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Look to the Sky

The UAE currently generates over 90% of power from gas, although the roadmap will take the Emirates to 24% power generation from clean sources by 2020—up from 0.2% in 2014. Gas is largely imported, notably from Oman and Qatar, and even though the UAE has the fifth largest proven gas reserves, it continues to be a net importer. Much of this 24% target will include purifying gas-generated processes.

The Shams 1 project, a collaboration between Masdar, Total, and Portuguese Abengoa Solar, feeds 100 MW to the grid. This looks a little meager compared to ongoing projects around the UAE, including Abu Dhabi’s Barakah nuclear power plant, which will generate 25% of the entire nation’s electricity by 2020. To give more perspective, the last project of the Emirate’s utility holding company, the Abu Dhabi Water and Electricity Authority, was the Mirfa Independent Water and Power Project and its 10th IWPP facility. When operational, the $1.5 billion project will generate 1,600 MW of energy as well as process 250,000 cubic meters of seawater per day.

After adding Shams 1 to the portfolio, Mubadala’s Masdar now accounts for almost 68% of the Gulf’s renewable energy capacity and close to 10% percent of the world’s installed Concentrate Solar Power (CSP) capacity. Masdar is looking to roll out rooftop photovoltaic cells on government buildings; 11 currently house the PV cells. The Masdar City Solar PV Park now also delivers surplus energy to the grid after adequately supplying the city’s infrastructure. All projects combined, Masdar now saves 194,000 tons of carbon emissions annually.
ADWEA is looking to boost the solar sector with the 350 MW Sweihan project, which will utilize photovoltaic technology, as opposed to the 258,034 parabolic troughs spread out over the 2.5sqkm that comprise the Shams 1 project. The Sweihan project, scheduled to be operational by 2019, will power 50,000 homes. A winner for the bid is expected to be decided upon in the second half of 2016, with 90 companies already registering interest in the project.

The solar market is ripe, as the current cost per unit of PV cells has dropped 80% since 2009. For the utilities companies it has never been as cheap—prices are being offered for as low as $5.84 per kWh. Meanwhile, the oil prices continue to erode profit margins for the gas generated sector, while the low price per barrel has not carried over savings to either the consumer or the utility companies. In fact, subsidies to power generation companies look increasingly likely to be removed in order to buffer the low oil revenues.

The UAE is prime for developing solar power, due to an undisturbed 6 months of intense sunlight. According to Bloomberg New Energy Finance, 2015 saw a 4% increase in global renewable energy investment, which included a 54% rise in the MENA region, bringing the total to $13.4 billion.

After the highly-acclaimed COP21 conference, it can be expected that the global investor community will be encouraged to focus heavily on the renewables sector to maintain global warming at under 2°C. Analysis by the Abu Dhabi based International Renewable Energy Agency (IRENA) shows that annual investment should be at least $600 billion to achieve the said target.

ADWEA will work with the China Merchants New Energy Group (CMNE) for renewable energy power generation; the company has 20 grid-connected solar power plants with a total of 672 MW across China. China is consistently one of the UAE’s top trading partners and this accurately reflects the movement in the domestic energy industry, as the CNPC is now part of the ADCO concessions and more recently signed an exploration and production MoU with Mubadala Petroleum.

The solar industry has now become attractive to all involved. The lower initial cost makes it a viable investment, and utility companies are encouraged by the low price per kWh, while those savings can be passed on to the consumer. This in turn could make the eventual cut on energy subsidies less painful for all involved. The point, of course, is that it protects Abu Dhabi’s environment and maintains a standard of living for the residents. However, as the saying goes; if it does not make money, it does not make sense. Now, in 2016, solar power will be both profitable and logical.

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