Masdar City was meant to be the world’s first carbon neutral city. Based in Abu Dhabi, its creators envisioned a glittering city in the desert, entirely self-powered, and after the initial building stage, having no net effect on the world’s carbon emissions.
But the plans have taken a major knock in the last 18 months. Lending for real estate dried up in the wake of the Dubai financial crisis, companies proved reluctant to move in to the new commercial space and the developers quickly realised their initial plans for the energy mix were too ambitious.
Earlier this month, the company confirmed it would cut up to $3.3bn from its budget after a 10-month strategy review. Last week, days after the results of the review were announced, I talked to the company’s CEO, Sultan al-Jaber, and the city’s director, Alan Frost, about their plans for the future.
Bank lending squeeze
The first and most important thing Frost told me was that there was still no bank finance at all for property in the Middle East:
The banks are not lending for real estate. We think that will change but it will take a while – we are still a couple of years away from that at least.
Instead, the city, which was supposed to be a commercial venture, is getting 60 per cent of its money from the Abu Dhabi government, which sees Masdar as an advertisement for the emirate itself and its commitment to clean energy. Sultan admitted this was not an ideal position to be in:
The ultimate goal is that it should be commercially viable – otherwise what good does it do the world?
So far, the company says only about 13 companies have decided to become tenants in the city’s commercial district, including Siemens, which announced its move last week. The goal is to have at least 800 by 2020. In fact, none of those companies are yet in the commercial sector as nothing has been built there so far. Instead, they are currently based in the “free zone”, which allows them to maintain 100 per cent foreign ownership. When they eventually make the transition they will have to have a mix of local and foreign owners.
No silver bullet
Both Sultan and Frost told me how the company’s plans for the city had changed, but Sultan insisted:
Do you think that a silver bullet solution exists to help Masdar city achieve its goals today? Obviously it does not. If it did we would have seen Masdar city developed in a number of places around the world.
So what has changed? First of all the energy supply. Having first envisioned that the city would be entirely energy self-sufficient, the company has now realised this is not possible. Frost said:
Masdar city cannot be an island. We have realised that you have to still connect to Abu Dhabi. We are more connected to the rest of Abu Dhabi and more available to share knowledge with anyone else.
But more worrying for those who hold out high hopes for the future of clean cities, Masdar is still taking some of its supply from energy produced by hydrocarbons. Although it should be pointed out that because the city is producing 2MW of power from a 10MW solar plant, and is not yet using that amount of energy, it is overall carbon-positive.
And as for the goal to have all power produced from renewable sources? Again, the mood music was not positive. This is what Frost said:
We remain committed to 100 per cent renewables but I don’t know for sure when that will happen.
This is part of a broader strategy to rebalance the Abu Dhabi economy. There is a recognition that this is a 20-year plan and it is not going to happen as quickly as originally thought.