Atlantic Council
Global Energy Forum
Luncheon and Special Briefing: A Brave New World for Renewables – Solar and Wind Energy Investments in an Era of Plummeting Costs
Introduced By:
Thomas Cunningham,
Deputy Director, Global Energy Center,
Atlantic Council
Participants:
Bader Al Lamki,
Executive Director,
Masdar Clean Energy
Eng. Fatima Alfoora Alshamsi,
Assistant Undersecretary for Electricity and Clean Energy Affairs, Ministry of Energy, United Arab Emirates
Shermine Dajani,
Founder and CEO,
PanMed Energy
Michael Eckhart,
Managing Director and Global Head, Environmental Finance, and Sustainability, Citigroup
Michael Taylor,
Senior Analyst, Renewable Cost Status and Outlook,
International Renewable Energy Agency
Location: Al Maryah Ballroom, Four Seasons, Al Maryah Island, Abu Dhabi, United Arab Emirates
Time: 1:50 p.m. Local
Date: Thursday, January 12, 2017
Transcript By
Superior Transcriptions LLC www.superiortranscriptions.com
THOMAS CUNNINGHAM: A quick announcement as we begin: Do feel free – people will be coming and going. We’ll of course allow that as we break through the schedule. We will go till 3:00 even.
Excellencies, distinguished guests, ladies and gentlemen, thank you for joining us for this panel focusing on renewable energy. Also, thank you to our sponsors.
I’m Tom Cunningham, deputy director of the Global Energy Center at the Atlantic Council, and I will introduce our panel in just a moment. Let me set the stage. As you may have seen in our CNN spot, renewable energy has reached a tipping point. Indeed, the amount of renewables coming on line is astonishing. In 2013, renewable capacity installations exceeded that of conventional energy. In 2015, renewable energy exceeded coal in total installed capacity. And the costs are coming down. Cost for new onshore wind fell by 30 percent between 2010 and 2015, and prices for new solar plants fell by two-thirds. Developers have bid ever lower prices to build solar in 2016, with just in March we saw a bid for – in Mexico for 3.55 cents per kilowatt hour; followed by May, Dubai, 2.99 cents per kilowatt hour; Chile, 2.91 in August; and then right here in Abu Dhabi, in September, 2.42 cents.
My big question, though – and hope we can get to it today – is, is this tipping point just hyperbole? After all, coal still generates more power overall. And Bloomberg New Energy Finance does not except renewables to overtake gas globally until 2027, and coal before 2037.
To help unpack this data and understand this outlook for a brave new world for renewables, we have a very distinguished panel here with us, and they’ve got a diverse array of expertise and responsibility. Just to my left is Mr. Michael Taylor, a senior analyst, renewable cost status and outlook at the International Renewable Energy Agency. He’s got over 20 year of experience in energy modeling, economic analysis of the energy sector, and energy policy development. He also worked on the world energy outlook at the IEA in the Technology Policy Division. He has joined that institution coming from the New Zealand Ministry of Economic Development and the U.K. Department of Trade and Industry.
To his left, you have Ms. Shermine Dajani, founder and chief executive officer at PanMed Energy, located in Oman. She has over two decades of experience providing consultancy services to multinational business companies seeking entry to Europe, the United States, and the Middle East. She has an interesting array of expertise across the energy sector, including work on the Arab gas pipeline, bringing Egyptian gas to Jordan, and as well as some expertise in Jordanian IT and telecom sectors. She also was the founding partner of Medgrid, in France, which is an interesting project that would connect renewable energy in the Maghreb to European markets.
We have Bader Al Lamki, director of clean energy at Masdar, over 18 years of experience in the energy sector, including about nine years at Masdar, I think. He’s leading teams with a company deploying nearly 1.5 gigawatts of clean energy or – deployed or under development globally. Maybe that number’s higher now. And he has also worked at Abu Dhabi-based offshore companies and – as – was a development planning engineer at Total, working in Angola and Republic of Congo.
We also have Her Excellency Engineer Fatima Alfoora Alshamsi, assistant undersecretary for electricity and clean energy affairs at the United Arab Emirates Ministry of Energy. She leads the Ministry of Energy’s activities in electricity, clean energy, climate change, and water desalination – a really interesting, important portfolio. Look forward to hearing about your newly announced national energy strategy. Her background ranges from electrical energy and renewables to business development and project management. And she’s a former vice president of privatization and business development at Dubai Electricity and Water Authority.
And last but not least, Mr. Michael Eckhart, managing director and global head of environmental finance and stability at Citigroup. He is on the Atlantic Council’s Global Energy Center Advisory Group. Thank you for your support and guidance. He’s also on the governing bureau of the REN21 Global Policy Network in renewable energy. He’s on the Renewable Industry Advisory Board at the IEA, and is an observer to IRENA. He also, I think it’s important to note, is the founding president of the American Council on Renewable Energy, ACORE, and he was – has an incredible background developing financing for solar energy, and he also helped draft the legislation establishing the feed-in tariff for renewable energy in Germany, which some would argue helped pave the wave or launch this global renewable energy market.
OK, that’s a lot of introductions, but let’s jump right in. I’d like to ask each of you a question, and then we’ll ask some couple more questions and we’ll go right to the audience.
So, Mike – Michael, apologies – why do these costs keep falling? Will they continue to fall? And can you explain a bit about what’s going on at the macro level?
MIKE TAYLOR: So the short answer is yes, they will continue to fall. What we’ve seen, actually, has been a very dynamic virtuous cycle where policy support to accelerate the deployment of renewables has led to technology improvements and ongoing cost reductions. So this has been a very important dynamic in what we’ve seen occurring in the last four to five years, and it’s one that’s set to continue. There’s some nuances there that I’ll talk about. But what we’ve seen is quite exciting. So you’ve talked already a little bit about what’s happened in recent years. And we try to track the actual project costs. We have a database around 15,000 utility-scale projects around the world. And between 2010 and 2016, you know, we saw solar PV module prices fall by 80 percent, the levelized cost of our electricity from utility-scale projects globally fall by 68 percent, reductions for onshore wind of around a fifth in terms of the electricity costs – so very significant cost reductions. And this is in technologies which are very widely deployable. There are few countries in the world that don’t have either good wind or solar resources.
This complements very well the more mature renewable technologies of course – hydro, geothermal, and biomass, where existing resources, untapped economic resources exist. These are very competitive obviously as well. So what we’ve seen, particularly for – and for solar technologies and for wind is that we’ve seen technology improvements that have either improved the capacity factor – this is notable for onshore wind with higher turbines, higher hub heights, larger swept areas capturing more electricity for the same resource has been a very important driver.
For solar PV, the technology driver is more about reducing the capital cost. So higher efficiencies for the modules has been driving down install costs, but you also get balance of system cost reductions as well, less racking and mounting, and so on, on other issues. And we’ve seen more competitive supply chains as time has gone as well. And also, of course, we talked – you’ve heard already about the rapid growth in the deployment of the economies of scale and manufacturing have also been important.
So earlier this year we released a report, “The Power to Change,” that looked at the outlook to 2025 for solar and wind. And we’re likely to see a continuation of these trends, but there’s some important nuances to that. But perhaps before I go onto that, it’s worth just highlighting roughly the level. So if – with the right regulatory and institutional frameworks in place, we could see another 60 percent fall on the levelized cost of electricity from solar PV. This is a global weighted average reduction. So obviously things vary at a country or a regional level, depending on the current state of the efficiency and cost competitiveness. Another quarter reduction in the levelized cost of electricity for onshore wind, 37 to 42 percent for concentrating solar power, and perhaps around 35 percent for offshore wind. So still very significant cost-reduction potentials. We’re seeing consistently the projects commissioned in 2014, say, for onshore wind in the 4-cent kilowatt-hour range for a levelized cost of electricity. Solar PV is somewhere above that. The best projects are around 6 cents, but obviously we’ve seen with these recent PPA and (tender ?) announcements, there’s a very rapid convergence between solar PV and onshore wind, which is already very competitive.
But the main challenge that we’ve been highlighting to our policy makers in government is that the drivers are changing. With low equipment costs, we’re going to talk – see more of the cost-reduction opportunities coming from balance of systems, the technology improvements. Operations and maintenance costs come more into play, and of course the financing costs, where I have a much better expert across from me. So these are challenges for policymakers that we want to highlight to our 150 member governments, because those are acting on a larger number of stakeholders. You have to get more of your ducks in a row. So overall, we’ve seen very, very dramatic cost reductions in the last four to five years, so we do see this tipping point as being something that is not hyperbole. This is something that is actually – it’s more a process where people have become aware of just how competitive renewables are for new capacity. And with the right institutional policy frameworks, industry will deliver even greater cost reductions.
MR. CUNNINGHAM: Thank you.
Shermine, let me turn to you. You – I’d like to hear from you your regional perspective. You have a wealth of experience advising companies about how to enter this market, as well as U.S. and European markets. So can you explain a little bit what’s going on in terms of broader GCC or Middle East renewable energy, and does it – is it unique, or is it very different from what you’re seeing other markets around the world?
SHERMINE DAJANI: It’s very different. You could – it’s very different, and you could tell that everybody in the world is here for the sustainability week. Everybody’s excited about investing in the GCC countries in the renewable sector, in Jordan, Morocco. The – we have the right regulations. We have the policies. We have green funding in place. We have the sun and the wind. We have the – so all the elements are in place.
And it’s a very easy sell. Everybody is here. Everybody’s looking to be a part of this revolution led by the United Arab Emirates and heading the GCC, Jordan, Morocco and other countries in the region. So I think we are fairly different in the sense that although we are rich in oil and gas and at the same time we are rich in wind and solar, and so we are now diversifying and moving – leading – leading the markets into the renewable. So it’s amazing. Every company in the world is just converging on this part of the world to be a part of that revolution.
MR. CUNNINGHAM: Thank you.
Bader, from your perspective, leading a business that’s involved in renewable energy – and you’re making investments here and around the world – can you explain from that insider perspective what’s going on? What’s the most interesting place for renewable investment around the world? And when we’re looking at this tipping point or when we’re looking at this threshold we’re reaching in terms of a – can you explain a little bit your perspective about how is it uniformed, is it nuanced, what regions are moving quickly?
BADER AL LAMKI: From a local perspective, yeah, what you are seeing is a case of alignment between policy and choice that makes business and commercial sense, whether it’s a policy towards diversification of the energy mix. And I’m sure Engineer Fatima will shed more light upon this. When it comes to business sense – and that’s where Masdar contributes into – today the case for renewables is very sound and it had made its case, and as such it’s on demand. The cost of electricity from PV or wind, for – solar or wind I think is now very competitively compared with the alternative-bid fossil fuel or other alternatives. And as such, as long as there’s growth in population, there’s growth in the economy, in country or across the globe, the backbone for growth is electricity, is energy, and that’s the enabler.
So what we are seeing today is an increasing trajectory whereby in the last three years, for example, year on year there has been more than 200 million – $200 billion that have been invested in this sector alone. So the choice is different from one country to country, to another country when it comes to energy mix. The energy mix here in the UAE includes of course conventional fossil fuel, renewables and nuclear, but the choices are different in other countries.
But I think what is common is that renewables now is not only being pursued part of the climate change sphere but is being pursued because it adds values. It’s being pursued because it creates jobs, it diversifies the economy. Now, the pace varies from one country to another, depending on the national needs. Here within the region, there has been significant announcements earlier this week about the UAE’s targets for 2050. We’ve earlier heard from the minister of energy in Saudi Arabia targeting 9.2 gigawatt by 2023. Across the region, when you look at Jordan, Egypt, Morocco, these are markets which are evolving, emerging, and actually fast-tracked. But we at Masdar, I think we take pride that we have been the first at this in this part of the world, in 2006. We have more than 10 years of experience in developing project, constructing projects, operating projects. So I think we have credibility to bring to the table, and I think we’re going to pursue investments across the globe. And again, there is demand in Africa, there is demand in Southeast Asia. Europe continues to focus also on renewables or by perhaps offshore wind plays a significant part there. But I think the growth for renewables is global. It is not specific to one place in the planet.
MR. CUNNINGHAM: Got it.
Engineer Fatima, let’s turn to you for this government perspective. As we know, natural gas dominates the electricity generation mix in the UAE. Electricity demand is already strong and rising steadily, making investment into new generation options critical. The UAE has had a target of I think 7 percent by 2020, and now clean energy – of 50 percent clean energy by 2050, I think – very new target. So let’s hear more about that national strategy. What are your policy tools for making this happened? And are these low costs that we’re talking about making this easier?
ENGINEER FATIMA ALFOORA ALSHAMSI: Definitely. I’ll start with the second question. Definitely the low cost has had an impact on the – increasing the percentage of the clean energy and the energy mix for the 2050. But it’s not only that factor. As a government, when we developed the strategy, we were looking into four major dimensions or factors. So we look to different resources, all the available resources or possible resources, but trying to have a balancing between the security and continuity of supply, to the affordability, because for these business and society, the cost of energy will definitely affect the business and society.
When we were looking also on the sustainability aspect and possible greenhouse reduction, we looked into of course the happiness. So those four dimensions. Defining special index. We have analyzed all the possible resources for UAE, and the outcome is that to have 50 percent courtesy of clean energy, that is 44 percent renewable and 6 percent nuclear, 38 percent gas and 12 percent clean coal.
Now, the question is why not 100 percent? People always ask me, every time they are asking me before announcing even the strategy, why not 100 percent renewable? And you know the discussion that maybe in the first session, yes, we – the solar is available, but we have in the coming period – because this strategy is flexible; after some time we will review it – but we are planning to focus on to the development of different technologies such as storage, electrification of adjacent sector that include the transport sector. The transport sector is a very important sector in the energy sector. We started the – as a continuation of the energy strategy, we started developing the transport strategy. As a government, even if we set the target for energy, but we need to develop the target also for the adjacent sector to the energy or it’s part of the energy sector, transport sector and industry sector will really affect the energy mix. And what we are getting from the renewable is electricity. So without electrification of especially transport, we will not be able to increase the percentage of the renewable of the mix. This is one thing.
Also what we need to do in the future is developing the required regulation, defining the target for the demand – required demand reduction as an enabler for the strategy. Of course, the strategy is also targeting to reduce the emission of the CO2 in the broad sector to 70 percent. This will need to be developed and detailed as a CO2 strategy in the broader sector with all the stakeholders, as the strategy already developed by a team from the ministry and all the stakeholders in the energy sector in the UAE. So we are looking for – to focusing on R&D and developing adjacent sector strategies especially.
MR. CUNNINGHAM: Thank you.
ENG. ALSHAMSI: Thank you.
MR. CUNNINGHAM: Now, Mike, do you – as you can see, we’ve got an amazing breadth. We’ve got an analyst, we’ve got consulting, we’ve got business executive, we’ve got government, and we have finance. I want to broaden the aperture, and what’s the investor perspective? You – the other thing I want and maybe you can share, you’ve been in this renewable sector from the beginning, and so in addition to what you’re seeing in the – that macro market sense as an investor, also how do you see the state of renewables today as part of that spectrum from when you began your work to now? What’s the state of play? Are things improving? What do we need to look out for?
MR. ECKHART: Great, Tom. Thank you. And thank you for having me here. This is a great conference, just ahead of IRENA and the Future Energy Summit. Great timing.
So Tom’s right. I’m probably the oldest person in the room. I started in renewable energy in 1976, so that’s 40 years and seven months ago. And it’s been quite a ride, and it’s a great perspective to have. If you joined this market or this industry in the last three years, it looks terrible. It’s chaotic. There’s changes, challenges, and so on. If you joined this 40 years ago, this is fantastic. This is called success, and these are the good old days and you see it that way.
And renewable energy, let’s say why is this happening now? A renewable energy system is going to have about one-third of its cost in the primary piece of equipment, the solar panels or the wind turbine. About a third of its cost – this is rough, just for conversation – a third in other equipment and services, construction and so on, and a third is the cost of money. Well, what’s happened to those three? Well, the cost of the primary equipment for solar has dropped 80 percent; wind turbines, 50 percent; the other equipment cost down 50 percent, and the cost of money is down 60 percent. Now, you can see the cost of money is going back up, so we’re in the perfect storm situation today, and that’s why we see the market conditions that we see.
Now let me lay out what I think on a global perspective a couple of points very briefly I’d like to make on what is the financing challenge we face globally under the Paris Agreement and where’s that money going to come from and not come from, and how do we put that together. Very quickly, what’s the problem? Well, according Bloomberg New Energy Finance, which we all use – is a very good source of information – $329 billion invested in clean energy or the year before in 2015. And we’ve got to get to a trillion a year, according to the IAEA and other good sources. So that looks like only a tripling. So what’s the problem? That’s not so big. But let’s dissect that a little bit. Where did the $329 billion go? Interestingly enough, 307 billion of it went to the OECD and BRICS nations. Only 7 percent went to the other 120 countries. That’s $22 billion. Well, the vision is, of the trillion, half will go to the developed countries and half to the developing countries. So we’ve got to take on the developed countries only a two-times lift, just doubling from 300 to 5(00) or 600. But in the developing – not the BRICS, but the real developing countries – we have to go from – to meet the Paris Agreement – from 22 billion a year being invested to 500 (billion). That’s a 25-times increase, immediately. There’s no way to do this in status quo. So that, to me, is the challenge. The OECD and BRICS, they’re going to do fine. They’re very financeable. We’re doing it. But the other 120 countries where we’re not investing, that’s where it has to go, and we don’t have mechanisms to do that. That’s why I’m an observer at IRENA. Why are we doing this? Where are we going? The IEA, we have to shift from our happy success in the OECD and BRICS and get to work on the other countries.
Now, how are we going to do that? Well, I know in the IRENA meeting we’re going to face a glum audience because their government – and they don’t have the money to face this climate challenge. And I agree: They don’t. Would you believe that government debt in this world is at $73 trillion right now? And would you believe last year’s GDP globally was, interestingly enough, $73 trillion? The world has borrowed its next year of economic activity. That’s like if somebody making $100,000 a year had a $100,000 in credit card debt. This is a serious problem. The ability of governments to continue borrowing, particularly at interest rates going up scenario, it’s got to be very limited, not in the trillions to put into climate change.
Now, take a look at the private sector or the capital markets. How much is there? Well, it’s not dead. It’s $200 trillion of actual money exists in the debt and equity capital markets, the bond market, the stock market. It’s about 100 trillion in the bond market, about 65 trillion in the stock market and other specialty markets. 200 trillion money is there. It’s churning every day. It’s not sitting in a vault. It’s going to work every second of the day. It’s all being put to work some place. We at Citi have 2 trillion, and we’re constantly – what we do for a living is put it to work, and that’s what the capital markets are doing. So it’s not a matter of saying hello, capital market, please come over and solve the climate problem. That’s like asking a stream to say, I’m thirsty, stream, come over to me. No, no, you go to the stream. And so climate has to go to the capital markets. The capital markets are not going to come to climate.
Now how do we do that for the developing countries? What is the issue? Why are we not investing so much? Is it because the returns aren’t there or because the risk is too high? Let me assure you. It’s because the risk is too high. It’s all about risk, because this capital has to be debt capital. And if you’re lending your mother’s money, you want to be sure it’s going to be repaid. You can’t take a wild risk with your mother’s money you’re investing in debt in a wind farm or something. It’s got to be low – it’s got to be repaid.
So the solution, then, to bring the two parties together, where you have government that has power, but no access to money, and you have the capital markets, which have the money, but no power. We can put those two together. And my suggestion is the public sector and IRENA leadership and the IEA take a serious look at creating an agency that provides offtake and other guarantees on these clean energy projects so that they will qualify for all their capital market financing that’s going on every second of the day. We’ve got to get in front of those investors and lenders and requalify for their criteria. Don’t ask them to change their criteria. They’re managing your mother’s money and my mother’s money, and they’re going to do a good job at that. We have to take our product and make it suitable for their investment. And this can be done. It’s done every day. That’s actually what banks do, in solving client problems, seeing opportunities, usually solving problems. And this is a classic banking challenge, to bring these two parties together, to create the guarantees, to reduce the risk, to allow the financing to happen. I’m very optimistic this can happen, but it’s going to take some serious work.
MR. CUNNINGHAM: Thanks, Mike. We’ve got about nine minutes, and I want to ask 400 questions. I don’t think I can do that. The – let me ask, though, related to the how do capital markets and government come together, in terms of other incentives or renewable energy targets, what’s the role of government intervention now as renewable energy becomes increasingly competitive with conventional energy?
Please, Shermine.
MS. DAJANI: I think the governments have to focus on transmission, smart grids, smart meters. What’s the idea of generating efficiently with solar and wind and biomass and whatever and not have the right grid and the right transmission? In Germany a few weeks ago they had to shut off wind turbines because the grid could not take it. And then when you look at 1.2 billion people in the world today who do not have access to electricity because there are no grids – in Southeast Asia, in Asia Pacific, in Sub-Saharan Africa – we really should focus as well on smart grids. In Jordan, we are, actually. We’re working on the green corridor, and we’ve tendered that to connect the south to the center, where all the solar projects are at the moment. So I very much urge governments to focus on smart grids, to continue this revolution in the generation, because generation alone is not enough.
Also, at some point in our lives we have to begin trading with energy. Jordan is looking to become a hub of energy in the next 10 years. We need to be interconnected with each other. The GCC’s well-connected with the GCC grid. Jordan has signed an agreement last year to become part of the GCC or to connect to the GCC grid. Saudi Arabia is going to connect with Egypt. Egypt will connect to the Mediterranean grid. And very soon you would have GCC electricity, clean electricity being sold in Europe. So you really need to think about the future and trading of electricity and the interconnections and smart grids and smart meters for all that.
MR. CUNNINGHAM: Well, the low prices for wind and solar show that the market exists for those products. Does the market exist for that midstream, that transmission, that distribution? Is that market there? Is that considered?
Bader, is your company working on that part of the renewable energy sector?
MR. AL LAMKI: Our work is primarily focused on mainstream utility-scale, large-scale projects whereby we have a global footprint, so we develop projects and sell electricity against power purchase agreement, but of course the financing sector comes also to bring – (inaudible).
MR. CUNNINGHAM: Full cycle.
MR. AL LAMKI: Now, in addition to that, off-grid solutions, distributed generation is another form of business avenues that is fast-growing, that is also creating demand for renewables. And this could help in the short-term deal with issues of lack of grid and transmission system. But I think both tracks are evolving quite fast, and we have expertise from – (inaudible) – perspective in developing projects in both areas. We have projects down in the Pacific islands all the way to West Europe. So we cover a wide range of geographical footprint.
MS. DAJANI: In Africa, they have a pay as you go system done by innovative group where poor people with salaries from one to six dollars can have access to solar, and each day they pay with electronic money, a few pennies here and there and so on, until the day that they pay for all the solar they have on the roof. And so, you know, people get creative when they don’t have access to energy.
MR. CUNNINGHAM: Please, Fatima.
ENG. ALSHAMSI: Yeah, with regard to the transmission, I do believe, yes, that will require to have the market. For the GCC, I know that GCIA (ph) now is working in developing the trading between the different states, and I know that there is a project – a study actually from the Arab League for the trans-Arab interconnection. The thing is, the market need to be there. And because of the difference on the demand timing and the difference between the cost of renewables to the – now to the cost of the fossil fuel, that would be attractive. Again, we still need to store it also. The storage is required. One area where the demand-side generation is possible on this region or in the Middle East, but the challenge is that not all the countries having the required regulation. So I think here in the UAE we have regulation in Dubai for it called Shams Dubai to allow only grid connection of renewable to the grid. And now also we are working on federal regulation with this regard. That will also encourage the increase of proliferation of renewable on the – on this region.
MR. CUNNINGHAM: Thank you.
Please, Michael.
MR. TAYLOR: So we’re starting to talk about, if you like, what’s the heart of a change in the energy system –
MR. CUNNINGHAM: A one-minute answer.
MR. TAYLOR: – with when you have a lot of variable renewables. But it actually, in terms of government thinking and what government needs to do, we actually – we’ve been focusing a little bit too much, as we tend to do, on electricity. We need to step up to the energy system level. And because of the diverse stakeholders and the misalignment, if you like, of incentives, as we see in the financing side, there’s a clear role here for government to take a look at the energy system level, to ensure that they have a long-term vision, like we’ve heard from the UAE, that incorporates these potential synergies and trade-offs in different subsectors. So, you know, is it just a transmission issue? Is it a system operation issue? Is there demand side thermal energy storage that may be cheaper? What about electric vehicles and the transportation sector and their ability to perhaps firm load? So it’s really – it’s a lot of work for governments, and they struggle. There’s a lot of learning by doing. And so, hopefully, these kind of panels, the work that we do, helps inform them in that process and hopefully make for fewer slipups along the way.
MR. CUNNINGHAM: Thanks, Michael.
Mike, you have a point real fast.
MR. ECKHART: Just really briefly, I just want to support the call for more transmission. It’s often overlooked because generation’s so interesting and exciting. The way we have opened up the renewable energy market in the U.S. is by building transmission lines specifically. The southwest transmission line from Imperial Valley into California, the new line we’re about to build from Idaho into California for 2 gigawatts of wind, specifically; the CREZ, C-R-E-S if you – C-R-E-Z, if you look it up, massive transmission system in Texas.
MR. CUNNINGHAM: Is that the role of business? Is it the role of business or is it the role of government to provide that in the U.S. case?
MR. ECKHART: It’s a combination of, in our case, state governments agreeing to cooperate on this with the utility companies to finance it. It is not an IPP private sector activity. It is a public-sector activity sometimes done with private capital, but it is a private sector.
MR. CUNNINGHAM: They create the market.
MR. ECKHART: That is the infrastructure needed to open up renewable energy markets. That’s my point. Very important.
MS. DAJANI: But the Arab League has a plan to interconnect all the Arab countries, so the plan is in place, and they are doing it in phases because of the problems with Syria or the problems in Libya, and so on, sadly because of the – but otherwise there is a grand plan there by the Arab League, funded by the Arab Fund for social economic development.
MR. CUNNINGHAM: That’s excellent.
MS. DAJANI: So there’s something in place there for us.
MR. CUNNINGHAM: Very good. I think they’re going to make us wrap, but I hope I have time for one question from the audience. Just one. Yeah, very clear signal. So we’ve got to mic runners. If you could raise your hand, whoever has the hand up first gets to ask that question. And now everyone’s very shy. I have a lot of – oh, there’s one right behind you. This will be it.
Please, sir, just name your affiliation and your name.
Right behind you, ma’am, behind you, behind you.
Mic runner? Sorry.
Q: Hello. Greetings. Taher Gozel. I’m a businessman from Azerbaijan.
If a country wants to start, you know, a vision of, you know, increasing its renewable energy, what are the steps, you think? What are – what would you advise? Where do we start from? Just very briefly from your experiences, where do we start from? Thank you.
MR. CUNNINGHAM: That’s a great question.
ENG. ALSHAMSI: I think of course each country has its own different resources, different requirement, but the process is the same. What we have done in developing our energy strategy, selecting the base year as a beginning and then developing a modeling tool or selecting the required modeling tool, and modify it to suit your country, and then define the different scenarios that is possible and based on scenarios.
Of course, during this process, we were building the capability of the team. The modeling tools for UAE, of course it has considered also the water requirement, because as you know we are also dependent on desalination for water generation. We have developed the model and defined the different KBIs (ph) as a result of each scenario by – for this model. And of course, defining the KBI (ph), as I said, we have defined four sectors. We have defined the KBIs (ph) related to the security and continuity, reliability of supply, which has the greatest weightage in our index of our selection, because what we need is a continuity of supply. It’s good to have very environmental-friendly resource, but without continuity – so continuity has – had the highest weightage. It was 40 percent in our index.
Then we have the affordability, because you need to keep your people happy and the lifestyle, so the energy cost will affect the attractiveness of the different individual to come to the country. Also, the business would be attractive, foreign investment business, to do business. Industries will be affected by the cost of energy. So the KBI’s (ph) related to the – affordability has been defined.
Then the sustainability, which is the CO2 emission and the demand reduction, possible demand reduction. The last one was the happiness as the government defined that – or the role of the government is to – or our target is to have happy community. So happiness target, we have defined the KBI (ph) related to the – also the environmental KBI (ph) and also the cost of electricity compared to the cost of electricity in the base year. Based on the result of all the scenarios we have conducted, we have selected which scenario is the best, and then we have applied sensitivity analysis, so we changed the constant factors such as the – I mean constant, the same factor that has changes is the DBB (ph) –
MR. CUNNINGHAM: Fifteen more seconds, Fatima.
ENG. ALSHAMSI: – oh, sorry – population and others, and then select the right scenario that best fit the government requirement.
MR. CUNNINGHAM: Thank you.
MS. DAJANI: I think you should have a regulatory – you should have a regulator, a regulatory framework in place, feed-in tariff. All these – all these things should be in place when you start. And then, you should have all the development banks by your side. The EBRDs, the World Bank, the EIBs, all these people should be there because they encourage investments and they should support the investors or the developers.
MR. CUNNINGHAM: Thank you. Mike, I’m not going to let you jump in because I’m going to lose my job if I let anyone else talk.
But stay tuned. We’ve got all of IRENA and the rest of Sustainability Week to focus on just these issues. We could easily have had a panel on each question. And I want to thank our panelists and thank all of you on what I think is the most interesting piece of this global energy puzzle, is dealing with this change and integrating renewables.
Thank you all very much. Thank you for being here. And one last plug, which is for the Global Energy Center in Washington, looking at these issues. Grab a pamphlet when you go by that round desk at the elevators. Again, thank you all very much. Round of applause, please. (Applause.)
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