A rather meaningful piece of energy news went almost unnoticed in recent weeks. The Abu Dhabi Power Corporation announced the lowest tariff for solar energy in the world. The new record came as the winning bid for the upcoming 2 GW solar power plant, the Al Dhafra Solar PV project, set the world’s most cost-competitive tariff for solar PV energy, at USD 1.35 cents/kWh (AED 4.97 fils/kWh in local currency). This is approximately 44% lower than the tariff set just three years ago for the ‘Noor Abu Dhabi’ project – Abu Dhabi’s first large-scale solar 1.2GW PV project and a world record tariff-setter at the time – which commenced its commercial operation back in April 2019.
The gigantic photovoltaic power plant is scheduled to come online in mid-2022. Expected to cover an area of 20 square kilometers, it will almost triple Abu Dhabi’s solar power generation to 3.2 GW and help the Emirate state achieve its 2030 goal to reduce carbon intensity by 70% compared to 2015. This single addition could on its own supply almost 3% of the entire United Arab Emirates annual electricity demand (~127 TWh in 2018). The Al Dhafra and Noor projects firmly position Abu Dhabi among the leading regions of the world for solar power adoption and price benchmark. To better appreciate the competitiveness of this bid, it’s worth noting that even old and fully depreciated coal power plants have LCOE values around USD 3.3 cents/kWh (see Lazard’s Levelized Cost of Energy 2019).
But why would this piece of news matter? Surely this is a geographical exception, a sunny oasis in a world otherwise dominated by cheap fossil fuels, a result that cannot be replicated worldwide. Well, not really. While the Middle East is naturally bound to become a solar powerhouse in the coming years – its wide desert areas and sunny climate result in typical PV load factors above 1800 kWh/kWp installed – high levels of solar irradiance are actually available throughout the world within a broad range of latitudes. A beautiful map from Global Solar Atlas is worth a thousand words.
As global data show, a vast portion of the planet is in fact ripe for exploitation with ultra-cheap solar power. And the news from the Emirates are indeed echoed by comparable prices set elsewhere over the past year, from Europe to America. The previous solar tariff record belonged to Portugal: the southern European country claimed the spot in July 2019, at about USD 1.64 cents/kWh for a 150 MW project. 211 MW of PV capacity were signed at USD 1.75 cents/kWh in Brazil just weeks before that, while a sub-2 cents/kWh bid was also presented in the same period for the Los Angeles Eland Solar & Storage Center project in Kern County, California (the final version of the project will in fact be a 300 MW / 1.2 GWh energy storage installation – with an aggregate price of USD 3.962 cents/kWh for dispatchable power).
At the levels being reached by utility-scale solar, even northern, rainy countries such as the UK – with half the solar irradiance of the Emirates – could soon see projects achieve LCOEs below USD 3 cents/kWh (if they are not beat by cheaper wind power at those latitudes). We are now at a point where economics alone is the main factor driving the energy transition towards sustainability. With an annual global growth hovering around the 100 GW mark before the coronavirus crisis, solar power is now poised for a long-term additional boost through favourable economic recovery policies planned by most governments around the world. The unfolding economic crisis, likely to push down solar capital costs even further, will only make the PV market even more attractive. Cheap large-scale battery storage, whether coupled to these projects or as stand-alone peaker plants replacement, will be the natural ally.
With the global financial community increasing its focus on fossil fuel divestment and sustainability, we can expect the booming utility-scale solar market to mark its presence in all continents at increasing pace. Investors with deep pockets, looking for stable and predictable returns at a time of increasing uncertainty and change, will safely bet on massive renewable energy developments for reliable returns on their portfolios, while avoiding the volatility and risk involved with projects in the incumbent sources of energy.
Competitive power generation costs make investment in renewables highly attractive as countries target economic recovery from COVID-19, new IRENA report finds.
Abu Dhabi, United Arab Emirates, 2 June 2020 — Renewable power is increasingly cheaper than any new electricity capacity based on fossil fuels, a new report by the International Renewable Energy Agency (IRENA) published today finds. Renewable Power Generation Costs in 2019 shows that more than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants.
The report highlights that new renewable power generation projects now increasingly undercut existing coal-fired plants. On average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation, and auction results show this trend accelerating – reinforcing the case to phase-out coal entirely. Next year, up to 1 200 gigawatts (GW) of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV, the report shows.
Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to USD 23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5% of total global CO2 emissions in 2019. It would also yield an investment stimulus of USD 940 billion, which is equal to around 1% of global GDP.
“We have reached an important turning point in the energy transition. The case for new and much of the existing coal power generation, is both environmentally and economically unjustifiable,” said Francesco La Camera, Director-General of IRENA. “Renewable energy is increasingly the cheapest source of new electricity, offering tremendous potential to stimulate the global economy and get people back to work. Renewable investments are stable, cost-effective and attractive offering consistent and predictable returns while delivering benefits to the wider economy.
“A global recovery strategy must be a green strategy,” La Camera added. “Renewables offer a way to align short-term policy action with medium- and long-term energy and climate goals. Renewables must be the backbone of national efforts to restart economies in the wake of the COVID-19 outbreak. With the right policies in place, falling renewable power costs, can shift markets and contribute greatly towards a green recovery.”
Renewable electricity costs have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains and growing developer experience. Since 2010, utility-scale solar PV power has shown the sharpest cost decline at 82%, followed by concentrating solar power (CSP) at 47%, onshore wind at 39% and offshore wind at 29%.
Costs for solar and wind power technologies also continued to fall year-on-year. Electricity costs from utility-scale solar PV fell 13% in 2019, reaching a global average of 6.8 cents (USD 0.068) per kilowatt-hour (kWh). Onshore and offshore wind both declined about 9%, reaching USD 0.053/kWh and USD 0.115/kWh, respectively.
Recent auctions and power purchase agreements (PPAs) show the downward trend continuing for new projects are commissioned in 2020 and beyond. Solar PV prices based on competitive procurement could average USD 0.039/kWh for projects commissioned in 2021, down 42% compared to 2019 and more than one-fifth less than the cheapest fossil-fuel competitor namely coal-fired plants. Record-low auction prices for solar PV in Abu Dhabi and Dubai (UAE), Chile, Ethiopia, Mexico, Peru and Saudi Arabia confirm that values as low as USD 0.03/kWh are already possible.
For the first time, IRENA’s annual report also looks at investment value in relation to falling generation costs. The same amount of money invested in renewable power today produces more new capacity than it would have a decade ago. In 2019, twice as much renewable power generation capacity was commissioned than in 2010 but required only 18% more investment.
There are some problems we never seem able to solve. The shortage of electrical power is one of them. Ever since President Carter proclaimed an energy crisis in the 1970s, people have been talking about all kinds of weird and wonderful solutions to the issue of energy and – thus far – no one has come up with one single answer.
While solar power is now providing as much as 4 per cent of British electricity, few people appreciate just how quickly electricity production will have to increase. If the internal combustion engine is on its way out then the western world will need to double its electrical supply just to recharge its battery-powered vehicles.
Progress on this scale demands a fundamental rethink of our entire energy supply industry. The beginning of the 21st century saw a group of German engineers doing just that. They developed a plan to harvest solar power in the Sahara desert and transmit the stuff across the Mediterranean using very high-voltage, direct-current cables.
Just as Carter had been influenced by the oil shock of 1973, the Germans had been influenced by the disaster in Chernobyl and a mounting recognition that all technology is associated with risk. At that stage, large scale solar power plants still sounded like science fiction but the potential of solar power had long been recognised.
One German engineer calculated that the amount of solar energy absorbed by the world’s deserts exceeds the total amount of energy consumed by man in an entire year. We’d only need to harness a small proportion of this energy to provide us with all the electricity we are likely to need without any of the usual headaches surrounding pollution or fuel supply.
The Sahara is a vast area of land, larger, even, than the continental United States and extending over several national boundaries. It would take only one or two per cent of the land here to provide the whole of Europe with electrical power. There isn’t a lot of wildlife to destroy in the desert and since the population density is close to zero, we can probably avoid the nimbyists too.
At first sight, though, the Sahara isn’t quite as perfect since much of the land here is still some distance north of the equator. As we approach the equatorial regions of the world, it seems logical to assume that the intensity of sunlight ought to go up. However, the equatorial region of the planet is associated with a much higher level of cloud cover than the Sahara and on balance, about 20 to 30 degrees north of the equator turns out to be the ideal location for a large scale solar power plant.
Plenty of land, plenty of sun, not a lot of cloud and not that far from the nearest major market for electrical power, western Europe.
Some manufacturers are now producing photovoltaic panels that are cosmetically indistinguishable from traditional roofing tiles. It’s easy to envisage a future where it becomes compulsory
Many of the nation states in the region are quite poor with little or nothing in the way of oil or gas reserves. Ever since the 1970s, countries with significant oil reserves have been able to cash in on the oil boom and increase its standard of living overnight, whereas a nation that lacks oil reserves is forced to import at potentially enormous cost. Thus far, this kind of prosperity has been based on geological accident, but solar power is different. Soon, relatively poor countries might have access to a major energy resource of their own, enabling them to generate their own power at home and to export anything left over to western Europe.
So why isn’t it happening?
Part of the appeal of large-scale solar power generation is the opportunity it provides for a secure energy supply. Ever since the early 1970s, western governments have been living in fear of another Opec crisis or – at the very least – some sort of military and political confrontation that might interrupt the supply of energy. When we try to calculate how many lives might be lost or damaged by one source of energy or another, we really ought to factor in how many lives we’d be likely to lose by fighting another war for oil. Politicians who are too young to remember the Yom Kippur War are old enough to understand Putin and the fear that he might try to suddenly cut off the supply of natural gas to western Europe as part of some alternative economic warfare. What will Nato actually do if that happens?
But our friction with the Middle East goes back even further than Yom Kippur. A generation older than my own has not forgotten the Suez Crisis. During the 1950s, the Egyptian president Gamal Abdel Nasser decided to seize the Suez Canal and nationalise the entire project. The countries, companies and investors who had paid for its construction were far from pleased. Attempts at recapturing the canal ended in fiasco. The Egyptians came out of the 1950s quite well.
Against this is the relentless march of progress and the emergence of new tech that has thrown the whole equation into disarray. Just 10 years ago, the environmental movement was obsessed with the idea that western governments should continue to subsidise solar power. In those dim and distant days, solar power was so costly that people had to be bribed to actually use it. This is no longer the case and governments believe that it is entirely reasonable to phase out their solar power subsidies. Whilst this decision may be premature, it’s hard to ignore just how quickly the price of a photovoltaic panel has fallen. Part of the reason for this is mass production and part is the Chinese desire to subsidise their own industry, effectively destroying their competitors.
Panels are falling in cost so rapidly that it is not unreasonable to suggest that we should delay buying them just to wait for the next major price fall. Some manufacturers are now producing photovoltaic panels that are cosmetically indistinguishable from traditional roofing tiles. It’s easy to envisage a future where it becomes compulsory for all new housing to be built with a photovoltaic roof. Given that Britain turns over about 1 per cent of our housing stock every year, it also isn’t difficult to envisage a future where the majority of homes in the country are self-sufficient in energy.
But if the vogue towards a cheap and efficient energy-powered future continues, people are bound to look at the Sahara again. A vision of the desert practically covered in solar power panels is now a reality with a number of projects already having been established in North America and north Africa.
There are already accusations that North African Solar Power represents a rebirth of colonialism with European powers attempting to snatch resources from Africa and seize it for themselves
Engineers in Morocco have built one of the most ambitious solar energy projects on the planet. Using Spanish technology, they have built a system of mirrors designed to reflect the sun’s rays onto a large box that has been placed on a pedestal in the centre of the solar farm. This kind of energy generation is different from photovoltaic panels. It requires moving parts and a different attitude, but it has advantages too.
The mirrors are placed on rotating platforms so they can move throughout the day to follow the sun. By synchronising the position of each mirror to the day-night cycle, the maximum possible energy can be directed at one point. That point is a box containing salt. The salt soon melts into a sort of man-made lava and can be moved as a fluid along pipes where it is used to heat water, which in turn generates steam. The steam can then drive turbines creating electricity. This kind of installation involves multiple moving components and would require more maintenance than a standard PV panel. However, the molten salt can remain hot well after sundown and continue to generate electricity for up to seven hours into the night. Given that a country like Morocco would typically experience about 12 hours of daylight, this still leaves the problem of the energy gap in the early hours of the morning while the system waits for the new dawn, but it’s much more comprehensive than PV. This kind of technology uses a lot of water for cooling purposes and this might restrict its use. But it’s already quite popular and a number of such systems have been built in the United States.
This kind of vision requires us to believe that it might be possible to transmit energy over vast distances. Electricity is pretty ephemeral stuff; it doesn’t lend itself to long-distance transportation. In complete contrast, crude oil is a liquid that can be pumped on and off a cargo ship quite easily. They say that if you stand on the bridge of an oil tanker sailing to Japan you can see the smoke from the funnel of the tanker ahead of you and the tanker behind you. Such is the hunger of the Japanese economy for the dark black liquid.
We still don’t know how to bottle electricity and the problems associated with battery storage remain formidable but progress has been made. There have been major electrical cables under the North Sea and the English Channel for many years now. In the southern hemisphere, the Australian government has also built a cable linking Tasmania with the Australian mainland so the idea of using high-energy, direct-current transmission from north Africa to Europe isn’t quite as far-fetched as it sounds. In these circumstances about 12 per cent of the power generated in the Sahara would be lost during transmission. Most authorities believe that the advantages of increased sunlight intensity associated with the north African environment outweigh the problems associated with this power loss.
And if the north African power plant succeeds? What then? Many of the countries involved have a clear memory of their days as European colonies and for some African politicians this is a difficult memory to forget. There are already accusations that north African solar power represents a rebirth of colonialism with European powers attempting to seize resources from Africa for themselves. Some of the optimists for solar power in the Sahara have suggested that most of our power could be generated in the desert but while this kind of political friction still exists, it’s hard to imagine European governments allowing more than 10 per cent of their grid to be supplied from overseas.
University of Southampton gives us an idea of the current situation through this article on Solar and wind energy sites mapped globally for the first time.
Researchers at the University of Southampton have mapped the global locations of major renewable energy sites, providing a valuable resource to help assess their potential environmental impact.
Their study, published in the Nature journal Scientific Data, shows where solar and wind farms are based around the world—demonstrating both their infrastructure density in different regions and approximate power output. It is the first ever global, open-access dataset of wind and solar power generating sites.
The estimated share of renewable energy in global electricity generation was more than 26 per cent by the end of 2018 and solar panels and wind turbines are by far the biggest drivers of a rapid increase in renewables. Despite this, until now, little has been known about the geographic spread of wind and solar farms and very little accessible data exists.
Lead researcher and Southampton Ph.D. student Sebastian Dunnett explains: “While global land planners are promising more of the planet’s limited space to wind and solar energy, governments are struggling to maintain geospatial information on the rapid expansion of renewables. Most existing studies use land suitability and socioeconomic data to estimate the geographical spread of such technologies, but we hope our study will provide more robust publicly available data.”
While bringing many environmental benefits, solar and wind energy can also have an adverse effect locally on ecology and wildlife. The researchers hope that by accurately mapping the development of farms they can provide an insight into the footprint of renewable energy on vulnerable ecosystems and help planners assess such effects.
The study authors used data from OpenStreetMap (OSM), an open-access, collaborative global mapping project. They extracted grouped data records tagged ‘solar’ or ‘wind’ and then cross-referenced these with select national datasets in order to get a best estimate of power capacity and create their own maps of solar and wind energy sites. The data show Europe, North America and East Asia’s dominance of the renewable energy sector, and results correlate extremely well with official independent statistics of the renewable energy capacity of countries.
Study supervisor, Professor Felix Eigenbrod of Geography and Environmental Science at the Southampton comments: “This study represents a real milestone in our understanding of where the global green energy revolution is occurring. It should be an invaluable resource for researchers for years to come, as we have designed it so it can be updated with the latest information at any point to allow for changes in what is a quickly expanding industry.”
Put simply, Asia is the main source of solar technology and demand for it seems to be however tumbling everywhere as confined resistance to the pandemic is hampering its dynamics. It remains that all renewables account for something like 26 percent of all capacity expansion in the Middle East region. As an exception amongst the most engaged would be Egypt. This emerging economy bets big on Solar as elaborated on by Oxford Business Group could be indicative of all that is happening nowadays.
This Emerging Economy Bets Big On Solar
April 06, 2020
Egypt’s total of 1173 recorded Covid-19 cases and 78 deaths, as of April 5, places Africa’s third-most populous country significantly below the global per capita averages for both counts as the pandemic continues to disrupt the global economy.
However, as a result of the sharp growth in international cases and the gradual closing of national borders, in mid-March the government decided to implement travel restrictions.
Egyptian airports were closed to international flights on March 19 for an initial period of two weeks. This shutdown has since been extended to internal flights and will last until at least April 15.
Additionally, on March 25 the government announced a two-week curfew from 7pm to 6am, while pharmacies and food shops will be the only retail establishments allowed to open on weekends and past 5pm on weekdays. Restaurants may only open for deliveries.
Pre-emptive economic stimulus
As the potential economic fallout of the pandemic began to become clear, on March 22 President Abdel Fattah El Sisi announced a comprehensive LE100bn ($6.4bn) package of measures. This included a LE22bn ($1.4bn) stimulus to support the Egyptian Exchange, which should also benefit from a 50% reduction in taxes on the dividends of listed companies.
In addition, the Central Bank of Egypt announced a 3% interest rate cut in what it described as a “pre-emptive move” to support the wider economy.
In a further bid to mitigate the impact of Covid-19 restrictions on key sectors, the government has committed to support exporters by allocating LE1bn ($63.5m) for export subsidies during March and April, and will furthermore postpone tax payments for three months on facilities and properties occupied by tourism companies.
Energy prices cut
Following the country’s IMF-backed reforms beginning in 2016, energy subsidies have been gradually removed, resulting in a projected price rise for both households and businesses into 2020.
However, in a bid to offset the impact of the pandemic on industrial output, on March 17 the government announced that the price of gas for industrial providers would be reduced from $5.50 to $4.50 per 1m British thermal units.
As part of the same package of measures, the government also announced that the price of electricity would be reduced for heavy industry consumption, from LE1.10 ($0.07) to LE0.10 ($0.006) per KWh. For other industries, the price is to be kept stable for between three and five years.
Boosting solar capacity
Against the current backdrop of challenging economic circumstances, on April 1 it was announced that the World Bank’s Multilateral Investment Guarantee Agency (MIGA) would provide funding for six new solar power plants at Benban Solar Park in the Aswan Governorate in Upper Egypt, one of the largest such installations in Africa.
The amount is guaranteed against the risk of currency inconvertibility and transfer restriction for up to 15 years. It is part of Egypt’s solar feed-in-tariff programme, which provides long-term contracts to private energy companies with a view to generating investment in renewable sources.
“In the face of uncertainty arising from the Covid-19 pandemic, MIGA remains committed to helping drive foreign direct investment (FDI) by supporting investors who are helping Egypt achieve its long-term goals of diversifying its energy mix,” Hiroshi Matano, executive vice-president of MIGA, said in a statement.
While the pandemic has caused a number of delays for the renewables segment, notably the postponement of the construction of four solar plants by domestic firm Inter Solar Egypt, the future bodes well for the expansion of the industry.
“In the current uncertain economic environment, solar energy has become popular, as it can be produced up to 80% more cheaply than other sources,” Yaseen Abdel-Ghaffar, Managing Director of SolarizEgypt and board member of The Solar Company, told OBG. “Although it was initially difficult to secure FDI for projects, banks are becoming increasingly receptive to renewables and a growth in financing is expected after regular economic conditions are re-established.”
Solar operations and maintenance company Alectris has completed a project to automate asset management activity at a photovoltaic plant in Jordan.
Alectris implemented the initiative at the 11.5MW facility with MASE, a solar O&M provider in the Middle East.
The partnership between Alectris and MASE aims to automate and standardise asset management activity across new solar projects in the Middle East and North Africa (MENA).
As solar development has increased in the MENA region, O&M and asset management has “struggled to keep pace”, limiting long-term productivity prospects, said Alectris.
The partnership began in 2016 with MASE responsible for field operations and maintenance services on location, while Alectris provided operations and “legacy expertise” in global asset care.
“Working together, both businesses successfully improved the bankability of the project, which was financed by key development finance institutions operating across the region,” said Alectris.
The initiative involved the integration of Alectris’ ACTIS software platform for solar PV plant asset management, with all data monitoring streams gathered under the single platform to “improve oversight” into project activity.
Alectris managing director Vassilis Papaeconomou said: “Solar development in the MENA region offers a significant opportunity to invest in clean energy projects.
“But if this market momentum is to be maintained, it is imperative that operating plants offer security and stability of financial returns. By partnering with MASE, we’ve been jointly able to combine the latest in asset management software with leading experience in services activity.
“This will ensure that project owners and investors benefit from enhanced and efficient performance reporting and operational management, saving time, reducing costs and ensuring the plant delivers at its optimum. As a result, the plant delivered above expectations with an excellent performance ratio and availability close to 100% over the last three years.”
MASE chief executive Tareq Khalifeh added: “Throughout this collaboration, Alectris have proved to be reliable, dedicated and experienced with a wealth of knowledge that has been indispensable when working in an exciting but challenging market.”
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