1.35 Cents/kWh: Record Abu Dhabi Solar Bid Is A Sober Reminder To Upbeat Fossil Fuel Pundits

Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!

Originally published on opportunity:energy.

Image courtesy Abu Dhabi Power Corporation.

A rather meaningful piece of energy news went almost unnoticed in recent weeks. The Abu Dhabi Power Corporation announced the lowest tariff for solar energy in the world. The new record came as the winning bid for the upcoming 2 gigawatt (GW) solar power plant, the Al Dhafra Solar PV project, set the world’s most cost-competitive tariff for solar PV energy, at USD 1.35 cents/kWh (AED 4.97 fils/kWh in local currency). This is approximately 44% lower than the tariff set just three years ago for the “Noor Abu Dhabi” project – Abu Dhabi’s first large-scale solar 1.2GW PV project and a world record tariff-setter at the time — which commenced its commercial operation back in April 2019.

Chip in a few dollars a month to help support independent cleantech coverage that helps to accelerate the cleantech revolution!

The gigantic photovoltaic power plant is scheduled to come online in mid-2022. Expected to cover an area of 20 square kilometers, it will almost triple Abu Dhabi’s solar power generation capacity to 3.2 GW and help the Emirate state achieve its 2030 goal to reduce carbon intensity by 70% compared to 2015. This single addition could on its own supply almost 3% of the entire United Arab Emirates annual electricity demand (~127 TWh in 2018). The Al Dhafra and Noor projects firmly position Abu Dhabi among the leading regions of the world for solar power adoption and price benchmark. To better appreciate the competitiveness of this bid, it’s worth noting that even old and fully depreciated coal power plants have LCOE values of around USD 3.3 cents/kWh (see Lazard’s Levelized Cost of Energy 2019). That means the cost of electricity from this new solar power plant is dramatically cheaper than the cost of electricity from a long-established, running coal power plant.

But why would this piece of news matter? Surely, this is a geographical exception, a sunny oasis in a world otherwise dominated by cheap fossil fuels, a result that cannot be replicated worldwide. Well, not really. While the Middle East is naturally bound to become a solar powerhouse in the coming years — its wide desert areas and sunny climate result in typical PV load factors above 1800 kWh/kWp installed — high levels of solar irradiance are actually available throughout the world within a broad range of latitudes. A beautiful map from Global Solar Atlas is worth a thousand words:

As global data show, a vast portion of the planet is in fact ripe for exploitation with ultra-cheap solar power. And the news from the Emirates are indeed echoed by comparable prices set elsewhere over the past year, from Europe to America. The previous solar tariff record belonged to Portugal: the southern European country claimed the spot in July 2019, at about USD 1.64 cents/kWh for a 150 MW project. 211 MW of PV capacity were signed at USD 1.75 cents/kWh in Brazil just weeks before that, while a sub-2 cents/kWh bid was also presented in the same period for the Los Angeles Eland Solar & Storage Center project in Kern County, California (the final version of the project will in fact be a 300 MW / 1.2 GWh energy storage installation — with an aggregate price of USD 3.962 cents/kWh for dispatchable power).

At the levels being reached by utility-scale solar, even northern, rainy countries such as the UK — with half the solar irradiance of the Emirates — could soon see projects achieve LCOEs below USD 3 cents/kWh (if they are not beat by cheaper wind power at those latitudes). We are now at a point where economics alone is the main factor driving the energy transition towards sustainability. With an annual global growth hovering around the 100 GW mark before the coronavirus crisis, solar power is now poised for a long-term additional boost through favourable economic recovery policies planned by most governments around the world. The unfolding economic crisis, likely to push down solar capital costs even further, will only make the PV market even more attractive. Cheap large-scale battery storage, whether coupled to these projects or as standalone peaker plant replacements, will be the natural ally.

With the global financial community increasing its focus on fossil fuel divestment and sustainability, we can expect the booming utility-scale solar market to mark its presence in all continents at increasing pace. Investors with deep pockets, looking for stable and predictable returns at a time of increasing uncertainty and change, will safely bet on massive renewable energy developments for reliable returns on their portfolios, while avoiding the volatility and risk involved with projects in the incumbent sources of energy.

As the fossil fuel industry struggles in the wake of the coronavirus emergency, all its hope lies on a swift, permanent, and unlikely recovery to higher prices to maintain its presence. An ironic plan with, ultimately, little chance of success.


Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.

Latest CleanTechnica TV Video


Advertisement
 
CleanTechnica uses affiliate links. See our policy here.

Carlo Ombello

Carlo Ombello is an environmental engineer based in London. He writes about environment, sustainability and green technologies on his blog opportunity:energy.

Carlo Ombello has 72 posts and counting. See all posts by Carlo Ombello