Race Enters the Final Stretch
DEWA attracts record low bids for solar park expansion (ANALYSIS)
DEWA attracts record low tariff bids for the expansion of its Sheikh Mohammed bin Rashid Al Maktoum solar park expansion
The race to win the contract to expand Dubai’s Sheikh Mohammed Bin Rashid Al Maktoum Solar Park has entered the final straight.
From the initial field of 48 runners that expressed interest, ten companies are now in contention for the tender which is expected to be announced this month.
The final bids for the 100MW project, revealed by Dubai Electricity and Water Authority (DEWA) in November, yielded some surprising results.
There was a spread of over $7 cents per kWh between the highest and lowest bid, with the average of all ten bids coming in at $9.35 cents per kWh.
Chinese developer Huaneng Power International placed the highest bid of $14.7 cents per kWh, but it was the lowest bid that has raised eyebrows.
Saudi-based ACWA Power has offered to develop the project for just under $6 cents per kWh, which industry observers note is a world record for a solar PV project without government support. It compares to around $10.8 cents per kWh in Germany, the world’s most mature solar PV market, or the $9-12 cents per kWh winning bids seen in India where solar power is just beginning to take off.
Not only that, but ACWA Power is also thought to have offered to build the entire 1,000MWplant at a 10% discount to that bid, or just $5.4 cents per kWh. DEWA is planning a phased expansion of the park through 2030, by when Dubai aims to produce 7% of its energy needs from renewable sources.
ACWA Power plans to use modules supplied by US company, First Solar which developed the initial 13MW phase of the solar park that began operations in January 2013. However First Solar has submitted a separate offer to build the 100MW expansion in return for $8.65 cents per kWh.
ACWA is an experienced player in the industry with a number of major power projects under its belt, and sources say it will have carefully considered its bid.
In a recent interview CEO Paddy Padmanathan signalled a shift in focus towards more renewables projects to help meet its target of more than doubling cumulated installed power capacity to around 39GW by 2018.
In Saudi Arabia, ACWA Power is bidding for a 100MW solar power plant in Mecca and has proposed the lowest tariff. It also recently proposed the lowest tariff to build the 200 MW Noor II concentrated power project (CSP) and the 100MW Noor III solar tower project in Morocco. The company is also preparing a bid for an 850MW wind project in Morocco.
Solar costs plummeting
The level of the bids perfectly demonstrates the huge strides that solar PV has made in cost and efficiency in recent years. The bids are much lower than the prices agreed for the first round of solar projects in Jordan, for example, a country which currently has 200MW of solar PV capacity under construction.
As Reda El Chaar, managing director, Access Power MEA explains elsewhere in this issue, the average price received for those projects was around the $0.17 cents per kWh mark.
In the space of just three years since then, the cost of PV modules and related equipment has fallen by around 30%. The larger scale of the DEWA project compared to the average 10MW size of the Jordanian projects, will have had a considerable bearing on the bids as well as continuously falling costs.
The Middle East factor
There are a number of other factors that would have influenced the bids, including the specification of the system proposed and the type of panel cleaning system used to remove desert dust, analysts say.
The higher level of insolation in the Middle East compared to other parts of the world may also help to explain why companies believe they can still make money while accepting a price of just $6-8 cents per kWh.
Cheaper access to finance in this part of the world will also have played a role. As Amol Kotwal, Director, Energy & Environment Practice, MENA and South Asia at Frost & Sullivan, explains: “The lower cost of financing in Dubai is a key driver for the low cost of generation as compared to other mature or developing markets.”
With the development of the 13MW Sheikh Mohammed Bin Rashid Al Maktoum solar park last year, Dubai stole a march on its neighbours in the Gulf Cooperation Council (GCC) in the field of solar power.
Now, the combination of rapidly falling solar costs, high levels of solar insolation and cheap access to finance would appear to provide the Emirate with the ideal conditions to consolidate that lead through the development of a truly world class utility scale facility.
The 10 bids: US cents per kWh
Abengoa Solar Venture
EDF Energies Nouvelles