A solar power project is likely to register a per kWh price below two US cents at some stage during 2017, according to analysis firm GTM Research.
As part of its 2017 market forecast, the company suggested that an impending tender round in Saudi Arabia was the most likely contender following on from a 2.3 cents tender for the Sweihan project under similar conditions in Abu Dhabi.
“Similar to the conditions that brought record low bids in Sweihan, namely a long project timeline, an escalating or split tariff, near-zero land cost, permitting costs, taxes, and most significantly, highly-attractive financing terms, the first Saudi tender could create a perfect storm for another record-setting bid that could dip below two cents,” Ben Attia, research associate at GTM Research and lead author of the report told PV Tech.
The Saudi Arabian market has long been “the next big thing” but substantial tenders failed to emerge. A target of 9.5GW of renewable power capacity by 2023 replaced a goal to invest US$109 billion in solar over the course of 20 years.
Responsibility for developing the necessary legislation has changed hands and an independent power producer (IPP) model, with no reliance on government investment, is now in place.
“It’s a brand new market that’s been talked about in fits and starts that seems to be taking off for real this time. If the Saudis want their solar goals to be taken seriously and want an attention-grabbing entry into the global market, there are ample resources present to be able to create an enabling environment that could host a sub two-cent PPA,” said Attia.
While Saudi Arabia is not unique in its ability to reach these low prices, Attia stresses that they are unlikely become the normal benchmark price for large-scale solar.
“Many of these conditions, though not to the same degree, are also present in the UAE, of course, Mexico, and potentially in Qatar in a year or two. It’s important to note that we don’t view these ultra-low bids as a long-term sustainable trend, and we believe only projects that capitalize on scale, preferential non-recourse financing, and free land, permitting costs and long construction timelines can achieve these prices, and their viability as bankable assets is yet to be proven.
“We expect world-leading bid prices to stabilize in 2018,” he added.
At least one bidder dropped out of the Abu Dhabi tender over concerns with the low bids.
Source:pv-tech
