Saudi Arabia Aims to Offer World's Lowest Solar Power Costs

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Saudi Arabia plans to offer the lowest levelized cost of energy (LCOE) for solar power. LCOE is a calculation of the cost to generate electricity at the point of connection to a load or electricity grid over the lifetime of a project. It includes the initial capital discount rate and the costs of continuous operation, fuel and maintenance. Saudi Arabia hopes to reduce its LCOE below that of 2009 by a factor of four.

Solar-sourced power costs have fallen dramatically during the last five years due to lower module prices and balance-of-systems costs, as well as increased competition in development and engineering, procurement and construction (EPC), according to Thierry Lepercq, president of Solairedirect (Paris, France), a developer of large photovoltaic (PV) power plants.

Financing costs have also decreased as investors recognize the low-risk profile of solar assets, as a result of which solar power is now cheaper that most alternative power sources, Lepercq said.

For systems with the right economies of scale (10 megawatts (MW) and above), solar power can now be generated at between $70 and $100 per megawatt hour (MWh).

In Saudi Arabia, it is possible to reach a solar LCOE of about $70 per MWh, in the higher irradiation/elevation areas of the western parts of the Kingdom, and about $90 per MWh in the Gulf area, Lepercq said.

The cost reductions can be expected to fall to between $50 and $70 per MWh by 2020 as cost factors continue to improve, he said.

"With access to all the critical elements--low-cost finance, land availability, high solar irradiance and locally based skilled resources--there is no reason that Saudi Arabia cannot achieve some of the lowest LCOEs in the region," said Raed Bkayrat, vice president for Saudi Arabia at First Solar (NASDAQ:FSLR) (Tempe, Arizona), a manufacturer of photovoltaic modules.

The second Desert Solar Saudi Arabia conference will be held in mid-September in the Saudi capital Riyadh, organized by the Saudi Arabia Solar Industry Association (Riyadh) and Solarplaza (Rotterdam, Netherlands).

For related information, see January 31, 2014, article - Middle East Bets Big on Solar Resources.

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