Although analysts are confident the ultra-low levelized cost of electricity (LCOE) agreed by the successful bidders in the latest tender to develop Dubai‘s Mohammed bin Rashid Al Maktoum Solar Park are atypical, the rock-bottom price could be indicative of the future cost of solar panels.
A report in this month's edition of the MENA Solar Brief published by the Solar GC Alliance examines what lies behind the $0.0598/kWh price agreed by Saudi developer ACWA Power and Spanish engineering company TSK and says it could be a pointer to falling panel prices.
According to the article, Aaron Morrow, managing partner of U.S.-Emirati renewable energy consultancy Global Energy Analytics, says the successful biders are likely to have priced in falling panel prices for the 200 MW second phase tender launched by the Dubai Electricity and Water Authority (DEWA) as construction is expected to take place over the next two to three years.
Anand Upadhyay, associate fellow at the Energy and Research Institute, in New Delhi, told the MENA Solar Brief the Saudi energy and desalination plant developer had offered DEWA a price of $0.054/kWh if given the contract to develop the whole Dubai scheme, which is planned to reach 1 GW capacity by 2030.
Half the LCOE of Berlin
Speaking to the publication produced for U.S. developer Solar GC's Middle Eastern and North African network the Solar GC Alliance, Upadhyay said, as Dubai has twice the irradiation of Berlin, where the FIT is around $0.018/kWh, the LCOE agreed in the emirate is not unusual.
Thierry Leperq, founder and president of French utility-scale developer Solairedirect, said his company offered an LCOE of INR7.49/kWh ($0.121272/kWh) for a project tendered under India‘s Jawaharlal Nehru National Solar Mission (JNNSM) in December 2011 and said bidders would offer artificially low terms to secure a trophy project like that in Dubai with investors accepting lower returns given the bankability offered by a project for the Dubai government.
But consultant Morrow told the publication, six-cent solar energy will not become the norm any time soon and ACWA had offered an aggressively low price beating the $0.0612/kWh offered by a consortium led by Spanish developer Fotowatio Renewable Ventures helped by high insolation, helpful terrain, the possibility of residual value beyond the 25-year PPA and in-contract replacement panels of higher efficiency.
Morrow added, although there is no official incentive program in Dubai, which is hosting the World Future Energy Summit (WFES) this week, factors like free land and interconnection, low-cost financing and an agreed low return for DEWA's stakeholding in the project would encourage low bids, with the publication stating the highest of the ten shortlisted bids was for $0.147/kWh.
All of those ‘backdoor incentives' are cheaper for the Dubai government than the cost of providing the equivalent energy to meet rising domestic demand from liquefied natural gas imports.