Declining solar energy costs in UAE sees major rise in demand

Demand for solar installations has picked up 'dramatically', with the cost of solar energy dropping by 50% in the last five years

The UAE continues to set the pace in reducing the cost of producing solar energy.

Blessed with near-year-round sunshine, utility authorities in both Dubai and Abu Dhabi have invested heavily in developing solar energy resources, which in turn has led to a continued reduction in tariffs for solar photovoltaic energy, which dropped to AED 4.97 fils/kWh (USD 1.35 cents/kWh) in a recent announcement in the UAE capital.

And, as one expert says, the cost could fall even further.

Solar energy equally contributes to the country’s medium to long-term decarbonisation and sustainable development objectives aligned with the UAE’s National Energy Plan 2050. The plan aims to increase the contribution of clean energy in the total energy mix from 25 per cent to 50 per cent by 2050 and reduce the carbon footprint of power generation by 70 per cent, with savings estimated at around $190 billion (AED700bn) by 2050.

A notable strand of the energy plan - representing 6% - is nuclear power, and marked a significant milestone on Saturday when the UAE started the first unit at Barakah.

The biggest portion of the plan, however, will be clean energy (44%), which includes solar power. Aside from the government-led investments in solar parks, the private sector has also seen a strong increase in solar use.

The demand for solar installations among both commercial and industrial customers has picked up “dramatically”, as the cost of solar energy dropped by 50% in the last five years, according to Daniel Zywietz, founder and CEO of solar utility firm Everywhere.

“The biggest growth is in locations where regulations make the connection process easy (e.g. DEWA’s Shams Dubai net metering programme), and from customers running expensive and dirty diesel generators. In both those cases, the savings from adding solar can be substantial and hundreds of companies have already installed more than 200 MWp of solar panels for their facilities, primarily on industrial roofs and car parking shades but also construction sites, islands and quarries,” Zywietz told Arabian Business.

Despite the shift in local and global perceptions of renewable energy and the acknowledgement of its potential by people, mass deployment still needs to be demonstrated, according to Laurent Longuet, CEO at SirajPower that was set up by Corys Environment, the environment investment arm of Green Coast Enterprises, a family-owned company.

Longuet said: “Today, clean energy systems are not only viewed as tools to mitigate climate change but [have] also received increased recognition as investments that can provide direct/indirect economic advantages to the community and businesses.”

Low cost of production

A consortium led by Abu Dhabi National Energy Company (TAQA) and Masdar, will work alongside French electric utility company, EDF and JinkoPower, to develop the world’s largest solar power plant in Abu Dhabi, at a record low rate of AED 4.97 fils/kWh (USD 1.35 cents/kWh).

According to Longuet the UAE has developed “exceptionally well structured and bankable tenders for large plants while providing a comprehensive and workable framework for the distributed solar market”. This has helped create regulatory frameworks to support the development of renewable energy in the country.

Competitive cost and a robust regulatory framework has led to the adoption of solar energy sources by a large number of private companies.

Additionally, Longuet said that in the current scenario with Covid-19, when most companies are looking to reduce their operational costs, solar energy could be a “great solution”, when combined within the solar leasing programme.

Solar leasing and net metering

A gamechanger in the renewable energy sector is solar leasing. Building owners, who opt for solar leasing need not pay an initial investment, as it is being covered by solar companies, along with the technical and financial risks associated with setting up the solar plant.

Additionally, with the solar leasing programme, the comprehensive operation and maintenance of the solar plant is also being carried out by the solar leasing company.

According to Zywietz, for companies with a large and clean roof, the savings versus the regular utility tariff can reach more than 40% of the total electricity bill in Dubai. He added: “That’s a very substantial saving on a cost item that is usually considered fixed.”

Meanwhile, Longuet told Arabian Business: “Solar energy, combined with financing solutions such as the leasing model [that] we use, will be helpful when it comes to easing energy expenses.”

Launched in 2015, Shams Dubai is DEWA’s net metering scheme that looks to increase the adoption of solar energy in Dubai. In a span of five years, the programme has connected almost 2,000 buildings in Dubai to solar, with a total capacity of 171.7 megawatts, according to Jeremy Crane, CEO and co-founder of Yellow Door Energy.

He added: “Both awareness and consumption of solar have increased significantly, since the launch of Shams Dubai.”

“The net metering scheme opened up the commercial and industrial market to solar, which enabled our company to start offering solar to businesses to help them reduce electricity cost and switch to clean energy. Over the past 5 years, we’ve witnessed the drop in solar prices as demand for solar increases and equipment prices fall.”

Switching to solar

The infrastructure requirements for a grid-connected solar rooftop plant are often very limited, as the solar panels are installed on an existing roof and the electricity is fed into the same cables that bring electricity to the equipment.

The plant is connected to the grid and does not require any batteries, which has in turn reduced the cost of overall installation of solar panels.

“For customers not currently connected to the utility grid - construction sites, quarries, islands - the situation is a bit more complex. The infrastructure requirements can actually be even lower than those for a grid connection, as the solar plant can be installed on site, without the need for several km of cables, and batteries or generators are still required for night-time operation,” said Zywietz.

Challenges

Despite the fact that solar is today by far the cheapest way to produce electricity in the region, there are a few challenges on the way to shifting gears to this renewable source of energy.

According to Longuet, the only drawback for companies planning to adopt solar energy is the high capex associated with the installation of a solar system. This also includes operational constraints such as performance monitoring, maintenance of the system, and regular cleaning of the panels.

“This has initially slowed down the development of distributed solar energy in the UAE,” he said.

Meanwhile, Crane added that “given the complex nature of properly managing a solar plant, our customers choose opex, so that they can continue focusing on their core business, while entrusting the design, construction, operation and maintenance of the solar plant to developers, like us”.

However, according to Zywietz, the challenges are mostly associated with the long-term operation of the solar panels in a very hot and dusty outdoor environment.

“There are obviously solutions – for example we use solar cleaning robots to clean the panels every day – but it’s nevertheless something that is worth thinking about before installation, as retrofits can get quite expensive."

“In the medium term the biggest issue for new installations will be the loss of revenue for the utility companies. However, going solar earlier, rather than later, has benefits," said Zywietz.