Solar has Become Dazzlingly Cheap for New Plants

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Courtesy of Robin Mills @ The National:

‘I believe solar will be even more economic than fossil fuels,” said the Saudi oil minister Ali Al Naimi at a climate change conference in Paris last week.

Recent bids in Jordan confirmed last year’s results from Dubai – solar is now cheaper than gas-fired power in this region, with major implications for energy strategies.

In Manaar Energy’s 2012 report, “Sunrise in the Desert”, published in collaboration with PwC and the Middle East Solar Industry Association, we were optimistic on the future of solar power in the region and saw it as competitive with power generation from oil or from more expensive gas. Costs have halved in just three years, meaning solar can now beat all conventional generation apart from the very cheapest gas.

Bids in Jordan’s recent solar auction were just over 6 US cents per kilowatt-hour, slightly above the record 5.84 cents from Acwa Power last November for the 200- megawatt second phase of Dubai’s Mohammed bin Rashid Al Maktoum solar park near Bab Al Shams. Egypt, struggling with a gas and power crisis, is up next with a reported 6,500MW of solar deals.

Solar prices should continue to fall because of improvements in manufacturing and installation, and steady gains in efficiency. There is also the possibility of breakthroughs, such as the recently announced possibility of perovskite crystals replacing silicon, which could be cheaper and capture a broader range of the sun’s light.

What does this mean for Middle East countries’ energy sectors?

There is no need for over-elaborate national renewable energy strategies. Some of these can even be counterproductive if they obstruct progress on building real projects. Petroleum-poor countries such as Jordan should seize the opportunity now to boost their economic and energy security.

Utilities need to revamp their plans to include a large share of solar power in new generation. Any country burning oil for power – such as Saudi Arabia, Kuwait, Egypt, Jordan, Lebanon, Iraq and Iran – should plan to replace this with solar as much as possible. Although liquefied natural gas prices have dropped sharply, territories using imported LNG – Kuwait again, Dubai, Egypt and in the future Bahrain and Jordan – can also replace some expensive imported fuel.

However, cutting fuel use significantly will require heroic amounts of solar power – saving one-third of Dubai’s gas use could require 14 gigawatts of solar – compared to its 2030 target of 3GW and its total gas-fired generation capacity today of 9.65GW.

The first generation of regional solar power depended on a few heavily subsidised pilot projects. We are now entering the second generation, when solar will often be the cheapest choice on its own merits.

Realising the full benefits of the Middle East’s solar potential requires a third generation that needs to solve two key issues. The first is meeting the need for electricity outside the periods of maximum solar output – particularly the early evening peak demand in summer, when the sun has set but residents come home and turn on air conditioners, lights, televisions and cookers.

Solutions to this issue of intermittency could include grid interconnections to other countries with different demand patterns. Batteries can store electricity, with some exciting – although perhaps over-hyped – recent discoveries that could bring down costs. Better demand management could also help – for example, using appliances in off-peak periods, cooling down buildings before the early evening or freezing stocks of water into ice that would provide cooling as they melt.

The second issue is the region’s demand for desalinated water, traditionally met by cogeneration using the waste heat from gas-burning power plants. Solar electricity could drive reverse osmosis plants, and Masdar is working on desalination using the sun’s heat directly.

More such opportunities to save fossil fuels and reduce climate impact will undoubtedly emerge. For now, the priority is to seize the opportunity of lower solar costs and build real projects.

Robin Mills is the head of consulting at Manaar Energy and the author of The Myth of the Oil Crisis

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