The sun could join the ranks of top commodities such as oil and gas in less than 10 years as it changes the landscape of energy, even becoming the lone source of power generation in some places.
When oil was first discovered, no one predicted it would evolve into a major economic driver moving markets in a way that very few other natural resources can. From engineers to geologists down the line to rope technicians, university programmes, shippers and construction, the hydrocarbon market has created a well developed ecosystem worth trillions of dollars annually.
Just as with oil, the solar industry is maturing, growing its own supply chain from manufacturing panels and other parts such as inverters. Specialised developers and contractors are increasing as projects multiply, also spurring the rise of new departments in law firms and consultancies catering specifically to this sector.
The global solar industry is expected to nearly double this year to US$75.2 billion from $39.6bn five years ago, according to research firm MarketsandMarkets.
So while the onset of an emerging electric vehicle (EV) market may not, at first glance, seem a fit with the solar industry, it very well could be the make or break of an emerging supply chain in the form of energy storage.
The EV industry, or rather the batteries that are powering these eco-friendly alternatives to gas guzzlers, is expanding. Dubai announced last month that it would increase its target of all cars purchased to be electric or hybrid vehicles to 10 per cent by 2030. The emirate has added 100 electric car charging stations with many more scheduled, and government entities have already started using this alternative in their fleet. The power utility, Dubai Electricity and Water Authority, was the first to use EVs – 13 – over the past year.
These cars come equipped with lithium ion batteries, the same technology to be produced at the electric car maker Tesla’s so-called Gigafactory being developed in the United States. Tesla says it plans to drive down the per kilowatt hour (kWh) cost of its battery packs by more than 30 per cent.
And, while these batteries can store energy to power a car from Abu Dhabi up the road to Dubai, they can also be used in power plants or in domestic homes to capture and store sunlight for conversion into energy during the night.
The main obstacle that has plagued the solar industry is the high costs of energy storage, but with new technologies such as Tesla’s batteries moving to the forefront of innovation – the reality of having communities powered solely via the sun could become a reality sooner rather than later.
Sami Khoreibi, the chief executive of Abu Dhabi’s Enviromena Power Systems, says such batteries are helping to shift the energy paradigm in a big way.
Mr Khoreibi points to parallels between falling costs in the solar photovoltaic (PV) market and lithium ion batteries. The price of solar PV panels have dropped around 75 per cent since 2008, according to the International Renewable Energy Agency, based in Abu Dhabi. "The cost reductions [in solar PV] have predominantly been completely a reflection of an increase in scale, and the same concept applies to lithium ion batteries," he says.
Mr Khoreibi says every time global solar capacity doubles, the overall cost decreases by 20 per cent. “Global capacity is likely to go up [by] around 55 gigawatts this year,” he says. “When you look at those underlying economics on the PV side and plug in the fact that storage technology is where PV was just eight years ago this is creating a seismic shift.”
Once lithium ion batteries begin a large rollout, the costs will drastically decrease, making cheap all-day solar power a real probability. “We’re going to get to the point where you can have 24-hour renewable technologies in and around that price point [of fossil fuel power generation] in the next five to 10 years under conservative assumptions,” Mr Khoreibi says.
It is not just new batteries that could help generate cheap solar power around the clock; repurposed batteries from EVs could also creep into the region’s solar value chain.
Claire Curry, a senior analyst at Bloomberg New Energy Finance (BNEF), says these batteries cannot just go to a landfill, but they can be used as storage systems for solar power plants.
BNEF says used EV batteries will provide 29GW per hour globally by 2025, from about 360,000 tonnes of leftover batteries.
Experts say the lifespan of an EV is about 10 years with the battery storage capacity declining around 30 per cent during that time. However, these batteries can be retrofitted by adding an inverter and some other smaller parts to make a stationary storage system. Take Nisson’s Leaf which can store 24 kWh when new, falling to around 20 kWh by the end of the vehicle’s life. This is enough to power a home with a solar panel on the roof.
The cost of a stationary storage system can run upwards of US$1,000 per kWh but used EV batteries could be converted into stationary systems, driving costs down to as little as $450 per kWh within two years. Ms Curry says that would shave off around 40 per cent of the capital expenditure of a stationary storage system project.
But this potential supply chain, akin to a scrapyard of sorts, is still in its infancy and currently only a handful of companies have got on board. However, BNEF expects this market to expand rapidly over the next five to 10 years.
That may be driven by regions where electric cars are being built today, mostly Europe, China, Japan and the United States – but others could take a piece, too.
“EV sales may not skyrocket, but with solar power and other [clean energy] mandates, you may see repurposed batteries being deployed in the Mena region,” says Ms Curry.
A used EV battery could be worth $4,000, and that may be enough to grab a regional entrepreneur’s attention or even a new division within a state-owned entity.
Mr Khoreibi says that the UAE is in a prime position to grab the solar industry from top to bottom and make it its own.
“We can continue being the energy exporters if the right investment is made and we take a look at what parts of the value chain are required,” he says.
Mr Khoreibi believes that reinvestment of oil and gas dollars will make solar a huge industry for the region.
“We’ve got to the point where the inflection point has occurred in renewable energy technologies, where the cost of solar energy is low enough to not just potentially displace, but actually displace conventional technologies.”
lgraves@thenational.ae
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