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(Jan 14): The United Arab Emirates is planning a US$6 billion (RM27.03 billion) mega solar and battery project to provide uninterrupted power supply as it targets a rapid boost in clean energy.

Abu Dhabi’s state-controlled Masdar will build 5.2GW of new solar capacity, chief operating officer Abdulaziz Alobaidli said. It will be linked to battery storage that would make the total project one of the world’s largest such facilities when completed by 2027.

The project is seeking to tackle a critical problem for renewable energy, where supply can be unreliable during periods of heavy demand because of its dependence on the sun shining and wind blowing. Companies have been trying to resolve the problem by using batteries to store the power that can be fed into power grids when required.

The facility will “transform renewable energy into baseload energy,” said Masdar Chairman Sultan Al Jaber, who is also CEO of Abu Dhabi National Oil Co. “It is a first step that could become a giant leap.”

The UAE, the first Gulf state to declare a target to reach net zero carbon emissions by 2050, is building solar facilities and is operating nuclear reactors to cut reliance on hydrocarbons for power. It is looking to add more solar facilities and battery storage sites as the oil-rich nation targets more carbon emissions-free electricity.

The project, which will be built over an area of 90 sq km in the Abu Dhabi desert, will be financed by a mix of debt and equity, Masdar’s Alobaidli said. State utility Emirates Water and Electricity Co will also be involved, Al Jaber said.

Masdar is targeting battery storage of 19GWh for the facility, the chairman said. Arevia Power and Quinbrook’s Gemini solar energy storage project in Nevada in the US, which has 1.4GWh of storage capacity, is currently the world’s biggest solar and battery project, according to BloombergNEF.

“This is an ambitious plan, and depending on when it is built, it may be the world’s largest solar and storage project at that time,” BNEF analyst Jenny Chase said.

Other countries in the Gulf are also following similar paths. Saudi Arabia, the world’s biggest oil exporter, is building solar and wind projects as it aims for a bigger share of renewables in its power grid. Still, crude oil remains the backbone of the economy of most of these nations.

Source: Theedgemarkets

The Bloomberg Dollar Spot Index slid as much as 0.4%, while the 10-year yield slipped three basis points to 4.75% after a report showed Trump’s economic advisors are discussing a slow and steady approach to tariffs rather than a large one-time increase. Such gradual restrictions could weigh on the dollar as they would slow inflationary pressure and potentially give more breathing room for the Federal Reserve to reduce interest rates.

The pullback in the dollar gauge followed five days of gains that drove it to a two-year high on Monday (Jan 13). The drop was its biggest since Jan 6, when the greenback fell following a Washington Post story that claimed Trump was planning to pare back tariff plans. The president-elect denied that story in a post on Truth Social.

“Dollar weakness can be sustained unless President Trump denies the reporting like he did in reaction to the report by the Washington Post,” said Carol Kong, a strategist at Commonwealth Bank of Australia.

Risk-sensitive currencies like the Australian and kiwi dollars jumped against the greenback, pointing to a sense of relief that a large tariff shock may be avoided. China’s offshore yuan, a prime selling target for traders betting on US tariffs, initially edged higher after the report.

The dollar’s drop underscores the key role tariffs play in swaying sentiment across the US$7.5 trillion-a-day foreign-exchange market. But the move may prove temporary: Most Wall Street banks expect the greenback to strengthen following an 8% rise in 2024, and blowout employment numbers last week have raised further questions about the pace of potential rate cuts.

A reading of producer prices later in the day will offer more clues into US price risks. Economists expect wholesale prices to rise on a monthly and yearly basis, according to a Bloomberg poll, which could support the dollar and keep upward pressure on US yields.

Goldman Sachs Group Inc sees potential for the dollar to climb 5% or more this year. Speculative traders including hedge funds and asset managers are more bullish on the greenback than they have been since 2019, according to Commodity Futures Trading Commission data compiled by Bloomberg for the week ended Jan 7.

“You can’t chase this thing, as a denial will be coming soon,” Win Thin, global head of currency strategy at Brown Brothers Harriman & Co in New York, said of the recent headlines. “Look through the noise and rest assured the dollar rally will continue on the US economic outperformance alone.”

Even those predicting that the greenback will lose steam think the decline may be some way off. The dollar is somewhat overvalued but a bout of dollar weakness is likely to be “more of a second-half phenomenon,” according to Mark Haefele, chief investment officer at UBS Global Wealth Management.

Knee-jerk reaction

The South African rand, South Korean Won and Taiwanese dollar led emerging market currencies higher on Tuesday. That pared losses since the start of the year, as investors shunned riskier assets in the face of the incoming Trump administration.

“The tariff headlines are positive for Asia FX as it suggests a less draconian approach, but at the moment it’s still headlines,“ said Eddie Cheung, a senior emerging-markets strategist at Credit Agricole CIB in Hong Kong. “While the knee-jerk reaction is positive, I think markets will still want a bit more confirmation.”

Source: Theedgemarkets

Source: Reuters