Made in the Middle East
Manufacturing PV modules locally could have multiple benefits, says Mohamed Alammawi, MANZ AG.
By Mohamed Alammawi, VP Sales for the MENA, MANZ AG
The last 12 months have ushered in strong tidings for the Middle East’s solar industry. While only 70 megawatts (MW) of solar photovoltaic (PV) projects were awarded across the region between 2007 and 2013, in 2014 that figure climbed to 287MW – an impressive fourfold increase, with an additional fourfold growth projected for 2015, as per figures published by the Middle East Solar Industry Association (MESIA).
Why? Well, glaringly obvious benefits aside, energy exporters such as Saudi Arabia and Kuwait are now waking up to the advantages of weaning their populations off fossil fuels, so that they’ve got more to export.
Added to this, electricity generated via solar PV has become cost-competitive. In fact, in the UAE, PV has been cost-competitive since 2014, according to a recent study published by the International Renewable Energy Agency (IRENA) and Masdar Institute of Science and Technology (MIST).
Looking ahead, several countries within the Middle East have set down concrete solar targets for the next few years. The Dubai Electricity and Water Authority (DEWA) recently upped its renewable energy targets to 7% by 2020 and 15% by 2030, claiming energy generated by PV in 2016 will be enough to power more than 700,000 homes. And Saudi Arabia plans to have 16 GW of solar PV installed capacity by 2040.
At this point, it would not be amiss to claim that the region’s solar industry is headed for a boom. But there’s a pressing question that deserves to be addressed at this juncture in the solar conversation: is it more viable to manufacture PV modules domestically, or import them?
To produce or to buy?
Interestingly, global PV module suppliers prefer satellite production – the assembly of modules in end markets – rather than centralised production. With time these suppliers have come to realise that, if optimised, manufacturing closer to end markets has several advantages.Policies incentivising local procurement, steep import tariffs and the profitability of being able to move products to end markets more rapidly, all make local module assembly more appealing.
Meanwhile, local industrial companies in new markets aspire to enter PV manufacturing, and often prefer module assembly as a market entry point because of its lower CAPEX requirements and fewer barriers to entry.
From a government perspective, it makes sense to encourage the local production of modules which results in increased self-sufficiency, widens the job pool and, most significantly, the know-how transfer opens the doors to further research. Essentially, domestic manufacturing needs to be embedded in the country’s long-term strategy.
Further validation for the local production of PV components has come in the form of many of the region’s governments incentivising local procurement. For instance, in Turkey, the feed-in tariff for PV stands at $13.3 cents per kWh, but local involvement can increase the tariff by $6.7 cents per kWh, to $20 cents per kWh.
Egypt has many renewable energy projects that are either signed or under construction, including 240MW of PV solar projects. Cairo has introduced feed-in tariffs of USD cents 14.34 per kWh for power plants of sizes between 20MW and 50MW.
While no such incentives yet exist in the UAE or in Saudi Arabia – two of the biggest potential markets for solar energy in the Middle East – green energy companies have been rallying for local authorities to implement a feed-in tariff to accelerate the region’s march towards its recently upgraded renewable energy targets.
As a result of plummeting manufacturing expenses, solar energy is now competitive with the wholesale price of electricity, even in the Middle East where solar power has to compete with naturally abundant fossil fuel-fired electricity generation. Grid parity has become a reality in the region and local manufacture of PV components can further supplement the cost-effectiveness of solar energy.