Dubai: Three factors are working against greater uptake of solar power generation among UAE businesses, says Jeremy Crane, CEO of alternative energy consultancy Yellow Door.
Cost isn’t one of them. Crane estimates going solar saves Dubai firms 15-20 per cent on energy bills.
In an interview at Yellow Door’s offices in Jumeirah Lake Towers, just hours before US President Donald Trump announced the US’ withdrawal from the Paris Climate Accords, Crane expressed confidence the commercial solar industry’s future in the Middle East.
Yellow Door recently completed an energy and water savings project for Novotel in Fujairah, and installed solar panels for Unilever’s factory in Dubai Industrial Park, which opened in December. It is working with several major retailers and construction companies.
He cited an increasing move to energy diversity, and authorities’ increasing acceptance of alternative energy throughout the Middle East.
“In Dubai people see it as something that’s exciting. It’s sexy. It’s not bleeding edge of new opportunities but it is the leading edge of where a smart business should go. I think there’s a very strong appetite for it. But there are hurdles to adoption,” he said.
Top of Crane’s list of challenges is the short-term business environment. “In many cases businesses have a short-term lease. If you only have a 5- to 10-year lease, why would you get into a long-term investment?” he said.
The second obstacle is technical — a firm’s building may not be strong enough to support sufficient solar panels, it may not have a suitable roof, or it may be located next to a dust-producing neighbour that would reduce panel efficiency and increase maintenance costs.
Finally, he believes some firms — particularly those whose revenues are doing well — may not prioritise a reduction in energy costs. “Multinationals that have a deeper management structure are more aware of these opportunities and are definitely moving forward,” he added.
Yellow Door’s business model is to offer solar panels on a lease-to-buy contract; Crane pointed out that their clients therefore have no capital outlay, and he dismissed return-on-investment as a factor.
Over the last five years, he says, the trend in utility-scale generation (see box) is for “continued price decreases as the equipment becomes less expensive, as the financing becomes less expensive. The utilities are doing an excellent job at getting very inexpensive energy from solar.”
Although there has been a reduction in prices in distribution generation, he said, there were fewer economies of scale, fixed costs such as the price of meters, and higher financing prices, that kept the unit price higher than utility-scale generation — though often still cheaper than the grid price. The per-unit savings depend, of course, on the local price of electricity from the grid.
“There has been a decrease, but the price drivers for distributed generation are different... But distributed solar is still in most markets significantly less than the cost of plug power.”
The distributed generation segment accounts for between 50 per cent and 70 per cent of solar power generation in developed countries such as Germany and the US, Crane said.
“While the headlines typically focus on megaprojects, the 300 megawatt (MW)-type scenarios, there’s a very significant market share for distributed solar energy.”
The penetration of distributed generation is, however, far lower in the Middle East, he said, but it will expand.
“We like Jordan,” he said. “There are two factors that make Jordan great for us. The first is the cost of power there — it’s at least double that of Dubai, in some cases triple, depending on your type of business. The second is that they allow wheeling of power.”
Power wheeling means a private enterprise can generate power at one location, feed it into the grid and consume it elsewhere. A firm is not obliged to generate on site.
The ability to feed power into a grid alleviates one of the technical difficulties of solar power: storage of power in batteries or capacitors. While Yellow Door does advise storage capacity in areas such as East Africa, where the grid is unreliable, “keeping it local we don’t see batteries as something that we’re likely to adopt in the future. The grid is offering us that storage capacity.”
Isolated sites, though, will be able to take advantage of the ongoing revolution in battery technology, and associated price drops. “At this point we’re keeping our eyes on the market, seeing what they’re going to deliver,” Crane said. “But I think in the next 10 years there will be an energy revolution, where the centralised utility will become much less relevant because storage on a local basis will be cost effective.”
The Gulf is one of the highest carbon-producing areas per capita. Crane believes that will change.
“Through adoption of solar at the distributed level, there’s a significant potential for everyone — business owners, residential owners — to change that.
“And our generation is the one that’s going to do it. People today working in the energy sector over the next 15 years are going to move us from a carbon intensive world to one that can be carbon light.”
Does he believe that change will be in time to prevent the worst effects of climate change?
“It depends how many people get on board.”
Terminology
Jeremy Crane, CEO of alternative energy consultancy Yellow Door, divides the commercial solar market into two broad areas: utility-scale generation, large projects undertaken to sell electricity utilities; and distributed generation, undertaken by private firms to offset or replace their grid requirements, which he defines as running from around 100 kilowatts (KW) of capacity — enough to run a moderate-sized community grocery — to around 10 megawatts (MW). Yellow Door specialises in distributed generation; it does not engage in the market for domestic or small businesses.
