TIME TO HELP

Abu Dhabi 2016 | DIPLOMACY | FOCUS: ADFD

Subsequent to the signing of the Paris Accord during the COP21, renewable energies and reduced carbon emissions have become the language of diplomacy and a primary topic on the agenda for foreign envoys.

The UAE is becoming extremely successful at implementing large-scale renewable projects domestically and has a long track record of funding such projects in emerging markets and developing economies overseas. Abu Dhabi's International Renewable Energy Agency (IRENA) and the Abu Dhabi Fund for Development (ADFD) have joined forces in order to supply much needed capital to overseas renewable energy projects.

While the two bodies operate as independent entities, they have just released their third round of investment, worth $50 million, which is destined for foreign countries that have successfully pitched renewable projects to the partnership. This is part of a $350 million war chest that will be attributed through concessionary, or soft, loans over seven funding cycles. Soft loans by nature do not generate huge revenue, though that can be offset with assuring trade supply of a commodity. The first two cycles saw $100 million released to fund 11 projects with the capacity to generate 56MW of renewable energy per annum.

Mohammed Saif Al Suwaidi, Director General of ADFD, has expressed the importance of the renewable sector in relation to sustainability, the creation of new economic opportunities (for the loan recipient), and mutual interests. He also mentions the huge potential in the sector, as well renewable energy as an enabler. Therefore, the loans operate as a multi-faceted policy. While this provides a revenue or supply stream for Abu Dhabi, it simultaneously increases the diplomatic reach of the UAE while positioning the country at the forefront of the renewable industry, globally. The Emiratis are fond of being pioneers, and their necessary capital reserves facilitate the commandeering of the sector.

In wake of the COP21 conference, the global investor community has been encouraged to focus heavily on the renewables sector to achieve the target of keeping global warming at under 2°C. IRENA's analysis shows that annual global investment should be at least $600 billion to achieve this target. According to Bloomberg New Energy Finance, 2015 saw a 4% increase in global renewable energy investment, which included a 54% rise in the MENA region, bringing the total to $13.4 billion.

The largest project, in terms of capacity, that the IRENA/ADFD partnership has funded was a 15MW project in St Vincent and the Grenadines, of which $15 million was supplied. The Abu Dhabi-based partnership does not function as the sole investor in the project, rather acting as a bridge to ensure the project is completed—similar to last mile finance seen in the real estate sector. The total cost of the project was $85 million.

Interestingly, this particular development was a geothermal energy project that will cut the cost of power generation by 25% and will deliver clean energy to over 100,000 people across the islands.

The projects that ADFD has been involved in include a variety of different endeavors, while not bearing a scrupulous attitude for the destination of the investment either. Cuba received $15 million to help fund four photovoltaic (PV) solar power plants with a total capacity of 10MW. The third round of funding, totaling $46 million, went to a wind and solar project in Antigua and Barbuda, one in Cape Verde, a solar project in Burkina Faso, and another in Senegal. The successful bidders were announced in January 2016 and will generate 12MW of energy annually.

During the first loan cycle at the end of 2013, $41 million was issued for six projects across Ecuador, Maldives, Mali, Samoa, Mauritania, and Sierra Leone. The second cycle funded five projects across Argentina, St Vincent and the Grenadines, Cuba, Mauritania, and Iran—totaling $57 million. In total, 68MW of power has now been provided by projects involving the ADFD and IRENA partnership.