Solar cheaper than fossil fuels in Middle East

From REW:

The Emirate of Dubai set a new world record for the cost of solar power on May 1, 2016 with the Dubai Electricity and Water Authority (DEWA) receiving bids for the 800 MW Sheikh Maktoum Solar Park Phase III as low as 3 U.S. cents per kilowatt-hour (kWh).

Editor’s take: In this case, the cost of capital is driving project development costs. As Apricum’s Moritz Borgmann surmises in this article, the lowest bidder here (Abu Dhabi’s Masdar in partnership with Spanish developer FRV, which was acquired by Saudi Arabia’s Abdul Latif Jameel group in 2015) surely has access to the Abu Dhabi government’s wealth and can borrow at rates that commercial banks could not match. This explains why JinkoSolar’s 3.69 US cents per kWh bid and First Solar/Acwa Power’s 3.96 US cents per kWh bid, still incredibly low, were beaten.

Still however, the top three bids are unprecedented and show that unsubsidized the cost of solar power in the Middle East beats fossil fuels. Said Borgmann: “As recently as October 2015, Dubai Electricity and Water Authority (DEWA) awarded the new Hassyan coal power station at a much higher tariff of 5.177 US cents/kWh. Gas-fired power plants in Dubai have an even higher generation cost.”

Yeh, but it’s ugly.

Houses and Holes
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Comments

  1. Other factors that likely played a part are cheap labor, cheap land, non-existent red tape (compliance costs) and low taxes.

    • Cheap land… if only Australia had plenty of desert that has zero value…….

      • Their cheap land is much closer to where the power is needed than ours though.

      • @jason

        That would only impact transmission and distribution costs though. We are talking about generation costs.

      • Sure but if you have to build a whole lot more transmission lines from the middle of the Pilbara to some existing East Coast grid then that cost is still something that will need to be paid for in addition to the 3-4c/kWh.

      • Yes, but to compare apples with apples, we need to compare generation cost only, and that’s quite a milestone to have it cheaper than fossil fuel.

      • UrbanWasteland

        Remind me… across what distances is hydroelectric power transmitted in Canada?

    • It’s called competitiveness. And you are correct, I’m reading between the lines here, Australia isn’t. Doesn’t mean the argument solar vs fossil is false.

      • I am not disparaging solar. I am just pointing out that it will be a long time until we will see local cost/kW anywhere near $.03/kWh.

      • @joao. not true at all. commercial solar is now 70/mWh in australia. solar is falling at 20%/annum in cost.therefore we will have 3c/kWh in under 5 years. regardless of redtape. moores law has come for electricity.

    • Totally. It’s off the backs of very poor people who are killed and discarded without a care.

  2. GeordieMEMBER

    “Yeh, but it’s ugly.”

    Don’t worry HnH, we can screen them out with wind turbines.

  3. “Yeh, but it’s ugly.”

    How can I not come back here again and again when the level of insight is so, consistently, deep and profound. This valuable post just says so much about how this particular project relates to the transition in the energy supply market including new players, new technologies/supply chains, new geopolitics and the macro economic overlay that it engenders.

    Bravo sir. I salute your genius.

  4. Today's Empire Tomorrow's Ashes

    I get the feeling we really are witnessing coal’s death spiral.

    I mean, things are bad (glad I am seeing the GBR in the next month), but I kind of feel we are turning a corner with respect to power.

  5. All we need now is an auction to determine the cost of storing electrons.

    Solar panels are dirt cheap.

    • Did you know that in a lot of places peak power draw is during the day… so to begin taking advantage, it doesn’t have to be stored… and the storage will come soon enough, don’t you worry about that!

      So how’s that ‘little black rock’ campaign working out for you then?

      • You seem to be badly misinformed about me!

        I never voted for John Howard.

        I love solar panels and hate coal. I am anti-immigration just like this website is!

        Till 12 months ago, I did not know that immigrants cheat on exams to come here.

        You may be pleased to know that Monash Uni and QLD Uni are no longer in the top 100.

      • Plenty of low-cost, low-tech, low-latency (immediate), endlessly scaleable ideas for storage. The best low-tech options use gravity.

        What’s lacking is an enormous amount of infrastructure spending needed to scale it up to a level that’s useful. Nah, screw that, let’s buy houses on credit.

        Couple of my favourites:

        ARES: http://www.aresnorthamerica.com/
        FLES: http://euanmearns.com/flat-land-large-scale-electricity-storage-fles/

        Higher tech, these look like a contender to displace lithium batteries in stationary applications (more pragmatic): http://cleantechnica.com/2015/06/21/flow-battery-vs-tesla-battery-smackdown-looming/

        One point (made by Euan in his article linked above) does need attention: there’s no obvious, pragmatic solution for buffering against seasonality (storing excess energy in summer that will last through the winter). Something that is much more of a concern in Europe than it is here.

        Such buffering would likely have to be chemical. I’m certain that engineers can come up with many solutions, but we’re talking about a huge level of investment here to roll it all out at scale at a time when the private sector simply isn’t interested and governments are pathetically weak, short-sighted and feeble-minded, enthralled to corporate interests that merely want to preserve the status quo.

      • Keep away from Euan Mearns. He’s a nasty little oil industry operative, and a climate denier to boot!

      • @R2M: I’m OK with Euan. Been reading him since The Oil Drum days and his signal to noise ratio is pretty damn good. Doesn’t mean I have to agree with everything he says, but he at least goes to the trouble of digging into data analysis to form his opinions.

    • Tassie TomMEMBER

      There’s heaps of storage capacity in Tasmania which can be turned on and off at a moment’s notice for free. Unfortunately we’ve discovered that the power cables connecting us to the mainland are unreliable.

      “Tumut 3” in the Snowies is one of the most awesome power stations in Australia – it’s reversible. Water is pumped back up to the top at night time and let down in the day time – this saves 1500MW of peak coal generating capacity and it saves the same amount of coal idle time at night. 80% total cycle efficiency.

      Tassie doesn’t have any reversible power stations, but we could have. Lake Gordon would be perfect – build a dam half way along it (pretty obvious where to on a map), permanently lower the level of the downstream side, and build a massive high-volume low-head reversible power station in the middle. We could even build a tunnel from Serpentine Dam (the deepest part of New Lake Pedder) to Lake Gordon, draining New Lake Pedder and restoring the original Lake Pedder.

      Now, for a reliable power connection to the mainland…..

  6. Can someone explain how supplying energy below cost with magic money is going to “end well”

    • creating a speculative answer to your challenge:

      middle eastern oil wealth seeks to diversify into non-oil tech/business that they see as being dominant in future energy markets. They make the play as a sector/exposure “hedge” by allocating sovereign debt funds or gov backed guarantees (or similar programs) to lower capital costs for local businesses to get out there globally and get their hands dirty.

      Should a new less-oil world eventuate they’ve taken some costs but have foot in the door/some leverage if the global transition eventuates, which would otherwise weaken their wealth/geopolitical position if oil demand weakens on a long term basis.

    • Robert, that’s a very poor astroturfer response. You aren’t worth the money they’re paying you, matey!

      🙁

  7. I’ve been saying it for a while now: PV is the low price winner for all daytime electricity.
    what’s interesting is that with these ultra low electricity generation costs the door to open for energy storage based on Hydrogen, possibly with the additional synthesis of Methane, Methanol or even Hydrogen Peroxide for longer term storage.
    Modern fuel cell technology will deliver 60% efficiency Methane/Hydrogen to Electricity so couple this with Hydrogen from electrolysis (70% efficient) and you have a reasonable round-trip efficient energy storage system (40% round trip). btw this is all technically possible today and even available in residential scale systems.

      • Yea maybe, but with how much water use and what electricity distribution costs
        AND
        who needs the added hassle of Solar Thermal when PV does the job at your house at these price points?

      • Solar thermal is utility scale. No need for every bogan to invest in panels, inverters, batteries and the rest.

    • Solar PV makes sense for a hot water system but the EROEI is too low for power unless you can charge your electric car with it, then it really helps the world not just your own electricity bill. Great if you are a shiftworker, otherwise as you say power storage EROEI is still in the too hard basket.

      • I’m not a big fan of EROEI calculations because they fail to take into account the production engineering innovations that cut costs (energy) and enable volumes unimagined in the original EROEI calculations.
        Look back just 10 or 15 years ago at the ridiculous calculations on the upper band for residential PV and compare it with the recommendations based on EROEI calculations for utility scale PV. Clearly Residential was the winner and as a result of this and the market dynamic that goes with it we achieved projected 2050 PV prices in 2015. WHEN someone integrates the whole package Residential PV + household demand management + daily storage + longer term energy storage all as one affordable product (say under $20K). The demand for this product will be enormous and the production costs (both $ and EROEI) will fall like a lead balloon.
        IMHO Utility scale electricity is drawing it’s last breaths and like all End Of Life products their playing around with maximizing returns…it’s this game of profit optimization that bifurcates the market forcing the hands of the majority that would have happily remained fence-sitters where does EROEI weigh in on these issues.