Clean Power

Published on August 12th, 2015 | by James Ayre


Another Low-Solar-Price Record: Saudi Electric Company Lands Solar PPA Under 5¢/kWh

August 12th, 2015 by  

Solar energy prices are continuing to fall rather rapidly around the world, but especially in the Middle East, as evidenced by a new deal that will see the Saudi Electric Company develop a 50 megawatt (MW) solar energy project that already has a power purchase agreement (PPA) secured for 0.1875 Riyals ($0.049) per kilowatt-hour (kWh).

News of the completely unsubsidized project was first broken by the country’s state news agency.

Saudi Arabia flag

The solar energy project is slated to be constructed by Taqnia Energy, with cooperative development occurring between the Saudi Electric Company and the King Abdul Aziz City for Science and Technology (KACST).

Reportedly, the Saudi Electric Company and KACST will also work together to create a new solar energy research center. Taqnia Energy and KACST are currently working together on a solar desalination facility accompanied by a 40 MW capacity solar photovoltaic (PV) facility that will provide the needed electricity.

As Saudi Arabia is currently aiming to invest upwards of $109 billion into solar energy in the coming years — as a means of keeping up with growing electricity demand, and as a means of decreasing local oil use (thereby increasing exports) — it’ll be interesting to see how low future PPAs in the region can get.

Given the very high solar insolation levels that the region receives, the potential is presumably there for the 0.1875 Riyals figure to fall a fair bit more. Though, obviously, much of this depends upon other factors, such as the investment climate and the economic state of the region.

If you haven’t been keeping track of record-low solar prices, don’t worry, we have been. Here’s a rundown of some of the lowest prices we’ve seen:

→ In 2013, First Solar landed a PPA for solar power in New Mexico at 5.8 cents per kWh, or, presumably, 8.5 cents per kWh if you added in subsidies. (But let’s note that if we are adding in subsidies for solar when comparing to other sources, we should also be adding in subsidies for fossil fuels.)

→ Last year, Austin Energy announced that it had awarded a PPA to Recurrent Energy under 5 cents per kWh, or under 7.1 cents per kWh with the US federal tax credit for solar included.

→ Late last year, ACWA Power landed a contract to deliver solar power to Dubai at a record-shattering low cost of 5.84 cents/kWh. However, that record only lasted a few months….

→ In Austin, Texas, this year, Austin Energy announced that it had received solar PPA bids under 4 cents/kWh. If you included subsidies (the US federal tax credit for solar), that would still presumably be under 5.71 cents/kWh.

→ Also this year, NV Energy signed a solar PPA at an initially stunning low price of $0.0387/kWh, or 5.53 cents/kWh after accounting for the US federal tax credit. Though, that PPA came with a price escalator, so the average price across the life of the PPA will be a bit higher.

→ Now we’ve got this contract, unsubsidized, for $0.049 per kilowatt-hour! Wow!

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About the Author

's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.

  • brucelee

    Clean energy & Ethical Practices (should) go hand in hand.

    I would like to see some commentary/report on Saudi migrant labour usage to achieve these low rates, and some feedback/critique on the Saudis to improve working conditions.

  • Ronald Brakels

    Not sure what you mean by the difference between the AC and DC rating, Brian. I’m pretty sure that Power Purchase Agreements would only be for the AC output (unless they were made by Thomas Edison). And I would only expect inverter losses of a few percent from utility scale equipment. Of course, there are solar farms that throw away a good portion of of their DC generation since they are inverter limited such as the last large one that was built in Australia. This was because low and decreasing electricity prices in the middle of the day meant it was cheaper to let some electricity go to waste at that time than to pay for more inverter capacity. It does give the single axis tracking solar farm a much smoother output though, with a smaller difference between sunny and overcast days.

    • Brian

      Yeah, the actual energy output is AC, but when someone says they are building a 100 MW solar plant, that can mean 100 MW worth of panels (DC rating) or 100 MW of actual output (AC). I don’t know the exact number, but I think it might be roughly 125 MW (DC) of panels in a 100 MW (AC) plant. You have losses due to fouling, panel temperature rise, wiring losses, and inverter losses. It might also be economical to slightly undersize the inverter. The losses are small individually, but stack to something significant.

      In the context of my post, it was important, because capital costs are often expressed as $/W (DC) by the module makers (because it’s smaller), but the energy yield I gave was based on the AC rating.

      • Ronald Brakels

        I see what you’re getting at. And I find that generally when ever anyone says they are building a solar farm they give the total PV capacity and that will always be inverter limited to some extent. As solar penetration increases we will see more tracking, which is now apparently used on more than half of installations in the US, and more inverter limiting since prices will be low in the middle of the day, but inverter limited tracking solar farms won’t see their output fall as much on cloudy days or in the early morning or late afternoon when electricity prices are higher.

  • Jacob

    When will the Saudis stop giving away electrons for 1c/kWh.

    • Ronald Brakels

      One would think the 3.2% of GDP that is used to subsidise electricity would soon be reduced given their growing population and Wile E. Coyote oil production. However, the encheapening electricity thanks to the decreasing cost of solar and potentially other renewable technologies may decrease the incentive to do something about electricity subsidies.

      • Jacob

        Solar will not crash to 1c/kWh.

        And there is still a distribution cost.

        I have read in The Atlantic, great long story about energy in KSA, that some people there leave their air con on even when they are away on vacation!

        • Ronald Brakels

          Decreasing the pressure on politicians to do something about subsidies for electrcity it is not the same thing as 1 cent a kilowatt-hour electricity. And I think big residential users of electricity pay about 5 cents or so a kilowatt-hour. It’s only the first 2,000 or so kilowatt-hours that are only about 1 cent.

  • vensonata

    Might surprise everybody to find out the sunniest place on the planet is Yuma Arizona. The only place with more than 4000 hours of sunshine per year. Even Saudi Arabia can’t beat that. But they are hotter, which actually reduces the efficiency of PV. If we can find a real sunny place with cold temperatures then Bob’s your Uncle. In fact high altitude mountain might be the winner.

    • Foersom

      Or PV floating on a lake. Look up Ciel-et-Terre.

  • JamesWimberley

    The ACWA plant in Dubai reportedly relied on quasi-governmental funding at 4%. The new one is probably the same. This isn’t necessarily a subsidy – SA has huge negative debt, and 4% probably looks a decent return compared to other safe investments like US or German government bonds.

  • vensonata

    What I need to hear is the cost per watt installed. Then I can reverse engineer that to 5cents kwh. And can finally pin down what people who actually make money from this stuff actually think these two critical numbers are. I am suspicious of $1 watt = 6 cents kwh which the DOE uses as a formula. It seems pessimistic. When you consider that purely mathematically, without any financing thrown in, $1 watt produces electricity at 2.5 cents kwh in sunny climate….and that is actually pessimistic! That is limiting the lifespan to 30 years and production to 1500kwh per year per kw installed. So how does 2.5 cents kwh become 6cents kwh? Is money really that expensive?

    • Bob_Wallace

      25% CF (avg 6 solar hours per day)
      3% financing for 20 years
      20 year lifespan
      3.1c/kWh plus a bit less than 1c/kWh opex.

      $1/watt in a sunny place with lowish cost financing should produce 4c/kWh electricity.

      Bring the CF down to 18.75% (US median) and the price moves up to 5c/kWh.

      Double the financing rate to 6%, keep the 18.75% CF and there’s your 6c/kWh.

      Keep the 6% and 18.75% but stretch the financing years to 30 and the price drops to about 5.5c/kWh.

      • thìs ís tips on how to fìll your bank-account with added funds weekly; check for more ìnformatíon ìn my profile

    • Jacob

      KSA is quite dusty.

      The panels would need to be cleaned very often.

      • Ronald Brakels

        Or they could just install extra panels to make up for the losses caused by dust as I suggest doing here. Mind you, labour costs are lower in Saudi Arabia than where I am, which is the other SA, (no, not South Africa, the other one no one knows about) so they might give them a clean now and then rather than only after duststorms. The cost of water would be a consideration though.

        • Bob_Wallace

          There are robotic solar panel cleaning systems which use very little water.

          • Ronald Brakels

            Those systems blow. Or use water, either one.

          • Bob_Wallace

            I thought they sucked….

          • Ronald Brakels

            Oh yeah, the recyling ones would suck the water back in for reuse.

          • Bob_Wallace

            Spit and suck.

        • Jacob

          You can put your location on your Disqus profile.

          I am about to specify my location also.

          We should all use the terms KSA or RSA instead of SA!

          The water required to clean solar panels can come from the humidity in the air. Israel has developed air to water machines.

          Just make water while the sun is up, store it in a tank and use it to clean the panels.

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