Tuesday, January 13, 2009

Gulf States Taking Lead on Clean Energy?

There's a nice piece in the New York Times today about the Middle East and their desire to diversify into the world's clean energy leader. Some highlights from that article:

So even as President-elect Barack Obama talks about promoting green jobs as America’s route out of recession, gulf states, including the emirates, Qatar and Saudi Arabia, are making a concerted push to become the Silicon Valley of alternative energy.

They are aggressively pouring billions of dollars made in the oil fields into new green technologies. They are establishing billion-dollar clean-technology investment funds. And they are putting millions of dollars behind research projects at universities from California to Boston to London, and setting up green research parks at home.

“Abu Dhabi is an oil-exporting country, and we want to become an energy-exporting country, and to do that we need to excel at the newer forms of energy,” said Khaled Awad, a director of Masdar, a futuristic zero-carbon city and a research park that has an affiliation with the Massachusetts Institute of Technology, that is rising from the desert on the outskirts of Abu Dhabi.

“The leadership in these breakthrough technologies is a title the U.S. can lose easily,” said Peter Barker-Homek, chief executive of Taqa, Abu Dhabi’s national energy company. “Here we have low taxes, a young population, accessibility to the world, abundant natural resources and willingness to invest in the seed capital.”


This is intriguing to me. I've been interested in investment opportunities in "frontier markets" such as the Middle East. Although these markets have basically been an oil trade in the past, its good to see that they are using their massive wealth to diversify into alternative energy. I'm not positive that they will take the lead, but competition in this space, or any space for that matter, will lead to cheaper prices, which is a positive. High cost has been one of the biggest detractors from the clean energy movement.

The Gulf States do have some advantages. They have a lot of cash from oil operations. They are centrally located to provide products and services to both Europe and Asia. Plus, areas like Dubai have been growing into major business centers, so the transition should be natural. Solar power seems like the obvious choice to start, but I'm sure they will look into many others as well.

There is no real way to invest in this trend yet. There are some funds that track this region (GAF, GULF, TRAMX), but are mostly tied to banks and construction companies, and actually trade based on oil prices. These are long term investments, but overall, this is a region gaining in wealth and influence, and seeing diversification amongst their economy is a positive.

Disclosure: Author owns TRAMX

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