Here comes the sun
Solar power may finally be on the verge of a breakthrough
I know that I’m doing myself no favours by starting this week’s column with the words ‘regulatory framework’ and that half of you may read no further. But bear with me.
The reason I mention it is the announcement by Dubai Electricity and Water Authority (Dewa) last week that it has come up with a set of standards that will allow both businesses and consumers the opportunity to connect their solar photovoltaic (PV) panels to the grid, and if they produce more power than they consume, to sell it back to the authority and offset it against conventional energy bills.
It is, as Dewa triumphantly exclaimed, the first time that a city in the Middle East had come up with the regulatory framework (last time, I promise) required to sell power back to the grid.
As a result it paves the way for potentially huge private investment into the sector at a time when the price of solar equipment is plummeting.
There are scores of commentators who have predicted bright things for solar in the past, but until now the barriers to entry, particularly in the Gulf, have been too high.
Private investors had no way of profiting from any excess power generated during peak hours to compensate for the energy consumed once it goes dark.
Also, most of the earlier forms of solar PV systems have proved to be too costly and inefficient to match the price of conventional energy elsewhere in the world – and this is before you factor in the subsidised energy prices prevalent across the region.
Yet the cost of a typical solar installation has fallen rapidly in recent years, as mass production geared up in China – a situation which led to a brief trade spat between China and the EU, with the latter accusing the former of ‘dumping’ cheap panels into EU countries in a bid to undercut domestic manufacturers.
At the same time, the efficiency of solar equipment – and particularly storage units – has been steadily improving.
Indeed, the declining cost of solar power can be witnessed through Dewa’s own deal announced last month for phase two of the massive Mohammed Bin Rashid Solar Park.
Saudi Arabia’s Acwa Power, in a consortium with Spanish engineering firm TSK, agreed to build a 200MW solar farm, which is twice the capacity originally planned, and operate it for 25 years. It is selling electricity back to Dewa for $0.0585 per kilowatt hour from the time it starts operating in 2017.
This is effectively a 20% reduction on current solar energy prices, a rate which Acwa Power CEO Paddy Padmanathan said “means that solar PV technology becomes commercially cost-effective”.
The fact that this deal was done with a background of plunging oil prices shows the new-found belief that is developing in the long-term prospects of solar energy as a viable source of energy in the region – a belief that led Dewa’s CEO Saeed Al Tayer to confidently treble Dubai’s current solar generation targets by 2030 from 5% to 15% of the overall energy mix.