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The Dawn of Solar

The Middle East is now leading the world when it comes to the development of solar power. Jason O’Connell reports.

A number of significant recent events confirm that the Middle East has welcomed a new age of solar power and is playing a leading role globally in pushing a technology that will be vital in taking the fight to climate change.

Last month Sheikh Mohammed bin Rashid al Maktoum, prime minister of the UAE and ruler of Dubai inaugurated the 200MW phase 2 of Dubai Electricity and Water Authority’s Solar Park – known as Shuaa Energy 1.

When DEWA signed a deal with Saudi-based ACWA Power in January 2015 for the development of the project, it shattered the world record for the lowest cost of solar power. But that was just the start of what is expected to eventually become home to a giant solar installation boasting a grand total of 5,000MW of power production capacity by 2050.

A consortium-led by Abu Dhabi Future Energy Group (Masdar) is developing the 800MW Phase 3 of the solar park which lowered the Levelised Cost of Electricity (lcoe) even further to another new world record of just $2.99 cents per kWh. The deal proved attractive enough to entice global energy giant EDF to buy in to the project last month, taking over the stake previously owned by Abdul Latif Jameel’s solar subsidiary FRV.

Phase 3 will be developed in three stages. The 200MW Phase A is currently under construction and is due for completion by April next year. The 300MW Phase B is expected to come on stream in April 2019, while the final 300MW tranche, Phase C, is scheduled for April 2020.

Future phases off the Dubai Solar park will also include some capacity of Concentrated Solar Power (CSP), a technology that has the advantage of being capable of generating electricity after the sun goes down, due to heat stored in molten salt. A consortium of KPMG (Financial), Mott MacDonald (Technical) and Ashurst (Legal) is advising DEWA on the first phase of the CSP plant which is expected to be operational by April 2021. The technology should eventually generate 1,000MW using this technology by 2030.

Game Changer

Ahmed Nada, Vice President and Region Executive in the Middle East for First Solar, the company that provided the solar photovoltaic (PV) modules for Shuaa Energy 1, says the Gulf region has made a major contribution to cutting the cost of solar power to a level where it is finally competitive with hydrocarbons, even without subsidies.

“The 200MW Shuaa Energy 1 project was the tipping point for solar, not just in the Middle East, but worldwide, when it effectively reduced the cost of solar electricity by 20% in 2015. Since then, we’ve seen mega projects bid at tariffs that are roughly half of Shuaa Energy 1, within the span of 18 months.

“Solar’s growth in the region is being driven almost entirely by economics, with the reduction in carbon emissions being a welcome byproduct. The solar PV projects we’ve seen tendered in the UAE, Saudi Arabia, Jordan, and Egypt will stand shoulder-to-shoulder with conventional power generation, helping address each country’s unique energy needs.

“In my opinion, this indicates the seriousness with which the region’s utility companies are treating solar PV. The days when solar PV was a nice-to-have are long gone – I would go so far as to say that solar PV is now essential to a robust, diversified power generation portfolio.”

There are a number of factors which contribute to the final cost of a solar power project. It starts with the cost of purchasing the equipment needed – most obviously the solar panels – but also includes the cost of paying a contractor to build the project, the cost of operation and maintenance over a 25-year period as well as the cost of financing the project.

In fact it was the availability of cheap finance in the Gulf that played a very significant role in bringing the cost of solar down in recent years. However there are signs that that could be a thing of the past and that further gains in the cost of developing solar projects could be harder to come by in the coming years.

“Tariffs are based on many factors ranging from the cost of finance and the cost of technology to the political and economic risks of developing a project in a particular country,” says Nada. “However, it appears that debt-finance, which accounts for as much as 40 percent of the Levelized Cost of Electricity of a project, is getting more expensive. What impact, if any, this will have on tariffs being bid in the region remains to be seen and will only be evident once the bids are in for the next few utility-scale tenders.”

While Dubai has led the way in the Gulf, its more oil rich neighbours appear determined they will not be left behind. China’s JinkoSolar and Marubeni Corporation of Japan are developing the 1,177 MW (DC) solar photovoltaic (PV) project at Sweihan, 120km east of Abu Dhabi. The plant will produce enough electricity to power around 200,000 homes when it is commissioned with commercial operation expected to begin in 2019. JinkoSolar and Marubeni will each hold 20 percent stakes in the consortium that will build, operate and maintain the power plant while ADWEA will own the remaining 60 percent.

Sleeping Giant

But it is Saudi Arabia that represents the biggest prize for the solar power industry in the Middle East, given the huge size of the potential market. With its bountiful crude oil reserves the kingdom has been rather slow to react to the falling price of solar and there have also been a number of false dawns.

But that appeared to change recently when in February the country released announced a tender for a 300 MW solar photovoltaic and a 400 MW wind project with a view to being operational in 2019. The tender is in line with Saudi Arabia’s ambitious Vision 2030 agenda launched in April, 2016 and the corresponding mid-term policy paper “National Transformation Program” (NTP) released in May, which specified a National Renewable Energy Program (NREP).

“After years of anticipation and several failed attempts, the tender now clearly marks the beginning of a sustainable large-scale procurement program for renewable energy in the Kingdom,” Dr. Moritz Borgmann, Partner Apricum – The Cleantech Advisory said in a recent report.

“The key enabler for the program has been the consolidation of all relevant entities under the central command of the Ministry of Energy, Industry and Mineral Resources (MEIM), headed by Khalid Al-Falih, the former CEO and now chairman of Saudi Aramco. The ministry has now set up a new entity called Renewable Energy Project Development Office (REPDO), which will be responsible for all renewable energy procurement and which directly reports to a committee under the minister.”

The first round of projects with 700 MW will be followed by two more rounds of 1,020 MW and 1,730 MW, respectively, to complete the targeted procurement of 3.45 GW of renewable energy by 2020, Apricum says. Later rounds are expected to include additional technologies, likely concentrated solar power (CSP) and waste-to-energy. As per the Saudi Vision 2030, this will be followed by further procurement to reach 9.5 GW by 2023.

Applicants can be a single bidder or a consortium, which must provide a strong track record of developing and operating both IPP projects in general and PV or wind projects specifically.

“As a result, the eligible set of bidders will most likely be limited to the largest developers and IPPs from Saudi Arabia and the region, together with select large European and Asian utilities and IPPs,” said Borgmann. “To an extent, international players with a limited footprint in the Kingdom may want to forge partnerships with local conglomerates.”

He adds: “The structure of the tender is set up such that Saudi Arabia can expect similarly attractive tariffs for delivered renewable energy as in recent landmark tenders in Dubai (DEWA) and Abu Dhabi (ADWEA).

“Apricum expects the wind tender to be of special significance, as the potential for wind in the region has been widely underestimated so far. With the rich wind resource in the country’s northwest, Apricum expects an extremely attractive tariff not only for the solar, but also for the wind part of the tender.”

Apricum says the release of the tender demonstrates a strong seriousness on the part of the Saudi government to implement the high-level targets for renewable energy released almost a year ago, and to proceed with a high degree of professionalism.

“The smooth rollout of the process is an auspicious sign for the potential of the Saudi renewable energy market, which will gratify many players who had to invest a considerable amount of patience in the market in past years.”

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