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UAE energy sector is ripe for ‘green’ funds

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According to International Renewable Energy Agency (IRENA), renewable energy could power an economic recovery from COVID-19 by spurring global GDP gains of almost $100 trillion between now and 2050.
Renewable energy presents an attractive investment opportunity for the UAE, with IRENA estimating that nearly $150 billion per annum until 2050 needs to be invested into decarbonisation of the energy system across the region. It is also critical for the future.

Coupled with growing concerns about the pandemic and subsequent implications on the energy sector, a significant change must be induced, and fast. To achieve this, increased renewable energy investment is required, not only to meet growing energy demand and reduce climate concerns, but also to enable sustainable development with significant socioeconomic benefits.
Internationally, renewable and sustainable energy is being given much attention as it promises sizable economic and societal gains, as well as a haven from the economic implications of the pandemic. In fact, the International Energy Agency predicts renewable energy is the only energy source that will experience growth in 2020.

The pandemic has exacerbated problems for the energy sector, with oil prices plunging to historic depths, subsequently implicating oil exporters and oil-dependent economies. However, the increased volatility of the oil market serves as an opportunity for the UAE to introduce stringent sustainability strategies that incur long-term change towards a greener future.
Although falling renewable energy technology costs have significantly lowered the upfront capital needed, financing renewable energy projects remains difficult. This is due to the high cost of capital, elevated by risks and underlying market barriers. Mobilising private capital is central to rapidly scaling up investment in renewable energy.
The role of public finance in this regard is to address investment constraints faced by the private sector.

Despite the unwavering advantages found in financing renewable energy efforts, a majority of financial institutions in the UAE are hesitant to participate on account of numerous variables perceived to be associated with sustainable investments. According to a report published by the UAE Ministry of Environment and Water, 29.1 per cent of institutions surveyed stated the high risk of green sectors, long payback period and lack of long-term finance, a lack of profitability and clarity in benefits impact their decision-making while considering financing renewable energy alternatives.

To combat this, the UAE has made considerable efforts towards driving its energy strategy. In 2017, the government launched the “Energy Strategy 2050”. This aims to increase the contribution of clean energy in the total energy mix – from 25 per cent to 50 by 2050 and reduce the carbon footprint of power generation by 70 per cent, resulting in savings of $190 billion.
In addition to the money saved, the UAE government aims to invest $163 billion by 2050 to meet the growing energy demand and ensure sustainable growth for the economy.

Source: Gulf News

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