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Is Dubai about to set a new normal for solar tariffs?

Is Dubai about to set a new normal for solar tariffs?


It was another week of a record-shattering solar tariff, with Dubai getting a lowest bid of 2.99 US cents per kWh for an 800MW plant planned by its Electricity & Water Authority. That is 15% lower than the previous record set in Mexico last month by Enel Green Power for 1GW of cumulative capacity.

Dubai’s state utility said it received five bids for the 800MW project, which will be the third phase of the Mohammed bin Rashid Al-Maktoum solar park. The identity of the winning bidder is yet to be announced. The facility is planned to have a capacity of 5GW by 2030.

The lowest priced solar power has plunged almost 50% in the past year. Saudi Arabia’s Acwa Power International set a record in January 2015 by offering to build a portion of the same Dubai solar park and supply power at 5.85 US cents/ kWh. Records were subsequently set in Peru and Mexico before Dubai reclaimed its mantel as purveyor of the world’s cheapest solar power.

Plunging costs but also the bankruptcy of the world’s biggest developer, SunEdison, have spurred questions about whether the cheapest projects will be profitable.

Dubai’s utility did not identify the developers behind the record-low bid it received. MEED reported that it is a group including Masdar Abu Dhabi Future Energy, Spain’s Fotowatio Renewable Ventures and Saudi Arabia’s Abdul Latif Jameel. Enel Green Power chief executive officer Francesco Venturini, whose company bid 3.5 US cents/kWh in Mexico last month, said in an interview that his projects would make decent money even with record-low prices for electricity. “There is no value in winning without margin attached,” Venturini said in an interview in Brussels last month. “I have two investment committees and two boards of directors I need to present my projects to and they want to see the money attached to it. So trust me, there is margin.”

In a note titled Dubai’s 3-cent solar: Is this the new normal? Bloomberg New Energy Finance said: “This is indeed a new record-low solar power price bid, but we do not know whether it is escalated with inflation or by another rate over time. This is like offering a loan without stating the interest rate.”

Tesla Motors rocked the electric vehicle world once again by announcing plans to produce 500,000 automobiles annually, starting in 2018, against the original plan of 2020. It also plans to deliver some 80,000-90,000 new Model S and Model X vehicles this year. “Increasing production fivefold over the next two years will be challenging and will likely require some additional capital, but this is our goal and we will be working hard to achieve it,” chief executive Elon Musk said in a letter to investors posted on its website.

As the penetration of electric vehicles increases, so will the demand for charging points. In California, in response to a request from regulators, local utility Pacific Gas & Electric submitted plans to spend $160m raised from ratepayers to roll out more than 7,500 electric filling stations. At hearings before the state Public Utilities Commission in late April, private operators expressed their opposition to handing over a big chunk of the market to the utility. California has more than 200,000 electric cars on the road, but Governor Jerry Brown wants to raise that number to 1.5m by 2025.

SolarCity – the largest installer of rooftop solar – managed to raise funds by selling revenue from a collection of rooftop solar leases to Manulife Financial, using a new financing model to raise $227m. Under the so-called “cash equity” deal, Manulife’s John Hancock Financial unit acquired the long-term revenue streams for 201MW of residential, commercial and industrial leases in 18 states, SolarCity said in a statement. SolarCity retains ownership of the rooftop systems and will be responsible for servicing them.

Rooftop power is the fastest-growing part of the US solar industry, and has been driven by leases that typically require no upfront payment and generate steady monthly income. Another rooftop solar company, Sunnova, arranged a $175m line of credit from Goldman Sachs Group last week. The industry is, however, facing multiple headwinds in the form of regulatory obstacles, high costs and uneasy investors. Detailed analysis can be read in our US residential PV tracker: Q1 2016 review.

Australia’s Clean Energy Regulator said it would enter into 73 new contracts to buy domestic carbon credits worth AUD 516m ($387m) after the latest Emissions Reduction Fund auction round. The contracts would result in the purchase of 50.4m tonnes of carbon abatement at an average price of AUD 10.23/tonne of purchased abatement. The majority of the contracts were for projects that boost the amount of carbon stored in landscapes, either by regenerating once-forested areas or by preventing deforestation.

SunEdison, the clean-energy giant that filed for bankruptcy protection last month, will be delisted from the New York Stock Exchange on 17 May. The removal will come almost a month after SunEdison’s 21 April bankruptcy filing, citing $16.1bn in liabilities.

Oracle agreed to pay a 30% premium to buy Opower, the provider of cloud computing services to utilities, valuing the company at about $532m. The latter’s board unanimously approved the sale to Oracle, which the companies expect to complete by the end of the year.

The US government extended the construction timetable for wind farms to qualify for federal tax credits by another two years, it was announced last week in a statement by the US Internal Revenue Service. Builders now have four calendar years to finish developments and still be eligible for the production tax credit. The changes will have a positive effect on new wind build with a peak in build likely by 2020, before a smaller nosedive in installations thereafter as qualifying deadlines to receive the credit have been softened, according to Bloomberg New Energy Finance analysis.

Anand Gupta Editor - EQ Int'l Media Network


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