Clean Power dubai sunrise

Published on November 29th, 2014 | by Anand Upadhyay

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Dubai Shatters Solar Price Records Worldwide — Lowest Ever!

November 29th, 2014 by  

What a year this has turned out to be. To be honest, everyone expected solar to grow at a “good” pace. But the sector has outdone most expectations — taking the fight to the fossil camp at every possible chance.

Here’s a quick recap before we delve into the big news. The year started with Recurrent Energy signing up a deal to sell solar electricity for 5 cents/kWh in Austin, Texas, without any support from the state. Even after accounting for the federal tax credit, the actual price would have been just about 7 cents/kWh. Later this year, in just a few weeks from each other, India and then Brazil announced low-cost solar power — within a band of 8–10.3 cents/kWh. This was without any subsidy whatsoever.

It’s hardly been a month since the previous announcements, so how much south would you think the solar prices would go? Well, the exact number is 5.98 cents/kWh, and the venue for this magic is Dubai. Without any “government support.”

The unsubsidised prices (that’s a plural, for there is more than one) bid in a commercial setting go on to show that the time has come for rapid expansion of solar in the Middle East.

dubai sunrise

Sun rises on Dubai

The state utility company of Dubai, the Dubai Electricity & Water Authority (DEWA), had opened a tender for a 100 MW solar power plant for the second phase of the Mohammed bin Rashid Al Maktoum Solar Park early this year. The park is located on a patch of 40 square kilometers of land just south of Dubai. While the solar park had come alive with a 13 MW solar PV plant back in 2013, its ultimate goal is to grow up to a gigantic 1,000 MW solar park by the summer of 2017.

DEWA had called on solar project developers to submit their bids for a fixed tariff over a 25-year period under a Build-Own-Operate (BOO) model. This was a much-awaited opportunity for local players who were missing out on solar action due to delays in the mega Saudi plans to deploy solar power. Of the 24 solar developers who started, only 10 remained till the final round of the bidding.

Riyadh-based Acwa Power (owned by eight Saudi conglomerates) bid a record low tariff of just 5.98 cents/kWh. To get an idea about how aggressive this is, consider that the average of the 10 finalists’ bids was 9.35 cents/kWh, with the highest bidder being the Chinese Huaneng Power International at 14.71 cents/kWh.

In the runner-up position is a consortium of Spanish developer Fotowatio Renewables and Saudi Abdul Latif Jameel Energy, bidding at 6.13 cents/kWh. That is even lower than the previous lowest solar tariffs!

SunEdison and First Solar, perhaps betting on their successful Indian and Brazilian experience, hovered around 8–9 cents/kWh. You can read the complete bid results at this link. It is quite interesting to compare the bids on the basis of tracking technology they had offered. The lowest bid proposed to use a simple fixed system.

Dr. Moritz Borgmann Partner at Apricum Group shares that Acwa Power did not just stop at bidding for the 100 MW project which was up for grabs. But it also provided alternative bids in which it proposed to immediately build the complete 1,000 MW at a tariff of 5.4 cents/kWh! That’s more than a 10% discount on the price they had bid for the 100 MW solar plant — again, the lowest solar bid in the world. Perhaps black friday came to Dubai a week too early! 😀

One more amusing detail comes up if you take a look at the solar panels the bidders have mentioned. First Solar’s name pops out at two places. Not only is First Solar one of the project bidders, but it also seems that Acwa Power will be using First Solar’s panels. That should be something to cheer the company up.

Renewables International makes an intriguing comparison between solar electricity prices in Germany (~10.85 cents/kWh) and in Dubai. As per NREL data, the insolation in Dubai is a little more than twice that in Berlin. So, on the basis of German prices, the prices in Dubai would be around 5.4 cents/kWh. Exactly what Acwa power has proposed if it would be allowed to build the complete 1,000 MW solar park!

Of course, this is too simplistic a comparison. Being located in a desert environment, the efficiency of the panels would be reduced by both the dust as well as the higher operating temperature. Regular cleaning of the PV modules can only add to the cost.

Dr. Borgmann also informs that low-cost financing has been a key ingredient to keep the tariffs low. In the politically stable environment of Dubai, project developers have been rumoured to secure loans at a margin of 175 bps over LIBOR, on a floating rate basis. Assuming 300 bps for the hedge to fix the interest rate, this would probably mean a 5% fixed-rate cost of debt, give or take.

With the spotlight turned on Dubai for good, this is sure to heat things up in its neighbourhood as well. We are looking at you, Riyadh.

Image: Dubai sunrise via Shutterstock

 
 
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About the Author

is an Associate Fellow with The Energy and Resources Institute (TERI, New Delhi) - an independent, not-for-profit research institute focused on energy, environment, and sustainable development. Anand follows the Indian solar market at @indiasolarpost. He also writes at SolarMarket.IN. Views and opinion if any, are his own.



  • Bob_Wallace

    Anand, could you recheck the non-subsidized cost for Austin and New Mexico?

    If the projects were using production tax credits to lower the selling price then the spread between subsidized and non-subsidized costs may be less.

    The PTC (Production Tax Credit) system gives a 2.3 cent per kWh tax credit for only the first 10 years of production. Most PPAs (Power Purchase Agreements) last 20 years. Some 25.

    That means that the seller won’t receive a full 2.3 cents over the life of the contract and the PTC would lower the selling price, on average, by 1.15 cents, not 2.3 cents.

    If the subsidized cost in the Austin case has been incorrectly calculated then the pink bar amount should be about the same as the Dubai price.

  • sintheticreality2

    Home use, yes.

    • Tom G.

      I once sold solar PV systems and just looking for the best price on panels might not be the best way to start. First think about how much of your electric bill you want to zero out. Zeroing out 100% of your bill is not necessarily the best approach for the following reasons and many more.

      1. As you replace your appliances over the years your electricity demand will decrease. If you installed a 8 kW
      DC system in just 2 or 3 years that system might be too large. Most utilities do NOT pay you well for any excess electricity you generate. In fact they might even charge you a penalty if you generate too much electricity depending on your utility.

      2. First take a look at how many kWh’s of electricity you used from December of 2013 through December 2014. This is your annual energy consumption. This tells you the total amount of electricity or solar you would need to zero out your bill. Without these numbers you are just guessing.

      3. Consider other things like, will this system be grid tied or off grid? Do you have kids at home that will be off to college soon because when they leave energy consumption goes down. Do you intend to do any major remodeling in the next year or two. For example, new dual pane, low E argon filled windows. Is there enough insulation in your attic. If its less than about R-45 [about 12″ deep]; adding some extra insulation will cause your furnace blower motors which use electricity to run less which means you will consume less electricity. Its all sort of related and any salesperson worth their salary should be talking to you in this manner.

      All of these thing help determine what size system you will need. I sincerely recommend you get a couple of free estimates before you do much of anything. A good salesperson should be asking these types of questions. Even if you someday intend to do the work yourself, just answering the these questions will be a good learning experience and well worth the cost which free estimates are – free, LOL.

      Its not really all that complicated. It basically boils down to energy used – energy produced. Really about that simple.

      Good luck and have a great day.

  • sintheticreality2

    What’s the cheapest site to buy solar panels from in the southwestern US?

    • Bob_Wallace

      Check this site for lowest price..

      http://www.ecobusinesslinks.com/surveys/free-solar-panel-price-survey/

      This company also has excellent prices from time to time.

      http://sunelec.com/

      Neither are in the SW but might be worth paying shipping. At least would give you some comparison numbers.

      If you’re looking for an installer try Yelp. Some people have started rating companies there.

      • sintheticreality2

        Man, some solar retailer needs to develop a consumer-friendly site that just says “are you looking for a system for a small, medium or large home? It seems like right now all of these sites are targeted at enthusiasts that understand the nuances of the terminology.

        • Bob_Wallace

          There might be an income opportunity for someone who wanted to set up a website that lets people ask for bids.

          Put up your address, how much electricity you use a month, check a few boxes about type of roof, trees, that sort of stuff.

          Receive bids.

          Web site connects parties. Only accepts bids from licensed installers. Gives customers a way to report on their experience so that future customers could avoid problems.

  • Will E

    why not install the 1000 megawatt at once.
    and the next 1000 megawatt next year , and so on
    Lots of dollars from the sun. no promblems fast and easy.
    solar is business

  • Jenny Sommer

    Iran could just do that…They’d probably even get payed for dropping that nuclear thing and installing some GW of PV.

    • Martin Lindh

      Would not this be a nice deal.

      US, EU and China gets together and decides to invest in 10 GW of solar in Iran in exchange for them dropping the nuclear program and accepting peace with Israel.

      • Jenny Sommer

        Make it 30GW 5.0c/kWh and throw in some flow batteries for free…

      • Tom G.

        Hi Martin:

        You plan sounds good to me but then again I happen to be a hopeless optimists, LOL. It is my guess and of course just a guessl that Iran’s nuclear program is NOT really about electricity. There seems to be a national pride thing and nuclear power thing at work here.

        Something like – They will do this one way or the other regardless of what the international community wants.

        But you are totally right. It would be nice if something as simple as providing some solar would do the trick. I hate to even think about the Middle East going up in a mushroom cloud someday.

  • JamesWimberley

    Sand is a key point in all the MENA region. It must drive up the maintenance costs of trackers quite a lot. SFIK New World deserts are nowhere near as sandy.

  • Thanks. That’s an awesome link! very informative.

  • Michael G

    About Dubai’s insolation – something that makes for a good conversation starter.

    Algiers and Fresno, CA are at 36′ 40″, Miami, FL (25′ 46″) is only one degree north of Riyadh, Saudi Arabia (24′ 38″)

    The US South West should be one of the solar capitals of the world. Once the Neanderthals get out of the way it will be.

    Actually, calling these politicos “Neanderthals” is insulting and I take it back. Neanderthals were an intelligent, caring, group of people who adapted to their environment. I regret the insult to Neanderthals everywhere.

    • Doug Cutler

      Apology accepted. 3% Neanderthal here.

    • Larmion

      Latitude is just one factor in solar resources. Miami is rather wet and often cloudy, unlike Riyadh or Algiers. As such, its resources are significantly worse.

      That being said, it’s still more than good enough to make solar cost-effective 🙂

      • Calamity_Jean

        OTOH, the rain in Miami makes washing the solar panels unnecessisary.

  • Bob_Wallace

    “the efficiency of the panels would be reduced by both the dust as well as the higher operating temperature”

    What about insolation differences?

    • Dubai has an average insolation of 6.5 kWh/day (or was it 6, you can check it on NREL PV Watts), Berlin is about 3. So Dubai is double that of Berlin.
      Were you asking something else?

      • Bob_Wallace

        I was mostly looking at the first three bars. All places which would be expected to have low labor costs.

        • Oh!

          Mehboobnagar in Andhra location for the proposed mega solar park has insolation of 5.92, Dubai is 6.52 while Brazil has a huge amount of area which receives 6+

          • Bob_Wallace

            Thanks. I think that’s telling us that the price difference is not solar resource related but mostly due to prices which continue to fall.

          • not to forget those super cheap loans they could manage !

  • JamesWimberley

    It looks as if the criterion was simply cost per kw/hr. A more sophisticated tariff would pay more for early morning and late afternoon power, which would favour tracking. Cf. various proposals to incentivise E and W-facing rooftop installations. Howver, in Dubai the peak is quite likely to be midday air-conditioning, which tracks the production curve of fixed S installation quite well.

    • Hmm.. interesting. I know for sure that tracking helps to increase output by as much as 30% in rooftop scale (~few kWs range). And the building block of tracking is essentially an electric motor. So even though tracking would increase outputs at larger scale, I think its O&M would become a nightmare! Electric motors have been infamous across industry for their reliability.
      But yes, you make a valid point. One will have to look at hard numbers.

      • Larmion

        Single axis tracking systems have an excellent track record in terms of reliability. Electric motors are quite simple and fail rarely and the added stress from single axis rotations are minimal. It’s only when you use highly complicated dual axis trackers that costs start to explode.

        I’d be interested to know in what industry electric motors are infamous. I’ve always heard the opposite: the thing the motor drives tends to fail long before the motor itself (the same thing applies to other simple engines like the Stirling engine as well btw).

        • Really? I have heard that spoken quite often in process industries, here is a link I could find on solar trackers- http://www.renewableenergyworld.com/rea/news/article/2013/06/on-track-to-succeed-with-solar-tracking-systems

          • Larmion

            Thank you for backing me up. Quoting from your link:

            “According to Dailey, during the FiT boom in Europe many projects utilised dual-axis trackers with poor reliability, which led to high O&M costs. Sometimes these systems can have compounding or cascading failure modes, which can be difficult to troubleshoot and require heavy equipment to repair, he says. Shaio notes that, as recently as even just a few years ago, the only people willing to use trackers were those that were also willing to take on a lot more risk. However, trackers are starting to become the norm, especially in places with high solar insolation.”

            “”The issue with dual axis at this point is basically that the added generation from upgrading from single to dual-axis doesn’t economically pan out in terms of the extra materials and costs,” says Shaio. “There are certainly players in the market that are still doing dual axis – AllEarth Renewables has one – and most CPV companies still in the game are typically using dual-axis tracking, but single-axis are more preferred.”

            Single axis systems are extremely simple and have excellent reliability.

          • Not sure what part of that article said “Single axis systems are extremely simple and have excellent reliability.” 😀 Unless of course you were going to submit a link.

            The article, under “reliability concerns” sub-heading simply says that “trackers are starting to become the norm” and makes a general observation that “anywhere with high irradiation, you’re definitely going to think about and consider trackers”.

            Anyway let us for once consider that single axis trackers are reliable, how many MWs worth of plant do we have that use them? I would really like to have some information on that, if you can share. Thanks.

          • jeffhre

            “Heavvy equipment to repair,” LOL, gosh that’s terrible! Well in that case, single axis it is 🙂

  • Steve Grinwis

    Everything about this puts a smile on my face.

    • Philip W

      On mine, too!

    • Mine too. 😀 One of the biggest cleantech stories of the year, imho.

      • Tom G.

        Amen to that.

        I just knew the day would come when solar would rule. I mean really; what could be better than an almost endless supply of nuclear energy 93 million miles away that man can’t screw up. Sounds almost perfect to me.

        • Will E

          What is the Solar radiation index in Dubai.
          in the Netherlands 1 on 1.
          1 kw installed 1 kw produced.
          I bet in Dubai the index is 1 to 4.
          1 kw installed 4 kw produced.

          • I think you are talking about energy production. 1kW solar panels would produce about 6.5 kWh in Dubai.

  • Larmion

    It’s of course possible that ACWA is willing to accept losses to build its market presence in the region – a strategy that the giant Gulf (semi) state corporations have followed before in other sectors. Even so, cheap renewables are always something to be cheerful about 🙂

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