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Environment and development AL-BIA WAL-TANMIA Leading Arabic Environment Magazine

PADDY PADMANATHAN Ten Years of ACWA Power and Corporate Responsibility 
Since 2007 the Arab region has undergone a number of changes because of economic cycles, movement of people and changes in attitudes to climate change and renewable energy. As a major regional producer of electricity and desalinated water, ACWA Power sits at the nexus of the water-energy-green economy. The challenges faced by this tripartite relationship have been discussed at many of AFED’s conventions and meetings, and will be adopted as the structure for this look back.
It has long been recognized that the cornerstone of any green economy strategy needs to address the significant portion of locally produced hydrocarbons that are consumed to meet local demand. As such, the region has embarked on an aggressive strategy to wean itself from hydrocarbons by embracing energy efficiency, demand-side management, and most importantly by deploying renewable energy. In parallel, over the past decade the cost of photovoltaic panels has dropped by more than 80 percent, which has led to regional initiatives embracing utility scale projects and some of the largest renewable power plants in the world. This year, the Kingdom of Saudi Arabia sought bids from companies to build wind and solar plants with a total capacity of 700 MW as a start to meeting their goal of generating at least 9.5 GW of renewable energy by 2030. The government of Jordan has entered into multiple agreements for solar projects with a total capacity of 1000 MW to be operational by 2018. Last November saw the award of a 176 MWp photovoltaic (PV) plant in Morocco – a new phase in the NOOR Solar program that aims to develop a total solar capacity of 2 GW by 2020. Already 165MW of electricity generated from solar energy is powering thousands of homes during the day and for three hours in the night in Morocco.
In the early part of 2017 almost every Gulf Cooperation Council (GCC) member and regional state utility (service provider in the GCC region) have announced ambitious plans for photovoltaic and concentrated solar power projects. ACWA Power is proud to have been part of kick-starting this renewable renaissance with our, at that stage, lowest ever worldwide tariff of US 5.86 cents for the Mohammed bin Rashid Phase II 200 MW photovoltaic plant. The plant was successfully commissioned two weeks ahead of schedule in March 2017 and is now supplying electricity to 50,000 homes in Dubai and reducing carbon emissions by 214,000 tons per year. Subsequent bids for utility scale photovoltaics have dropped still further which, coupled with the speed of installation as compared to fossil fuel power plants, makes the technology very viable and attractive.
The coming years will see a large-scale rollout of renewable power plants that will be supplying power around the clock using thermal and battery storage, making them base load plants. Battery technology, for the storage of electricity produced during the day and for delivery at night, is reaching an inflection point with its cost dropping and capacity increasing. ACWA Power is including the option for battery storage into current and future utility scale photovoltaic project proposals. In addition, desalination of water will be increasingly supplied using renewable power and hybrid technologies. The combination of both cheaper renewables and cheaper storage combined with the region’s abundant solar potential (the majority of days per year are cloud free with high solar insolence in combination with available land in close proximity to existing transmission networks) is enabling a reduction on the dependence on fossil fuels as a base load.
The benefits of harnessing renewable energy to soften the water-power-development entanglement is now a foregone conclusion. These material changes in the affordability, maturation and demonstration of renewables’ central role in providing energy and water to the region are the greatest paradigm shift since 2007.
ACWA Power has been a strong advocate for consumers paying the full cost, or as close to it as possible, for the power and water they use without the support of subsidies. Over the past decade, all regional governments and state utilities have implemented pricing structures that have incentivized users, via slab pricing, to avoid excessive consumption. These policies have avoided rampant wastage of precious non-renewable resources, contributed to moderating investments and the need for new infrastructure and so reduced the carbon intensity of national economies. The strategic importance of demand-side management is now engrained into growth strategies. In parallel with these successful economic instruments, the region’s growth and demand for power and water is still strong and growing rapidly to keep up with social economic development.
Finding funding for major developmental projects has been a bumpy road over the past decade, with some periods seeing liquidity and availability of financing while others have seen dramatic and acute reductions and increased risk aversion by funders. At the same time, local and international funding has increasingly embraced the Equator Principles as a benchmark for environmentally and social responsible lending. Nearly 80 financial institutions that have arranged around 80 percent of global project finance lending have adopted the Equator Principles. The principles set standards for environmental and social sustainability to ensure environmental and socials risks of any project are assessed and managed. ACWA Power has always ensured that the company’s projects and assets comply with the World Bank and International Finance Corporation’s Environmental and Social Performance Standards. These standards set by the global financial institutions are pushing the region and the supply chain to meet common international standards through financing projects. In addition, in recent years these standards have been included as a minimum requirement in requests for proposals from national utilities. This gradual maturation of environmental and social performance is another notable change that is welcomed as it has win-win benefits for all parties and stakeholders.
The final significant change has been the rise in the maturation of environmental and social reporting by public and private organizations. This change has been spurred by a combination of factors including organizations’ strategies to become the “best in class” environmentally and socially, subtle pressure from central governments and the support and encouragement of regional non-governmental organizations (NGOs). NGOs such as AFED continually emphasize the benefits of corporate social responsibility while simultaneously developing grassroots support and understanding. In parallel, there are several regional award schemes focusing on corporate social sustainability reporting and performance, which have become highly sought-after. The Global Reporting Initiative (GRI) standard for corporate reporting is commonly accepted as the good practice whereas in the past it was considered the standard. Reviewing international databases of regional corporate social reports demonstrates the evolution of corporate reporting which could only have come about by changes in corporate strategies and leadership. Sustainability reports of the sector’s leaders now routinely include independent assurance statements as is common in Europe, which supports local and international stakeholders’ requests for transparency. Overall, the development both in technical depth and breadth of adoption of corporate social reporting is an area to be watched for the future.
Looking back, it seems hard to believe that ten years have passed so quickly as ACWA Power and the region have both grown and changed tremendously. The continued reduction in the carbon intensity of power supply coupled with the increases in efficiency of consumption and a focus on responsible corporate behavior all bode well for a sustainable and successful regional green economy. Looking to the future I would expect the successes achieved by the sector’s leaders and by multinational corporations to be adopted by the next tier and wave of entrepreneurs in order to take us even further, and to push the leaders to stay at the forefront of development.
Paddy Padmanathan is CEO and President at, ACWA Power International

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