Bidding to win a 100-megawatt solar photovoltaic (PV) contract for Dubai state utility DEWA, Saudi Arabia’s Acwa Power in November stunned solar industry players by submitting a tender-low bid of 5.98 U.S. cents per kilowatt-hour.
Acwa has become well known for its aggressive bidding in solar energy tenders across the Middle East-Africa region. Nonetheless, its sub-6 cents per kWh bid was unprecedented, setting a new record-low cost for the building and operation of new utility-scale solar energy facilities globally.
The record-low bids submitted during DEWA’s recent tender, and others in countries such as Brazil and South Africa, will prompt project developers to recalibrate their valuation models in light of: lower equipment and soft costs; higher performance; and more efficient and cost-effective operations and maintenance. It will also prompt national governments and utilities across the region to further streamline and reduce the administrative overhead associated with bidding and gaining approvals to construct solar energy facilities, Apricum-The Cleantech Advisory’s Dr. Moritz Borgmann asserts.
Solar’s rise in the GCC
With their economies still overwhelmingly dependent on revenues from oil and natural gas, Gulf Cooperation Council countries’ commitments to deploy renewable energy resources on the whole have been relatively slow, gradual and halting. The region’s untapped solar energy potential is vast, however, and solar industry players and other clean energy proponents continue to press ahead and work to accelerate construction of both solar PV and concentrated solar power (CSP) plants.
The United Arab Emirates is at the forefront of solar energy development and deployment in the region. Abu Dhabi is home to Masdar City, a grand experiment in sustainable city development, as well as an international hub of renewable energy and clean tech research and development.
The neighboring emirate of Dubai in 2009 set a goal to meet 5 percent of its electricity needs from renewable energy resources by 2030. In 2012, DEWA launched the Mohammed bin Rashid Al Maktoum Solar Park, awarding a contract to First Solar to engineer, procure and construct a 13-MW solar power facility. To date, 21 MW of solar power capacity is up and running in Dubai. Earlier in 2014, DEWA issued a tender notice to increase the capacity of the solar park by 100 MW.
Dubai’s government is going further to spur solar energy deployment: Aiming to establish a retail market for solar energy, new regulations were issued this past September that would permit property owners to install rooftop solar PV systems.
New record low utility-scale solar power
Demonstrating just how cheap and quick to deploy solar energy facilities can be, the results of DEWA’s latest solar tender are likely to have far-reaching effects across the solar power market and industry value chain across the Middle East and beyond. As Dr. Borgmann wrote in a Nov. 27 post on the Apricum-The Cleantech Advisory blog:
“[T]he DEWA project results can be expected to have a lighthouse effect for the development of renewable-energy projects in the Gulf region, demonstrating that the cost-effectiveness and scalability in particular of solar PV technology has still been widely underestimated. We expect the momentum for renewable energy in the region to pick up significantly after this long-awaited and necessary milestone.”
Acwa Power’s stunningly low bid, and the overall results of DEWA and other solar tenders in developing markets, may also reignite Saudi Arabia’s lackluster efforts to deploy solar power capacity.
“In particular, Saudi Arabia is now even more in the spotlight for failing to deliver on its promise of a 42 GW solar-energy procurement program, which has stalled since the responsible government entity K.A.CARE went into hiding in 2013 amid political struggles behind the scenes,” Dr. Borgmann adds.
“The fact that its smaller neighbor Dubai can create such an apparent success should be an additional incentive for Saudi Arabia to move forward, given the traditional rivalry among Gulf monarchies for prestigious projects.”
*Images credit: 1) DEWA; 2) Masdar; 3) First Solar