop a green hydrogen plant in the UAE powered by 1.3 GW of solar energy, Bloomberg reported on December 22. The plant is expected to generate green hydrogen by 2026 and the EU wants to import the clean fuel the facility will generate, Masdar’s executive director for clean energy Mohammad Abdelqadar Al Ramahi told the business information service. The location of the plant and the financials of the agreement have yet to be disclosed. Masdar officials did not respond to Enterprise Climate’s request for comment as of the time of publishing.

Part of Masdar’s plans to become a major renewables generator: The firm is aiming for a renewable energy capacity of at least 100 GW by 2030 with a production quota of up to 1 mn tons of green hydrogen. It ultimately plans to expand its renewable energy portfolio to over 200 GW, a company statement notes, without giving a time frame for this target.

The firm already has a strong footing in MENA and beyond: The company is active in over 40 countries in six continents with a portfolio worth over USD 20 bn. Alongside Infinity Power and Hassan Allam Utilities, Masdar signed an agreement at COP27 in November to build a 10 GW wind farm in Egypt — which could be one of the world’s largest — and the three companies also went big on green hydrogen, inking an agreement to establish a facility with production capacity of 480k tons of green hydrogen a year. Masdar is expanding to Turkmenistan with a 100 MW solar plant, following an announcement in September that it’s building a 500 MW, USD 600 mn wind farm in Uzbekistan. The company — along with waste management company Bee’ah and France’s Veolia Middle East — will also operate and maintain the Sharjah waste-to-energy plant for 25 years.

Dewa’s first-of-its-kind hydroelectric plant has a completion timeline: The Dubai Electricity and Water Authority’s 250 MW hydroelectric power plant is 58.5% completed and slated to become operational in 4Q 2024, according to a statement. The plant cost USD 387 mn (AED 1.4 bn) and will have an energy storage capacity of 1.5 GWh with an 80-year operational lifespan.

The details: The facility will store water from the Hatta upper dam, transporting it via a 1.2 km subterranean tunnel where the water will be transformed into kinetic energy. The energy generated from the flow of water through the tunnel will power the plant’s turbines, converting the mechanical energy into electricity to be sent to Dewa’s main grid within 90 seconds.

Solar power will pump water to the plant: The energy needed to route the water through the tunnel will be powered by Dewa's 5 GW Mohammed bin Rashid Al Maktoum Solar Park, making the whole project 100% dependent on renewable energy.

One more W in UAE plans to become carbon-neutral by 2050: The UAE began financing clean energy projects over 15 years ago — investing over USD 40 bn in the renewables sector to date — and the country’s production capacity of renewables is set to reach 14 GW by 2030. Clean energy currently makes up 14% of Dubai’s total energy production capacity, WAM reported earlier this month.

What key climate finance trends and developments should we be keeping an eye on in 2023? Climate finance was a major focal point of 2022 with three particular trends coming to the forefront in the MENA region: More issuances of green bonds and sukuks, the growth of carbon markets, and increasingly heated discussions about compensation for climate damage and funding to ensure a fairer transition to a lower-carbon future, culminating in COP27’s landmark loss and damage agreement. So, what can we expect to see in terms of progress on these fronts in the year ahead?

A continued commitment to sustainable finance: Strong investor appetite for green debt instruments and commitment from MENA’s public and private sectors to raising sustainable funding are ongoing trends, head of MENA Debt Capital Markets at HSBC Khaled Darwish told Enterprise Climate. 2022 was a positive year for MENA’s ESG market, “and there’s more to come in 2023,” Darwish added. “Across all sectors, we’ve seen an increased commitment to looking at strategies to expand the investment in cleaner sources of energy and renewables — even with the energy crisis,” Darwish noted.

UAE’s COP28 should help maintain this momentum: The strides made by MENA in 2022 in addressing climate change are partly the result of increased focus from investors, media, and internal stakeholders, noted Darwish. Key international conferences like COP27 and COP28 taking place in the region have also been effective in refocusing attention on strategic initiatives in the ESG space, he added.

We can also expect more corporate green bond issuances in 2023: HSBC worked with multiple stakeholders throughout 2022 — including Qatar’s Masraf al Rayan — to establish sustainable financing frameworks, Darwish noted. “In 2023, when market conditions are hopefully more stable for issuers, you’ll see some of the issuers whose debut frameworks we’ve worked on come to market,” he added. We could see the issuance of green bonds on the UAE’s Abu Dhabi Global Market (ADGM) from 2023, ADGM’s Head of Sustainable Finance Mercedes Vela Monserrate told Bloomberg in November.

While in Egypt, more sovereign green issuances are also on the cards: Egypt was the last country in the region to issue a sovereign green bond, and it’s already indicated it could issue green and sustainable development sovereign bonds worth around USD 500 mn apiece next fiscal year.

Maiden ESG sovereign bond issuances from major regional players could follow: Several regional governments — including Saudi, Qatar, Kuwait and Abu Dhabi — haven’t yet made their ESG debuts, but sovereign issuances are definitely pending, Darwish said, pointing to PIF’s 100-year ESG bonds issuance as a prime example of the scale of ambition in this area. “Once a sovereign does its ESG issuance and communicates its strategic ESG priorities, framework and areas of focus, I think that helps reshape the focus of everyone — especially in a region with a multitude of government-related entities across multiple sectors,” he added.

Investor interest in green bonds and green sukuks will also remain strong: Green bond demand will likely continue to outstrip supply — including in emerging and frontier markets, European Bank for Reconstruction and Development (EBRD) Principal, Local Currency & Capital Markets Development Razvan Dumitrescu told Enterprise Climate. The EBRD also expects to see increasing interest for green sukuk coming out of Egypt and Jordan, he noted. “The key challenge is if issuers are keen to tap the debt capital markets, given the increasing interest rates and sub-investment grade credit profile — leading to higher expected cost of funding,” Dumitrescu added.

Over in the carbon markets arena, Egypt is ready to strike: We’re keeping our eyes peeled for the EGX’s launch of Africa’s first voluntary carbon market (VCM) — due in mid-2023, according to EGX boss Ramy El Dokany. As of late November, the EGX was close to finalizing contracts with a Canadian fintech to supply the technology for the carbon credit platform, according to El Dokany. The bourse is partnering with the Agricultural Bank of Egypt and Enara Group’s Libra Capital to establish Libra Carbon, the Egyptian company that will supply carbon offsets to the VCM — in part, by working with emissions-reduction projects to create a carbon offset pipeline. Egypt’s broad emissions reduction market — including carbon trading — is expected to “grow considerably,” Libra Carbon’s head of project development Omar El Nemr told Enterprise Climate in November.

Many details still need ironing out: The VCM’s regulatory framework was pending review by Egypt’s cabinet as of November, and an auditing and verification system for carbon certificates also needed to be put in place, El Dokany noted at the time. Discussions were taking place in late-2022 between the EGX and global offset verifiers including Verra and Gold Standard, and between Egypt’s UN high-level climate champion Mahmoud Mohieldin and Financial Regulatory Authority Executive Chairman Mohamed Farid on points including the market’s technical and regulatory requirements. We can assume these will continue to be a priority in 1H 2023, in the run-up to the VCM launch. We may also expect to see the EGX hold roadshows throughout Africa to market carbon trading, El Dokany noted in November.

The GCC’s interest in carbon markets is also likely to gain traction: The UAE’s ADGM is said to be working on a framework for the first-ever regulated voluntary carbon market. The ADGM announced in November its plans to launch a VCM in a matter of weeks and its Financial Services Regulatory Authority implemented regulatory changes that made voluntary carbon credits a tradable financial instrument on the ADGM. It’s unclear whether plans to launch a separate VCM are also in place.

Finally, loss and damage funding remains a key point of debate: Anger about the climate crisis is increasing in developing countries and wealthy nations must respond “urgently,” US climate envoy John Kerry recently told the Guardian. But the details of the loss and damage fund would need more work in the coming year, the publication noted him saying. “How you manage [loss and damage] is still at issue: how do you approach this challenge of the financial arrangements,” Kerry said.

But we should see some progress early in 2023: A transitional committee tasked with negotiating the details of the loss and damage fund is expected to meet for the first time before the end of 1Q 2023. The 24-member committee — 14 of whom represent developing countries and 10 developed nations — will identify the scope of work, funding sources, and priorities for loss and damage action, Mohieldin told Enterprise Climate in December.

Can decentralization of renewable energy accelerate decarbonization efforts? The Middle East sourced more than 350 MW of energy from off-grid renewables sources such as decentralized solar installations in 2021, according to the 2022 International Energy Agency (IEA) off-grid statistics report (pdf). Some 775 mn people globally won’t have access to electricity in 2022 due to the global energy crunch, extreme weather, and poor infrastructure. More than half of these people can gain access to full-fledged electrification mainly through renewables-based decentralized energy solutions by 2030, according to another IEA report.

What are decentralized energy systems? Several energy sources can be utilized in off-grid and standalone energy systems including wind power and solar energy. Decentralized energy systems see power generated in close proximity to where it’s consumed, instead of relying on centralized national grids. The nature of the offgrid approach effectively minimizes transmission losses and distribution costs over long distances, and maximizes the use of renewable energy, according to research by the United Nations.

Africa is a success story: 52.6 mn Africans — who otherwise would have been living without electricity — are now able to source their own power needs due to off-grid energy solutions, according to a recent IEA report.

Easy deployment and tremendous benefits for decentralized solar: The smaller magnitude of resources needed for the utilization of solar panels in residential areas and for businesses, compared to utility scale projects, renders off-grid solutions a cost-efficient option to bolster decarbonization. Although decentralized systems require upfront investments in storage systems and components like solar panels, it enables users to become self-sufficient, and enables the sale of excess power back to the grid and other stakeholders, which would ultimately mean cheaper electricity bills in the long term, according to Friedrich Ebert Stiftung. Becoming self-sufficient also translates to effective immunization against energy market volatility, according to research published in Science Direct. From a real estate perspective decentralized systems also hike the prices of buildings.

MENA is gearing up for the decentralization game: Individuals and businesses in Morocco will be allowed to generate, store, and sell their own electricity from renewables after Morocco’s House of Representatives unanimously approved a new bill on electricity self-production. While the bill aims to regulate electricity production for self-consumption, it also touches upon the possibility of selling excess electricity to the grid. The legislation — which was approved by the Moroccan Senate in November 2021 — became law last month.

Ditto for Egypt: The Egyptian government launched in 2018 the Egypt PV project to bolster decentralization efforts for businesses and individuals looking to implement off-grid energy systems. The program offers cash incentives for individual households looking to adopt standalone systems up to USD 200 per KW for decentralized installations, but sets a cap of 10 KW for this type of financial support for residential installations. Incentives up to USD 200 per KW are provided to larger residential complexes comprising multiple households, with a cap of 50 MW. For industrial players, the government is offering incentives amounting to USD 150 per KW with a generational cap of 100 KW.

Bahrain’s government is also pushing for off-grid energy: The country is eyeing the generation of 100-150 MW of power from decentralized models including rooftop solar photovoltaic (PV), biogas plants, and micro wind turbines, as part of its National renewable Energy Action Plan. The Bank of Bahrain and Kuwait also provides sustainability financing for retail customers looking to adopt energy-saving technology and renewable energy sources in their houses, we wrote in October.

Meanwhile, in Tunisia: The African Development Bank (AFDB) approved in February a finance agreement that would see Tunisia and six other African nations receive USD 164 mn to promote decentralized renewable energy systems, an AFDB statement notes. The projects AFDB will finance would ultimately reduce some 28.8 mn tons of greenhouse gas emissions. More recently, Germany approved a EUR 105 mn grant to bolster, among other things, Tunisia’s decentralization efforts.

Decentralization could be the remedy for pollution and energy woes: In Lebanon, Iraq, Yemen, and Libya, systemic central power network failures have left residents reliant on generators that pump over 40 toxic contaminants into the air. Diesel-powered generators spew out especially large quantities of climate change-inducing emissions — and more than 40 toxic by-products. To combat pollution and bolster decentralization of renewables, donors funded a USD 100k 185-panel solar farm in the village of Toula. The village, which used to run on only three hours of electricity a day, now has 17 hours of consistent electricity.

And saves lives in crisis-hit countries: The Yemen Emergency Electricity Access Project, spearheaded by the World Bank, was approved in 2018 to stave off energy poverty through decentralized solar installations. The project benefits some 91k households in rural regions, and services 517 critical facilities including schools and health centers, according to a World Bank statement.

Kuwait Oil Company explores wind power at Ratqa oil field: The Kuwait Oil Company (KOC) sent out requests for proposals to five companies for the installation of a wind turbine at its Ratqa oil field, Al Arabiya reports. The generational capacity will range between 3.4-3.6 MW. Companies included Elecnor, Vestas Mediterranean, Vensys Energy AG, Power Construction Corporation, and Eno Energy.

Bahrain secures several offers for multi-site solar project: Bahrain received 7 bids for a 72 MW solar project tender to install solar power at several sites in the country, Zawya reports. The project — which will include rooftop panels, car park power systems and electric vehicle charging stations — is being procured on a Build-Own-Operate-Maintain basis for a 20 year period at locations including the University of Bahrain, Bahrain International Circuit, Bahrain International Exhibition & Convention Center, and the Al Dana Amphitheatre. Accepted proposals came from DEFT Contractors, Tarsheed Energy Consultation and Services, Yellow Door Energy, Safeer For Renewable Energy, and Alpha Energy Generations Co., the news outlet notes.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Egypt approves green hydrogen grant: The Egyptian presidency approved a EUR 500k grant agreement from the French Development Agency earmarked for the development of the country’s green hydrogen sector. (Statement)
• UAE clamps down on pollution: Abu Dhabi issued 32 environmental pollution fines totalling some USD 89k for violations impacting air, water, and soil resources’ quality. The largest fine amounted to USD 13.6k and was enforced for the dumping of hazardous materials in the Arabian Sea. (Gulf News)
• Egypt’s mega waste management project has a completion date: Egypt’s EGP 7 bn waste management project to minimize waste discharging across 11 sites in the Gulf of Suez will be fully completed by the end of 2023. (Statement)

Turning polluted water into electricity: An Egyptian professor has invented a microbial fuel cell (MFC) able to purify wastewater and generate electricity, Attaqa reports. Nasser Ali Barakat has created a small microbial cell using a three-dimensional electrode of ultrafine carbon fibers proven to be effective in producing electricity using microbes from polluted water sources like sewage and industrial wastewater.

How it works: The technique sees electrons discharged from wastewater through biochemical reactions facilitated by the metabolic power of bacteria, according to research published in Science Direct. MFC enables the purification of wastewater while generating 420-460 milliwatts of electricity per square meter of sewage water.