Solar and wind may now be the cheapest sources of new energy supply in the United Arab Emirates, according to a report released on Wednesday by the UAE Ministry of Foreign Affairs, International Renewable Energy Agency (IRENA) and the Masdar Institute of Science and Technology.
According to the report, Renewable Energy Prospects: United Arab Emirates, the UAE could achieve a 10% share of renewable energy in its total energy supply and almost 25% in the power sector, resulting in energy system savings of $1.9 billion annually by 2030.
"The UAEs strategy of innovation and diversification has placed it at the fulcrum of the massive transformation of the global energy landscape that has already begun," said IRENA Director-General Adnan Z. Amin.
Amin added that renewable energy sources had "decisively emerged from a niche technology to a major component of the energy mix and have been the majority of global power capacity additions for the last three years."
The director-general noted that the dramatic technology cost declines currently taking place presented "a real possibility to move to a sustainable energy future even in the hydrocarbon producers in the MENA region."
The report, developed by Masdar Institute in collaboration with IRENA and the UAE Ministry of Foreign Affairs, leverages local resource expertise and earlier UAE energy modeling efforts. To create a portfolio of renewable energy options and their associated costs for the UAE Masdar Institute, researchers localized an IRENA energy model and applied the results.
Sharp declines in renewable energy costs in the UAE and rising costs for natural gas due to domestic production declines and an increase of more expensive imported sources are the key drivers for renewable energy’s financial attractiveness, according to the study.
Solar PV costs have fallen by 80% since 2008, while the cost of new gas supplies in the UAE has grown from under $2.50 per one million British thermal units (BTU) in 2010 to $6-8/MMBtu for domestic production and $10-18/MMBtu for imports today, even after the recent decline of oil and liquefied natural gas (LNG) prices. The report estimates that solar, wind, and waste-to-energy are preferable for power generation when new gas is above $8/MMBtu making them immediately competitive in the UAE, where natural gas supplies almost 100% of power.
The study likewise predicts that solar costs will decrease even further. In January, the tender for the second phase of the Mohammed bin Rashid Solar Park in Dubai was awarded to the lowest bidder for under $0.06 per kilowatt hour for a 25-year fixed contract the lowest solar price ever achieved worldwide.
"This report is an eye-opener," said Fred Moavenzadeh, president of Masdar Institute, Abu Dhabis graduate-level research university focused on advanced energy and sustainable technologies. "It provides policymakers and investors with an objective cost baseline, making the clear case that renewables, and especially solar, will have a much larger role sooner than we ever expected in the UAE and Middle East."
The report is one of the first three country analyses under IRENA’s REmap 2030 project, which evaluates how the world can meet the United Nations’ Sustainable Energy for All goal of doubling the global share of renewable energy by 2030. The project maps how renewable energy can grow in the power, industry, buildings and transport sectors. Health and environmental benefits are also included in the analyses, and in the case of the UAE, they could amount to additional annual net savings of $1 billion to $3.7 billion by 2030.
"The UAE made an early bet on energy diversification," said Thani Ahmad Al Zeyoudi, the UAE’s permanent representative to IRENA and the director of Energy and Climate Change at the Ministry of Foreign Affairs. "We are investing broadly and letting technologies compete to produce the optimal supply mix. As this report shows, there is now a clear financial case for renewables, even before we consider benefits like energy security, emissions, and job creation."
The report notes that solar and wind are still challenged by intermittency, which will require natural gas to fill gaps in output. However, the savings from generating solar power during the daytime, instead of consuming gas, are so great that they could justify 17.5 GW of PV in the UAE by 2030, up from around 40 MW today.