The UAE's Clean Energy Transition: Investments and Innovations

From oil wells to solar cells, the UAE is navigating towards ‘powering’ sustainability.

The race towards energy transition in the UAE is driven by two forces- the quest for economic diversification, and the urgent need to adopt clean energy and further their Net Zero 2050 goals. To this end, the UAE has emerged as a hub of investment and opportunities for non-oil energy.?

Current Industry

The industry's current landscape includes solar energy, hydrogen, wind power, agritech, and desalination plants amongst others, and is regulated by the Federal Ministry of Energy and Infrastructure.?

Masdar City

The UAE’s climate arena is perhaps best known for its flagship sustainable city, Masdar, in Abu Dhabi. Masdar City has been positioned as a hub for testing and adopting pioneering technologies aimed at producing green hydrogen, wind farms, and solar energy in the UAE and abroad.?

The UAE is home to three of the world’s largest solar parks. Noor Abu Dhabi is one of the world’s largest standalone operational solar plants with a photovoltaic capacity of 1200 MW. Per the plant’s estimates, this powers 90,000 individuals’ energy needs.

The larger Al Dhafra plant in Abu Dhabi was inaugurated in 2023. Upon full operation, it is expected to power 160,000 households’ electricity needs.

Dubai is also home to the Mohammed bin Rashid Al Maktoum solar park which has been operational since 2020 and since the inception of its 3rd phase, powers 240,000 households.?

The UAE’s investments have been targeted towards local as well as regional/global projects.?

In Egypt, Masdar's Siwa Solar PV Plant is powering over 6,000 homes as part of the UAE’s grant to electrify rural areas. In Jordan, the Baynouna Plant provides energy to 160,000 homes.?

Projects are also underway in Uzbekistan (the Guzar project), Marshall Islands, Azerbaijan (the Garadagh project), the Bahamas, Kiribati, and the Seychelles.?

Wind energy is also emerging as a focal area in the UAE. The UAE Wind Program is expected to generate 100 MW of energy across four locations in Abu Dhabi. Previously thought of as a low utility location, the UAE has been collaborating with PowerChina and GoldWind International (HK) to capture low-speed winds for energy.?

To diversify global investments, the UAE has also established a wind farm in Jordan. This has increased the country's power capacity by 3% and reduced emissions by 235k tonnes annually.?

Joint venture projects and investments with Masdar are underway in the Dhofar Wind Project in Oman (the funding for which is provided by the Abu Dhabi Development Fund), Krnovo Wind Farm in Montenegro, the Mlawa and Grajewo Wind Farms in Poland, the London Array in the UK, and Hywind Scotland, the world’s first floating offshore wind farm, to name a few. These projects ensure continuous collaboration between Masdar and other investors involved, such as the EBRD and local governments.?

Hydrogen, Biofuel, and Nuclear?

Another goal of the UAE’s Net Zero 2050 strategy is to produce 1.4 mtpa of blue and green hydrogen by 2031. While the primary goal is for green hydrogen energy to be consumed locally, the UAE also has a MoU with four Dutch companies for Masdar’s exports of green hydrogen. In 2022 the UAE also established an agreement with Egypt to support its development of green hydrogen. The UAE’s home project for green hydrogen currently is a collaboration amongst DEWA, Expo 2020 Dubai and Siemens Energy at the Mohammed bin Rashid Al Maktoum Solar Park. Solar energy will produce green hydrogen.?

A collaboration between Sharjah’s Bee’ah and Masdar has resulted in the creation of technology that can divert >300k tonnes of solid waste into heat, which drives electric turbines.?

The Barakah Nuclear Plant is also an important component of the UAE’s drive towards clean energy. It provided 75% of the green energy produced in the UAE in 2023.?

In 2021, it accounted for 7% of the country’s electricity consumption. By 2030, the aim is for this share to rise to 12%, powered primarily by the Barakah plant.?

Local Initiatives

Other local initiatives include projects to replace traditional high-pressure sodium lamps on federal roads with LED lights. This project is expected to reduce energy consumption by 35-50% annually, and improve the lighting system's efficiency by enhancing its lifespan by 50%.?

Opportunities?

With green energy operations ongoing, opportunities abound in the production of green energy through the manufacture of solar panels. Opportunities also exist in the contribution towards producing green hydrogen and hydrogen electrolysers. Wind energy projects are relatively untapped in the UAE at the moment, but in the future are expected to power more than 23,000 homes a year in the country, as per Masdar’s UAE Wind Program estimates. This provides opportunities for businesses in the production of wind turbines. Technological opportunities are also available in energy production, energy storage, transportation and export, and carbon capture technology, amongst others.?

The lack of freshwater sources in the UAE means that desalination plants are in constant use, increasing demand for innovative and energy-efficient technology to replace the existing energy-intensive plants.?

The UAE also aims to expand its local EV market. Nearly 14,000 EVs were registered in the UAE at the end of 2023 serviced by over 600 charging stations across the country. The UAE unveiled its first locally produced EV Rabdan One in October 2023. This was done in collaboration with Chinese company NWTN.?

Plans are also in motion for California-based HummingbirdEV to launch a micro-facility in the UAE, which means that opportunities are present for external producers in the industry to test the UAE waters.?

Funding

The UAE’s Net Zero 2050 strategy has earmarked AED 600 billion of investment towards clean and renewable energy sources.?

The Emirates Development Bank was instituted to support businesses in innovative sectors including renewables. The current mandate for the bank is to approve the financing of 13,500 companies within this sector by 2026 with its existing finances of AED 30 billion.

The UAE also offers tax benefits and grants to ‘green’ businesses through its various ‘free zones’. Abu Dhabi is home to Hub71+ClimateTech, a tech ecosystem for sustainable decarbonization technologies. Startups joining this ecosystem can expect AED 250,000 worth of incentives in kind.?

Dubai Future Accelerators Program is a platform that aims to bring together investors, the government, and innovators in fields including climate technology.?

Subsidies are offered through the Dubai Smart City Accelerator program, especially to businesses looking to invest in the EV space. VC initiatives are also key in powering the sustainability drive in the UAE. In the field of agritech, for instance, VCs have been increasing the amount of funds they pump into the industry. In 2021, $51.7 bn was invested.?

Billions of dollars have been earmarked for developing green technology not just locally but also in the larger ME and Africa region, so setting up a business in this industry in the UAE can effectively open the export door to Africa as well. So far, the UAE has invested upwards of $12bn in Africa in climate technology through public and private collaborations including 300MW of new solar capacity in Angola and Uganda.?

Challenges?

While challenges exist in the region, the UAE is making considerable progress in providing a nurturing environment for climate tech pursuants by acquiring skilled labour and navigating regulatory and licensing requirements. The geopolitics of critical minerals employed in solar energy batteries, wind turbines, etc. could hinder the UAE’s path towards energy diversification and transition.?

The investment in the region is ample and, at this stage, only needs to be met with local entrepreneurial drive and skills. This could change through the government and other stakeholders continuing to build upon robust and encouraging ecosystems for climate tech businesses to prosper.