Published on February 13th, 2013 | by Zachary Shahan3
Masdar — Manufactured Silicon Valley Of Cleantech?
February 13th, 2013 by Zachary Shahan
I recently had the chance to visit Masdar City as part of a VIP Media trip to Abu Dhabi Sustainability Week. Naturally, if someone pays for me to visit their home, I’m cautious of propaganda, smooth-talking, and candy of all sorts. But even with my cautious and skeptical face on, I have to declare that Masdar (or the folks behind it) have ambition, intelligence, perspective, and an eye for becoming the energy champions of the coming century. But there are a lot of intricate pieces to this story that I think are worth your time, so let’s delve into them.
First of all, let’s get right into the first thing most people will think about — motive. Masdar was established in 2006 with an initial commitment of $15 billion from the Abu Dhabi government. Yes, $15 billion. Abu Dhabi has the fifth-largest proven oil reserves (about 9% of the world’s reserves) and the sixth-largest natural gas reserves (about 5%). Fortune magazine and CNN in 2007 declared that Abu Dhabi was “the richest city in the world.”
Clearly, Abu Dhabi is in a comfortable position, and it is no doubt happy to have so much oil and gas to sell. But it’s also well aware of a couple other things:
- oil and gas won’t dominate the energy industry forever;
- global warming and climate change come with extremely expensive and harsh costs.
With oil and gas at the center of its economy, Abu Dhabi is well aware of what’s available, what it costs to retrieve those resources, and the fact that global supply has peaked or soon will. It will never extract and sell all of its oil and gas. Long before that would happen, the price of these resources will be higher than the price of solar power, wind power, and electric vehicles. As the head of the International Renewable Energy Agency (IRENA) noted during the World Future Energy Summit, solar is already the cheapest option for electricity in developing countries all across the world, and even in some developed countries. Solar, wind, and EV costs continue to drop. At some point, it just doesn’t make sense to expend the money to extract oil and gas, store it, and ship it for sale across the world — the price of doing so will increasingly become greater than the price for which you can sell it.
With that clearly on the minds of the leaders of Abu Dhabi, combined with the extremely comfortable and extravagant lives they’ve gotten used to, combined with plenty of extra money lying around to invest as wisely as possible, they have decided to try to become one of the leaders (if not the leader) of the energy technologies of the future.
Furthermore, I don’t think climate or environmental matters are insignificant to them. The region’s climate is harsh. The weather was perfect when I was there… at the beginning of January. But the hot and arid climate is well respected by residents there. A world 11° Fahrenheit warmer, on average, would be a difficult world to live in. Furthermore, as the images below show, the UAE as a whole has a decent history with environmental stewardship. It hasn’t passed up exploiting the oil and gas resources that has made it super rich, but it did: implement a hunting ban not long after its inception, sign the UNFCCC and ratify the Kyoto Protocol, and implement a “Zero Flaring” policy way back in 1992. And the late founding father Sheikh Zayed was awarded the Gold Panda Award in 1997.
The point of all this: there can be more than one motive, and I’m convinced that that’s the case in Abu Dhabi. I believe Abu Dhabi’s leaders are concerned about global warming and want to do the right thing. And I’m sure they want to remain at the head of the global economy, and they see that leading in cleantech is the way to do so.
Where Exactly Is $15 Billion Going?
Before my trip to Abu Dhabi, I was actually under the impression that Masdar was just Masdar City. I’ll admit that I didn’t read up on it a whole lot in previous years, thought that it was a bit of a green pet project or gimmick, and had seen many critical comments about it being simply a dream, greenwashing, a mirage, etc. Quite frankly, now that I’ve been there, I can tell you that it’s much more than a city, and it most certainly is not greenwashing or a mirage.
Masdar is actually split up into four separate (but, obviously, somewhat linked) parts:
- Masdar Institute of Science and Technology
- Masdar Capital
- Masdar Clean Energy
- Masdar City
To quote Masdar, this is the company’s vision:
“To make Abu Dhabi the preeminent source of renewable energy knowledge, development and implementation, as well as the world’s benchmark for sustainable development.”
And this is its mission:
“To advance renewable energy and sustainable technologies through education; research and development; investment; commercialisation and adaptation.”
The best analogy I can think of is one that a Masdar employee there used while we were having a chat — it’s goal is sort of to become the Silicon Valley of cleantech.
One key difference, of course, is that Silicon Valley earned its title “organically,” while Masdar is actually a company that aims to create or become the various walls (figuratively speaking) of such a place. It has a nascent research institute that, it seems, it intends to make the leading cleantech research institute on the planet. It is bringing headquarters of major cleantech companies (such as Siemens and GE) to Masdar City — through various enticements, of course. It has an investment arm that manages investment funds (its own and investments of others’) and private equity. Last but not least, Masdar Clean Energy is focused on actually deploying clean energy projects in the region. It has invested in many of the largest cleantech projects in the world — such as the London Array, which will be the world’s largest wind farm once completed; the Gemasolar CSP plant in Spain, the world’s first 24/7 solar power plant; and Shams 1, the largest single-unit CSP plant in the world.
I have more info on Masdar Clean Energy, Masdar City, and Masdar Institute that I think will be more worthwhile to share in their own posts. Stay tuned.
But let’s tackle one last point before closing.
Can Masdar Become the Silicon Valley of Cleantech?
Another key thing about this story is actually unrelated to Masdar or Abu Dhabi. The fact of the matter is: many countries and companies see cleantech as the economic engine of the coming century. Thus, others do have similar goals to Masdar’s goals, if in slightly different forms and frameworks.
For example, China (a country with a somewhat significant population and economy), is clearly gunning for the cleantech “trophy.” It has rather successfully attempted to take over the solar panel and wind turbine manufacturing industries. (Of the top 10 solar panel suppliers in 2012, 7 were based in China. It isn’t so dominant in the wind turbine industry, but #2, 3, 8, and 10 on the list are all Chinese.)
But China isn’t only going after manufacturing. As Lux Research recently noted, “China’s rapid transition from a low-cost manufacturing hub to an innovation hotspot with growing foreign ambitions represents both a threat and an opportunity for companies and investors around the globe.” Of course, Lux isn’t the only one to note China’s aim of becoming more than the manufacturing basement of the world. And anyone who follows clean energy knows that China is a giant to keep a constant eye on. China’s clean energy investments have completely dwarfed US clean energy investments. And the country has also been holding strong as the most attractive country for renewable energy investment, according to Ernst & Young.
Nonetheless, China isn’t the only player to watch. European countries, the US, and others also want to be the center of cleantech attention. Major corporations such as GE, Siemens, and Google have put a lot of investment into various sectors of the cleantech arena. And Silicon Valley itself is involved in cleantech research, investment, and deployment of various types. As noted above, each of these countries, companies, and regions have their own frameworks — some are more organic, some more cohesive, some more focused on one aspect of the market or another.
So, where is all this context leading? It’s leading to the point that, like clean energy itself, I think the clean energy “sector” will be quite dispersed, a more decentralized market. It will be more global. There won’t be a clear “cleantech center.”
But that doesn’t mean that being one of many centers is not important. That doesn’t mean that investing in becoming a cleantech leader in as many ways as possible won’t pay off. That doesn’t mean that I’m not extremely impressed with the integrated way in which Masdar is approaching things. I am impressed. I was almost breathtakingly impressed with the vision and scale of the company when learning about it. And I’d invest a good chunk of my measly pocket change that the $15 billion put into Masdar (and probably more down the road) will pay off.
Oh yeah, and to put that $15 billion into a bit of perspective, the US government invested about $5.55 billion in clean energy from 1994–2009. In other words, this ain’t no gimmick.
For more content from CleanTechnica’s trip to Abu Dhabi, check out our archive pages for Abu Dhabi Sustainability Week, the World Future Energy Summit, and/or the International Renewable Energy Conference.
Full Disclosure: my trip to Abu Dhabi Sustainability Week was funded by Masdar. That said, I was completely free to cover what I wanted throughout the week, and at no point did I feel under pressure to cover any specific events or Masdar in any particular way.