The report, titled "Sunrise in the Desert: Solar Becomes Commercially Viable in the Middle East", by Manaar Consulting has been commissioned by the Emirates Solar Industry Association (ESIA) and sponsored by international consultancy firm PwC.
The reports author, Robin Mills, presented his findings at an ESIA press conference held on 17 January 2012 during the World Future Energy Summit (WFES) in Abu Dhabi, United Arab Emirates (UAE). "The work that weve done here is very encouraging for the new competitiveness of solar power in the region," said Mills.
Factors such as falling costs of solar PV panels, rising costs of fuels used in conventional power generation and excellent fit to demand patterns challenge the prevailing view among many policy makers and utilities in the MENA region that solar is expensive unless heavily subsidised. In the case of some countries in the Middle East, such as Saudi Arabia, domestic consumption of fossil fuels is steadily rising creating a demand for new sources of electricity.
The research posits that solar is well matched to demand patterns in the Gulf, unlike Germany the worlds largest solar market where demand patterns are not as complementary, such as during the evening on a typical winters day when there is little sun about.
"In MENA the demand patterns are completely different. There is a peak in demand during the middle of the day when everyone is at work and air-conditioning units are running", Mills observed.
In a MENA scenario, without solar power, summer demand of about 10.8 GW is met with baseload combined-cycle turbines running on cheap legacy gas and expensive imported liquefied natural gas (LNG). "With the introduction of 3.5 GW of nominal solar PV capacity the optimal generation mix changes and the use of open-cycle turbines at midday can be replaced by solar generation saving high-cost fuel," explained Mills.
In some MENA countries, Morocco in particular where the evening peak is even higher than the midday peak, using solar photovoltaics with suitable energy storage technologies, such as pumped or thermal energy storage or trading electricity with neighbours with different peak times, solar PV is attractive where there is a lower capital cost than peaking gas turbines, assumed at USD775/kW.
In his presentation slides, Mills showed that the cost of solar PV (at USD2.5/W) versus that for gas or oil-fired generation, with solar cheaper than an open-cycle peaking unit at gas prices above USD5/MMBtu, which is equivalent to oil at around USD30 a barrel, but requires USD17/MMBtu to be competitive with baseload combined-cycle power, which is around current LNG prices.
The report should make interesting reading for policy makers, consultancies and advisories, developers, utilities and other businesses in the energy industry in the MENA region.
Mills made a clear point that solar PV should be viewed as complementary as opposed to competitive electricity generating technology before going on to define solar sweet spots throughout MENA. In countries such as Lebanon, Northern UAE countries, Jordan and Morocco where there is little domestic gas production and high use of oil for power, solar saves significantly on fuel costs and enhances energy security, making it a very attractive option. In countries such as Saudi Arabia, Kuwait and Syria, where there is significant domestic gas but insufficient to meet demand, solar PV generation can free up domestic oil consumption for export, which is economically attractive. Several other scenarios for other states in MENA are detailed in the report, which can be found on ESIAs website.
However challenges remain, not least the political fragility in many parts of MENA, which will affect the economic viability of solar power in individual countries. To take advantage of new opportunities many of them economic MENA governments and private sector organisations will have to work closely together to provide environments for de-risking investment in solar power.
Implementing feed-in tariff (FIT) models may work in some cases, for example to encourage the uptake of solar panels for domestic consumers on rooftops. "The best approach is to apply transparent pricing, but the next best thing would be to subsidise solar at least equally to subsidies to conventional fuels or more as solar power has environmental advantages such as being a carbon free source of electricity generation," said Mills.