Abu Dhabi has achieved a record low cost for electricity generated by solar power in a deal with an Asian consortium to build the world’s largest single-site solar facility in the emirate.
The Abu Dhabi Water and Electricity Company (Adwec), the procurement arm of the Abu Dhabi Water and Electricity Authority (Adwea), signed a 25-year power purchase agreement with Japan’s Marubeni and the Chinese firm Jinko Solar for a 1.17 gigawatt solar power plant in Sweihan, according to a statement released by Marubeni.
The new plant, about 100 kilometres south-east of the capital, will have the capacity to power about 200,000 homes. It will be built, owned and operated by a special-purpose company, with Marubeni and Jinko each taking a 20 per cent stake and Adwea holding the remaining 60 per cent.
Six bids were submitted in September for a “minimum net power capacity of 350 megawatts together with associated infrastructure and facilities”. Marubeni and Jinko submitted a record-low bid for 1.17GW at a weighted 2.42 US cents per kilowatt hour (kWh), The National has learnt. Adwea declined to comment.
However, once the Sweihan plant begins producing electricity, expected by April 2019, the actual price that Adwea will pay for the power generated during the peak months from June to September will be 1.6 times higher than that.
A Jinko Solar spokesman told The National that it believed that the 2.42 cent price level was the new normal for the solar industry.
The Adwec-cited non-weighted bid price at 2.94 cents for the Sweihan plant is 1.67 per cent lower than Dubai’s 800MW third phase of the Mohammed bin Rashid Al Maktoum solar complex.
“The cost of solar energy still has room to [drop],” said the Jinko spokesman.
The cost of electricity from solar depends on numerous factors including the type of land, photovoltaic (PV) panel prices and the cost of financing.
Solar panels, depending on the developer, can make up between 25 and 40 per cent of total project costs. And prices have fallen by 80 per cent since 2009, according to the Abu Dhabi-based International Renewable Energy Agency.
Jenny Chase, a solar analyst at Bloomberg New Energy Finance (BNEF), said that there was 10 to 15 per cent more supply than the amount that was needed in the market. According to BNEF, prices of the two main types of panels, mono and multi, had dropped between 10 and 12 per cent in the four months to December.
The variables driving down the cost of solar power are important to the UAE and wider region. Demand for electricity will grow by 7 per cent annually in the Middle East North Africa region, according to the Economist Intelligence Unit.
Abu Dhabi’s peak electricity generation, or the maximum power needed during the height of summer in August, passed 10GW for the first time five years ago. Only Saudi Arabia and Kuwait have peak electricity generations that are greater, according to Adwea.
As the need for electricity grows alongside projected growth in economies and population, solar energy has become the cheapest form of new power generation.
BNEF estimates that the price of generating power from a combined cycle natural gas plant in the Middle East is at least 3 cents per kWh, assuming a gas price of US$2 per million British thermal units (Mmbtu). The Sweihan plant represents, based on these calculations with adjustments for inflation, a 2 to 19 per cent decreasecompared to building a new gas plant.
Follow The National's Business section on Twitter