Study: Solar Power is Cost Effective Way to Go for UAE

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The United Arab Emirates (UAE) could save $1.9 billion a year by 2030 by beefing up the share of renewables in its energy supply, according to a new report. The country could boost the share of renewable energy to 10% of its total supply--and almost 25% in the power sector, according to the report by the UAE Ministry of Foreign Affairs, International Renewable Energy Agency (IRENA), and Masdar Institute of Science and Technology.

Solar and wind power may be the cheapest sources of new energy supply in the region, according to the report.

"Renewables have decisively emerged from a niche technology to a major component of the energy mix and have been the majority of global power addition for the last three years. The dramatic technology cost declines we are mapping present a real possibility to move to a sustainable energy future even in the hydrocarbon producers in the MENA [Middle East-North Africa] region" said IRENA Director General Adnan Z Amin.

Currently, nearly 100% of the UAE's power comes from natural gas. Sharp declines in renewable energy costs in the UAE, as well as rising costs for natural gas, as domestic production declines and the country turns to more expensive imported sources, serve as incentives to use renewable energy, the report says.

Solar photovoltaic PV costs have fallen 80% since 2008, while the cost of new gas supplies has increased from less than $2.5 per thousand British thermal units (MMBtu) in 2010 to between $6 and $8 per MMBtu for domestic gas, and $10 to $18 for imported gas, even after the recent decline of liquefied natural gas (LNG) and oil prices. The report estimates that solar, wind and waste-to-energy are preferable for power generation when new gas is above $8/MMBtu, making them immediately competitive in the UAE, where natural gas supplies nearly 100% of power.

Solar costs are poised to decrease even further. In January, the tender for the second phase of Mohammed bin Rashid solar park in Dubai was awarded to the lowest bidder for under six cents per kilowatt hour (kWh) for a 25-year fixed contract. This is the lowest solar price ever achieved worldwide.

"The report is an eye-opener. It provides policy makers and investors with an objective cost baseline, making the clear case that renewable, and especially solar, will have a much larger role sooner than we ever expected in the UAE and Middle East," said Fred Moavenzadeh, president of the Masdar Institute.

The report notes that solar and wind are still challenged by intermittency, which will require natural gas to fill gaps in output. But the savings from generating solar power during the daytime, instead of consuming gas, are so great that they could justify 17,500 megawatts (MW) of PV in the UAE by 2030, up from around 40 MW today.

For related information see July 29, 2013, article - GCC Countries Look to Renewables to Avoid Energy Import Dependence, and October 9, 2014, article - Gulf Cooperation Council Investments Drive Power Demand Through 2020.

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