UAE, US earmark USD 20 bn for US-based renewables projects by 2035

Good morning, wonderful people, we have a slew of updates from all over the region today — and it’s only Tuesday. Let’s dive in.

THE BIG CLIMATE STORIES- More big ticket details have emerged from South Korea’s blockbuster inaugural state visit. The UAE will direct USD 30 bn towards renewables projects and other sectors in Korea and we have more information about those 13 MoUs that were signed earlier this week. In other UAE news, we know more about what to expect from the UAE and US’ PACE agreement that was inked last November and how the funding mechanism will work. Over in Egypt, Elsewedy Electric subsidiary Elsewedy Electric for Transmission and Distribution has agreed to build a 300 MW solar power station for Saudi Arabia.

^^ We have chapter and verse on these stories and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- The World Economic Forum (WEF) kicks off in earnest today, bringing attendees together in person for the first time since 2019 and running until Friday. Keep an eye out for several climate-relevant discussions today, including Philanthropy: A Catalyst for Protecting Our Planet, which looks at how public and private sector players can bridge the USD 100 tn climate finance gap; Decarbonization: An Insurmountable Challenge?; and Infrastructure for a Clean Energy Economy. Tomorrow, sessions to look out for include Leading the Charge through Earth's New Normal; Building Momentum towards COP28; AI for Climate Adaptation; and Open Forum: Energy Transition Rush.

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WATCH THIS SPACE- Are debt-for-nature swaps the answer? Some USD 2 tn of developing country debt could be eligible for restructuring under debt-for-nature swaps — where developing nations see a portion of their foreign debt forgiven under a restructured agreement, on the condition that they invest some of the savings in local conservation measures — Bloomberg notes, citing data from US nonprofit the Nature Conservancy (TNC). “Serial debt defaulter” Belize inked a debt-for-nature swap worth USD 364 mn in 2021, and Gabon, Ecuador, and Sri Lanka are reportedly considering agreements worth between USD 700 mn and USD 1 bn, the outlet adds. Proponents of the mechanism laud its scalability, saying it effectively uses public funds to de-risk private investment and could plug the multi-USD tn financing gap for nature protection, adaptation, and decarbonization, Bloomberg notes.

But enthusiasm for these swaps among investment banks, institutional investors, and debt-distressed countries may conceal problems, the business information service says. Critics say the loan terms can be unclear and transaction costs are high. Belize’s debt service costs under the restructured agreement add up to an estimated USD 84-86 mn more than what’s being returned to the investors that financed the new debt, Bloomberg cites experts from the United Nations Conference on Trade and Development and TNC saying. These extra costs include ins. premiums for companies involved in the agreement, loan interest, and an array of other financing costs. And at the recent COP15 biodiversity conference in Montreal, dozens of not-for-profits are said to have called for an end to debt-for-nature swaps, Bloomberg notes.

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CIRCLE YOUR CALENDAR-

Bahrain will host the Energy & Sustainability Forum from next Sunday, 22 January to Tuesday, 24 January in Manama. The forum will host panel discussions on how to decarbonize the downstream industry and how to pave the way for regional net zero objectives.

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

More details on UAE and Korea’s renewables plans: The UAE and South Korea are forging closer links when it comes to collaboration on clean energy and climate-friendly, with news about a host of agreements announced during South Korean President Yoon Suk Yeol’s four-day visit to Abu Dhabi, which kicked off on Sunday.

Mubadala is spearheading a USD 30 bn investment: The UAE is investing USD 30 bn in a range of sectors in South Korea — with hydrogen, solar energy and nuclear power being among the priority areas, Reuters noted South Korea’s presidential office announcing on Sunday. The investment — which UAE President Mohammed bin Zayed Al Nahyan announced following a meeting with Yoon — will be led by Abu Dhabi’s Mubadala and other sovereign wealth funds, the newswire reported, citing a statement from South Korea’s Finance Ministry. No information has been given yet about the investment timeframe.

And we know more about those 13 signed MoUs: The 13 agreements signed on Sunday include one on cooperation in water resources between the UAE’s Energy and Infrastructure Ministry and South Korea’s Environment Ministry, according to a Wam statement. An MoU covering hydrogen use in cities and its production, transmission, and storage was signed between the UAE’s Energy Ministry and South Korea’s Land, Infrastructure and Transport Ministry — though we don’t know whether the two countries intend to produce green, blue, or gray hydrogen. Another MoU directed towards setting up joint strategic working groups for a Carbon Neutrality Acceleration Program was “exchanged” by Emirates Nuclear Energy Corporation, Korea Electric Power Corporation, and Korea Hydro and Nuclear Power, the Wam statement noted. Other agreements also spanned smart farming and carbon capture, utilization, and storage, we noted yesterday.

One of these agreements involves creating a carbon credit market in Asia: South Korean telecoms group SK Group has signed a partnership agreement with Mubadala to set up a voluntary carbon market in Asia, it announced yesterday, according to daily newspaper the Korea Herald. The two entities now aim to form a working group to build the partnership, officials from SK are reported to have said.

Among the key issues to be ironed out? The usual sticking points like how carbon offset projects can be certified, building market transparency, and engaging more public and private sector participants.

Voluntary carbon markets are currently seeing a surge in popularity in MENA, with Egypt’s EGX set to launch Africa’s first voluntary carbon market in mid-2023 and the UAE’s ADGM said to be working on a framework for the first-ever regulated voluntary carbon market. A new carbon market company set up by Saudi Arabia’s sovereign wealth fund auctioned 1.4 mn tons of carbon credits at Davos in the Desert in October.

We have details on upcoming UAE, US PACE investments: The UAE and US are allocating USD 20 bn to fund 15 GW of new clean energy projects in the US before 2035, according to a Wam statement. This will be the first wave of investments to take place under the USD 100 bn partnership to accelerate transition to clean energy (PACE) agreement announced by the two countries in November, the statement adds.

How the funding will work: The investments will be led by Emirati clean energy firm Masdar and a consortium of US private sector investors, the statement notes. The aim is for USD 7 bn in cash equity from the private sector to unlock a further USD 13 bn through a variety of instruments, including US debt financing, it adds. This follows reports we picked up in mid-December that Masdar — already on an ambitious expansion drive — was eyeing participation in PACE.

REFRESHER- The overall goal of PACE is to spur USD 100 bn in green financing in the US and UAE, and channel investment to emerging economies, we noted in November. It’s targeting a scaled-up rollout of low-carbon energy — specifically, building an additional 100 GW of clean energy generation capacity globally by 2035 and building up supply chains. It’s also targeting particular investment in emissions management (specifically carbon and methane emissions), nuclear technology development, and decarbonizing industry and transport. These four areas are being termed PACE’s strategic pillars.

Who is heading up strategy? PACE will be directed by a newly-formed committee of public and private sector reps from the US and UAE, who will lead activities including progress tracking, proposing new projects, developing new financial models, and identifying potential partner institutions, Wam noted. Members will meet on a monthly basis to oversee the work taking place under the four strategic pillars, and the group’s co-chairs — newly-appointed COP28 President Sultan Al Jaber and US Special Presidential Coordinator Amos Hochstein — will meet with the group on a quarterly basis to assess impact, launch new projects, and expand support for the program.

Egypt’s Elsewedy Electric is upping its solar energy game: Elsewedy Electric for Transmission and Distribution — a subsidiary of Elsewedy Electric — signed a USD 176.1 mn turnkey contract to build a 300 MW solar power station for Saudi Arabia’s Al Ghazala Energy company, according to a company statement (pdf). Elsewedy will design, supply, and install the entire project within 16.5 months, the statement said. Elsewedy will operate and maintain the facility for 29 months after its completion.

Elsewedy has been stepping up its involvement in Saudi lately: Yesterday’s announcement comes a few months after the company approved in November setting up one or more new companies in Saudi Arabia, according to a company disclosure to the Egyptian bourse (pdf). The companies’ potential activities include the management of holding companies’ subsidiaries, investments, real estate ownership, lending, and leasing.

Saudi greenlights KSA-US energy partnership: The Saudi Arabian cabinet has approved the long-awaited “Partnership Framework for Clean Energy Development” between the United States and KSA, the Saudi Gazette reports. The agreement is based on a 2017 MoU (pdf) between the Kingdom’s Energy Ministry and the US Department of Energy agreeing to collaborate in renewable energy projects including carbon capture utilization and storage with follow-up agreements signed in July of last year.

The details: The extensive new agreement (pdf) is made up of six sections including the implementation of a circular carbon economy to support the Paris Agreement goals, increasing the efficiency of electric power systems, streamlining energy storage systems, fuel life cycles to reduce emissions, and supporting the uptake of clean hydrogen.

Nuclear is on the menu: The agreement stipulates the two countries can share knowledge on reactor technologies, uranium exploration (mining and processing), and the safe disposal of nuclear waste. Saudi Arabia has been making the case for setting up a nuclear power industry for domestic use and export, and showcased the country’s diverse and abundant supplies of uranium during the Future Minerals Forum last week.

This partnership has been a long time coming: US-Saudi talks over nuclear cooperation began as early as 2008 but were delayed because of disagreements over nonproliferation requirements, the US Government Accountability Office reported in 2020. In 2009, the Saudi government stated that “atomic energy is essential” to enable the Kingdom to fulfill its electricity and desalination needs as well as diversifying its economy away from hydrocarbons, the World Nuclear Association reported last April.

What’s next? The country is targeting 17 GW of nuclear capacity by 2040 and bringing online two reactors with a combined capacity of 3.2 GW within the coming decade while adhering to international standards of transparency, Saudi Energy Minister Prince Abdulaziz bin Salman said last week, adding that contracts for building reactors will be awarded “very soon.”

EWEC clean energy certificates auction sold big: State-owned Emirates Water and Electricity Company’s auction for clean energy certificates last month closed with over 9 mn units sold, according to a statement. The company — the exclusive vendor of nuclear and solar-produced electricity in the UAE — is selling digital certificates to certify the source of renewable energy usage and allow companies to back up ESG goals. The auction was the company’s most successful to date, six months after the company’s fourth auction was held in June 2022.

SOUND SMART- Renewable energy certificates (RECs) are a MWh by MWh way of proving that you own or created renewable energy. A REC is issued when one MWh is delivered to the electricity grid from a renewable energy source, the US Environmental Protection Agency (EPA) notes. RECs contain important data about the source of the renewable energy — including the kind of energy produced and its level of emissions — which play a crucial role in the tracking, accounting, and identifiable ownership tied to renewable electricity generation and use, the EPA tells us. Investopedia has more.

EWEC has fulfilled big CEC purchases outside of auction: Emirati aluminum conglomerate Emirates Global Aluminium (EGA) purchased clean energy certificates for 1.1 mn MWh of electricity from EWEC to support its production of solar aluminum last November. These certificates will certify EGA’s production of around 80k tons of its solar-powered aluminum CelestiAL.

UAE’s Masdar, Azerbaijan ink renewables agreement: Emirati renewables giant Masdar and the State Oil Company of the Republic of Azerbaijan (SOCAR) signed an agreement to develop renewables projects with a combined capacity of 4 GW, Azerbaijani news outlet Azernews reports. The projects will include the joint development of offshore wind energy and hydrogen projects with a capacity of 2 GW, solar photovoltaic energy projects with a capacity of 1 GW, and 1 GW of onshore wind energy. No financial details or a prospective timeline on the projects has been disclosed.

Masdar already has a foot in the door in Azerbaijan: The renewables company signed an implementation agreement for a 230 MW solar plant in 2020, which broke ground in March 2022. The plant will generate 500 mn kWh of renewable energy annually and cost an estimated USD 200 mn funded by foreign investments.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The Egyptian Natural Gas Holding Company (EGAS) inked an MoU with Italian multinational energy company Eni to reduce emissions by identifying opportunities to reduce gas flaring and methane emissions in the Egyptian oil and gas sector and exploring the feasibility of carbon capture, utilization and storage projects. (Statement)