Solar in spotlight with UAE fuel subsidy liberalisation

As the Governement’s move to liberalise fuel subsidies places UAE petrol and diesel in line with world market prices, the fluctuation may represent a more difficult path for solar power providers.

The Dubai clean energy investment company, Adenium Energy Capital, believes that the removal of fuel subsidies is generally positive, allowing for free-market competition. But it is not an all-rosy outlook as volatility over the past year has created economic struggles for many oil-reliant economies.

Brent crude fell to a six-year low in August to below US$50 a barrel, down more than 55 per cent from highs seen a year ago of $112 a barrel.

“The downside of subsidy removal for consumers is that fuel prices will fluctuate with the world market, so the long-term visibility is less certain,” says Jeremy Crane, the chief operating officer of Adenium.

““Yet solar provides a further hedge against this fluctuation,” he says. This year, his company invested US$10 million in hybrid mobile solar-diesel power units provided by the UAE company Enerwhere. Mr Crane says the decision was taken to hopefully capture some of an estimated Dh4 billion diesel generator market.

However, for the Bond Interiors managing director, Saad Moaswes, solar diesel generators still are not cost-efficient for his company. “Of course we considered a solar diesel hybrid system, but it’s not economical due to the cost of the battery needed,” he says.

Batteries would be needed to store the solar energy produced during the day as most of the power consumed at Bond Interior’s labour camp in Ajman is at night. An expert based in Abu Dhabi says a facility such as a labour camp may need 50 kilowatts of power for 10 to 12 hours during the night. A solar power storage battery costs about $500 per kilowatt hour.

Mr Moaswes says a hybrid unit would be cost-effective after seven to 10 years only if the solar power generated was used during the daytime – meaning no battery required.

But for Adenium Capital, the major factor may just be market volatility. Mr Crane believes solar power will help mitigate any surge in market prices.

“We can provide customers with equipment leases where they will know their cost of power for the next 20 or more years,” he says.

Yet with diesel prices in the UAE falling, it might be a while before many companies consider solar-diesel generators.

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