The World's Greenest City Takes Shape

Often overshadowed by construction-happy Dubai, its extravagant, cosmopolitan and pretentious cousin, Abu Dhabi is a laid-back Persian Gulf city with ambitions of its own: to reinvent itself as a center for clean energy, an unlikely goal for a place fueled by petrodollars.

Abu Dhabi is, after all, the capital of the United Arab Emirates (UAE), the world’s third-largest oil exporter. But with the crude predicted to run dry sometime in the 22nd-century, this prosperous Arab fishing port-turned-oil hub has begun focusing on its other bountiful natural resource: the sun's rays.

The UAE last year broke ground on solar-powered Masdar City, a desert oasis of green technology. Located in a stretch of sun-baked sand near Abu Dhabi International Airport, the 4-square-mile planned community has the goal of becoming a carbon neutral, zero waste mini-municipality. Once completed, the nearly self-contained town will be able to sustain up to 50,000 residents and 1,500 businesses in its role as a center for academic and corporate research on renewable technologies.

With the backing of some global heavyweights, the monumental undertaking is definitely in reach: BNP Paribas (EPA: BNP) is acting in as the project's financial advisor; the city is being designed by high-profile British architects Foster and Partners—the minds behind large-scale, cutting-edge public works projects including Hong Kong's Chep Lap Kok Airport, London's City Hall, the Bilbao Metro, a rapid transit system in the largest city in the Basque Country of northern Spain, and the Millau Viaduct in France, the highest vehicular bridge in the world; and WWF International (known in North America as the World Wildlife Fund), is monitoring the project to ensure it meets sustainability standards.

The community, which is being constructed on the traditional principals of a walled city, will be filled with examples of energy-saving technology. Tall buildings will act as a buffer to divert scorching desert winds and reduce airport noise. Its narrow streets will by shaded by canopies made of photovoltaic panels, which will capture the sun's energy and help minimize need for air conditioning. Automobiles will be banned, with public transport being provided by a battery-powered rapid transit system. The arid town's thirst will be quenched by water from a state-of-the-art solar-powered seawater-desalinization facility. Fruits and vegetables will be grown in nearby greenhouses. And all waste will be recycled through composting or other means.

Significant progress has already been made. With the help of the American PV Module manufacturer First Solar (NASDAQ: FSLR) and China’s Suntech Power (NYSE: STP), Masdar City has completed and connected to the grid its $50 million 10-megawatt (MW) Solar Power Plant, which will provide energy for the first phase of the city's construction. And the government-run Abu Dhabi Future Energy Company (ADFEC) recently signed a agreement to purchase three thin-film solar-panel manufacturing plants from Santa Clara, California-based Applied Materials (NASDAQ: AMAT) for $2 billion (some of the produced PV panels will be used to power Masdar City; others will be sold in Europe).

A key part of the UAE's ongoing efforts to cut carbon emissions and goal of reaching a 7% renewable energy target by 2020, Masdar City is scheduled to be completed by 2016. Investors should keep a close watch on companies involved in its planning, infrastructure and construction.