Masdar to award solar thermal contract (finally)

Masdar will today award a contract for its 100-megawatt solar thermal power plant, named Shams 1, after over a year of delays, said a senior government official.

The plant, located near Madinat Zayed in Al Gharbia, would be the largest single-site solar power plant in the world, and use mirrored troughs to concentrate the heat of the sun to create steam and generate electricity through a conventional turbine. The solar heat would be supplemented by a smaller gas-fired turbine to smooth out the dips in power production when the sun is obscured by clouds or dust.

The delay was the result of a number of technical and regulatory factors. When Masdar first welcomed bids for the project in late September 2008, officials said they were surprised at the high price--up to $655 million--and asked for new submissions the following spring. In 2009, Masdar officials again delayed as they explored several alternative locations for the plant, but ultimately settled again on Madinat Zayed.

The delays were also the result of lengthy discussions between Masdar and Abu Dhabi utilities on power purchase agreements, said the senior government official, who declined to be named.

Current laws governing the power sector effectively subsidise electricity produced from fossil fuels and bind utilities to buy the cheapest supplies available on the market. The rules are designed to protect consumers, but made it impossible for solar producers to sell their more pricey power. Special exemptions and government funding had to be provided for the Shams project, said the official, and the Government intends to create a more permanent regulatory structure to support future solar projects.

The contract will be awarded to Spain's Abengoa and France's Total, "two people with knowledge of the deal" told Bloomberg.