Costs tumble as Dubai's Mohammed bin Rashid Al Maktoum Solar Park sets the mark

The hotly contested race to win the latest phase of work at Dubai’s utility-scale solar plant is pushing bids down to record-breaking lows, at less than half the price of power generated by natural gas, potentially helping to boost the emirate’s efforts to diversify its energy mix.

The Mohammed bin Rashid Al Maktoum Solar Park is the largest single-site project to generate electricity from solar energy in the world, with a planned capacity of 5,000 megawatts – enough to power 800,000 homes – by 2030 and a total investment of Dh50 billion, according to Saeed Al Tayer, the managing director and chief executive of the Dubai Electricity and Water Authority (Dewa).

Dewa has received five bids for the park’s 800MW third phase, with the lowest at 2.99 US cents per kilowatt hour (kWh).

That compares to the second phase’s winning bid last year, a then world record 5.84 cents per kWh, from Saudi Arabia’s Acwa Power and its Spanish partner TSK. The average cost for power produced from natural gas in the UAE, its biggest source, is about 7 cents per kWh, according to industry experts.

The solar park was initially slated to be 1,000MW by 2030, and Dewa has increased capacity twice as the price of solar has steadily dropped.

Dewa received 95 expressions of interest for the third phase in September. Bids were submitted at the end of last year. With only five remaining applicants in the running, the utility provider is reviewing bids and looking to award the scheme in June.

“The next step in the bidding process will review the technical and commercial aspects of the bids to select the best one,” Dewa said.

Among the companies vying for the project, Abu Dhabi’s Masdar with partner FRV, China’s Jinko and Acwa are said to be the most competitive. When contacted by The National, Masdar and FRV referred questions back to Dewa.

Last week, Mr Al Tayer and Mohamed Al Ramahi, Masdar’s chief executive, met in Dubai to discuss ways to enhance cooperation and “exchange experiences in clean and renewable energy”.

Dubai is targeting a share of power output from clean energy sources of 7 per cent by 2020, 25 per cent by 2030 and 75 per cent by 2050.

The potentially new record low price for the third phase of the Dubai plant could turn the tide for solar energy in the region, but it could also pose major risks for project developers, according to Gus Schellekens, partner at Ernst & Young.

Mr Schellekens added: “There is a danger of driving prices down too quickly just in an attempt to win work by bidders,” he said, adding that the point may have already been reached where little profit is on offer for the winning bidder. You want to make sure that you attract companies that are robust and reliable enough to see the project through to completion.”

Mr Schellekens said the pressure to bring down the cost of utility-scale solar is mounting. Italy’s Enel bid for a solar project in Mexico at 3.5 cents per kWh to be delivered in 2019, according to Bloomberg New Energy Finance.

Regional ambitions for expanding renewable energy capabilities are building. Last week, the Abu Dhabi Water and Electricity Authority pre-qualified 34 companies for its 350MW photovoltaic park in Sweihan. And Saudi Arabia could require US$20 billion of investment to meet its renewable energy targets as it also looks to diversify its economy away from its dependence on oil by 2020.

The country has set an “initial target” for the installation of 9.5 gigawatts of renewable energy as part of its National Transformation Plan.

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