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GCC era of solar energy arrives
Published in The Saudi Gazette on 11 - 05 - 2015

JEDDAH — The era of solar energy has finally arrived, the CEO of Saudi Arabia's ACWA Power believes.
“Fast forward to 2020, if we're going to have this discussion, I'm absolutely convinced that people will look back and say 2014-15 was the point of inflection. That's when solar became mainstream. I think we have just turned,” Padmanathan said in an article published in Arabian Business Sunday.
In the last two years, he has signed multi-billion-dollar deals in Morocco and contracts worth hundreds of millions of dollars in the UAE and South Africa and now has an asset portfolio with an investment value in excess of just over $27 billion.
The change, he said, comes down to financial sense, citing DEWA's $330 million solar power station, which is all set to be completed in April 2017.
“This is the period during which the price levels have come to a point where it has become cost competitive. The proof of the pudding is here in Dubai. They start off with a 100-megawatt [MW] tender, saw the price, said it was a compelling case, and doubled the procurement,” he added.
“The plan was to develop 1,000MW in stages over five to eight years. The second project of 800MW — one project — is coming before the end of this year. By the end of this year, there's a very good chance that the whole 1,000MW will be spoken for. They have started to immediately revise their targets and to think about buying more solar.”
The financial sense in the discussion comes right back to the basic measurement of how much it costs to produce electricity, in terms of cents per kilowatt hour. Five years ago, Padmanathan said the conversation would have been completely different.
“An average price for [gas] power generation would be 8 cents per kilowatt hour, as a point of reference. Up to five years ago, the average price of solar energy would have been 50 cents; even as recent as two years ago, it was 15 cents,” he added.
“You could have alternatively generated it at 7 cents using gas two years ago. Quite frankly, from a cost competitiveness point of view, it didn't make sense to talk about renewable energy. But today, where it [solar] has now come to 6 cents, the story is completely different.”
The solar energy provided at 6 cents provides the power during the heavier daytime use hours only, he said, because ACWA can't supply solar energy at night using photovoltaic technology because there is no way of storing the energy.
“We can using concentrated solar power, which uses molten salt storage, another more sophisticated technology, but the cost of that is still around 14c,” Padmanathan noted.
He said the big difference between solar and fossil fuel is that the biggest component of the cost of the fossil fuel electricity with comes from the fuel cost, which can fluctuate.
“With solar energy, you have built the plant and spent the money, the energy comes free and there is no price volatility, so I'm able to commit to a fixed price for 20 to 25 years,” he noted.
Demand for renewable energy has been strong in the region, Padmanathan further said. Dubai could end up in about 20 years with a grid of 20,000MW, with 5,000-6,000MW of that coming from renewable energy.
“Jordan has hesitantly started to step into renewables, unsure whether it will be price competitive. Now they're seeing the projects coming through, and the speed of deployment, they can't get it out fast enough. Egypt I fully expect will embrace more and more renewable energy, wind, CSP [concentrated solar power],” he pointed out.
The kingdom's plans had centered around King Abdullah City for Atomic and Renewable Energy — Ka-Care — a $109 billion plan to provide 40,000MW of additional power generation capacity from solar power, and another 21,000MW from geothermal and wind power by 2032.
“They (Saudi Arabia) are completely convinced of the renewable energy story and that it has a part to play in the fuel mix. That's not a debate that needs to be initiated. The only questions now: how much, how fast and how do we do it, and extract as much value out of it,” he added. — Agencies


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