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Top five challenges the Gulf's solar rooftop sector must overcome

Taqati's executive director outlines the key areas for improvement and growth in the region's growing solar rooftop energy sector

Solar rooftop projects are gaining traction in Dubai [representational image].
Solar rooftop projects are gaining traction in Dubai [representational image].
Awareness of solar rooftop projects is growing in Dubai [representational image].
Awareness of solar rooftop projects is growing in Dubai [representational image].
Regulation is supporting solar rooftop projects in Dubai, and across the GCC [representational image].
Regulation is supporting solar rooftop projects in Dubai, and across the GCC [representational image].
Financing is a key area of focus for Dubai's solar rooftop sector [representational image].
Financing is a key area of focus for Dubai's solar rooftop sector [representational image].
The economy of solar rooftop projects must be understood in Dubai [representational image].
The economy of solar rooftop projects must be understood in Dubai [representational image].
Operational efficiencies must be optimised in Dubai's solar rooftop sector [representational image].
Operational efficiencies must be optimised in Dubai's solar rooftop sector [representational image].

Awareness and operational efforts are among the key market challenges that regional solar energy stakeholders will have to overcome.

Aref Abou Zahr, executive director of Taqati, says that despite initiatives under way to boost the sector in Dubai, "there is still room for accelerated efforts to further drive adoption of distributed solar" across the Gulf. 

He continues: "Shams Dubai, the emirate’s solar rooftop programme under the Demand Side Management (DSM) Strategy by Dubai Electricity and Water Authority (DEWA), has begun to show positive results and is set to witness increased adoption of photovoltaics (PV) on building roofs."

Shams Dubai is based on a net-metering scheme, and allows consumers to connect their PV systems to the DEWA grid to offset their electricity consumption with solar generation. 

 

"The connected solar rooftop capacity [in Dubai] has doubled from 7.3MW in 2016 to 22MW by the end of 2017," Zahr explains. 

"It is indeed a fast-expanding market, and the outlook for 2018 is very promising for the industry. Additional solar rooftop capacity to be connected in 2018 is expected to double the existing connected capacity to date."

READ: Solar retrofits prove functional and cost-efficient

"Though efforts are being initiated from all directions, there is still room for accelerated efforts to further drive adoption of distributed solar," Zahr says.

"To identify the priority areas that need to be addressed to speed up solar rooftop penetration, and to achieve existing market potential, Taqati conducted an in-depth market study covering the solar rooftop value chain."

READ: Dubai Carbon and Innogy to develop rooftop PV projects

Zahr says Taqati identified five market barriers through the study, namely awareness, regulation, financing, economy, and operations. 

In the following pages, Construction Week rounds up Zahr's insights about each of the five factors, and how the challenges may be countered.

Awareness 

"Even though the demand for energy is constantly rising, the awareness levels among customers and financiers are still relatively low, which is reasonably expected for a new market offering," Zahr explains.

The Taqati official also lauds Dubai Government's efforts to adopt energy efficiency measures, which will help to boost awareness about the sector: "DEWA has been driving the programme through large solar rooftop projects, and there have been a number of installations in government buildings.

"One of the programme priorities for the government is to continue its efforts in the solar transformation of our buildings."

Regulation

Legislation is supporting the development of solar energy projects, including rooftop developments, but more work is being done to expand the sector's regulatory remits.

"There is an active and continuous debate with respect to the risks associated with a solar rooftop investment, and the way regulation could help mitigate some of these risks," Zahr says.

READ: DP World begins work on solar rooftop project

"Shams Dubai incorporates significant learning and innovation from international market experience, and is expected to further evolve over time."

In August 2017, Eversheds-Sutherland's partner Gurmeet Kaur, projects associate, Aditya Gaur, said legislation is supporting the growth of the Gulf's solar rooftop sector.

"Saudi Arabia’s Electricity and Cogeneration Regulatory Authority (ECRA) has prepared the Small Photovoltaic Solar System Regulation, which – although still in draft form – will set out the framework for the connection of small-scale solar photovolatic (PV) systems to the nation’s distribution system," Eversheds-Sutherland's experts said.

"Similarly, Oman’s Sahim scheme incentivises the installation of solar PV panels in homes, as well as public and private facilities, in a bid to boost electricity production in the sultanate."

Financing

Funding is a key factor influencing the local solar energy sector. Two business models are being followed in Dubai's distributed solar market so far, the first of which is direct ownership, through which the customer buys and maintains the solar PV system.

Most projects implemented in Dubai to date fall under this category, according to Taqati's executive director.

The second model is third-party ownership, also known as solar leasing, through which the customer pays a rental fee to a solar financing company that remains the owner of the PV system during a lease agreement period, which is usually between 15 and 20 years long.

"Today, cost of financing is still high, as the asset class of solar rooftop generation is relatively new to the investor base," Zahr explains.

Last November, logistics firm RSA Global has announced the official launch and implementation of its first solar rooftop project in Dubai South under DEWA's Shams Dubai initiative.

The power plant, developed and installed by Dubai-based joint venture SirajPower, will generate 1.1 MW from RSA Global’s rooftop in Dubai Logistics City.

It will provide an alternative source of electricity for the next 15 years and generate 90% of the energy required for the facility.

Economics

The regional market is yet to lock in the economics of solar energy, Zahr explains.

"Despite market efficiencies, current financing and connection costs limit the attractiveness of solar rooftop to the market segments where solar generation has the potential to reduce electricity bills."

READ: Saudi's first solar rooftop plant for KAFD

Other solar energy technologies appear to be better-placed for success in Dubai, however.

In June 2017, it was announced that DEWA had received its lowest international bid for Phase 4 of the Mohammed bin Rashid Al Maktoum (MBR) Solar Park. 

The $0.0945/kWh proposal was submitted for the 200MW concentrated solar power (CSP) plant, which makes up the fourth phase of the solar park. 

Operations

The value chain associated with solar rooftop projects – including utility, design, and contracting service providers – is growing in Dubai. 

This growth, Zahr says, is "affecting the efficiency and the lead time of the end-to-end sale, permitting, and connection processes". 

READ: ABB unveils new 315kW rooftop solar power plant

He adds: "The target to have a solar panel installed on every roof in Dubai by 2030 is a major push in the right direction."

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