In just over a decade, solar energy has evolved from being relegated to highly specialised applications that justified the high cost, or heavily subsidised programmes entirely dependent on continuing policy support from governments; to increasingly capturing a large share of the total power generation market on the strength of econ-omics alone.
At the end of 2015, the unsubsidised Levelised Cost of Electricity (LCOE) of utility-scale thin film solar stood in the range of $0.05 (Dh0.18) to $0.06 per kilowatt-hour, which was lower than any conventional generation technology operating without the benefit of subsidised fuel.
The UAE, of course, played an important role in influencing these record low prices thanks to a groundbreaking tariff of $0.058, bid by ACWA Power and TSK using high performance First Solar modules, for the second phase of the Mohammad Bin Rashid Al Maktoum Solar Park in Dubai.
Today, policymakers, investors and the public increasingly recognise that we are in the midst of an energy transition and that solar energy has reached the prognosticated tipping point. While there is no doubt solar is a sustainable response to the environmental and opportunity cost of hydrocarbon-fuelled power generation, its competitive economics are increasingly coming to the forefront. What is it that has changed over the last ten years that has earned solar power the recognition of being a reliable and affordable energy resource, able to hold its own against conventional power generators?
Some of the factors have been policy and investing foresight, while some has been good luck arising out of vicious cyclicality. Early and generous policy efforts in many parts of the world generated significant new demand that was relatively cost-insensitive. This led to a scaling of the industry not seen before, which resulted in technology advancements and capacity additions. When it became clear that much of this policy support was too costly to be maintained long term, it forced a brutal period of consolidation and cost cutting.
Many view this process as part of the growing pains that any maturing industry can be expected to experience. I tend to believe it is relatively unique. After the solar bubble burst in 2011, the industry was forced to grapple with a new, unsubsidised reality which made competitiveness — both technological and cost — critical for survival. Even as the industry continues to consolidate in this brutally competitive environment, it is clear that the financially fit and innovative will not only survive, but thrive.
The global photovoltaic industry consists of many different competitors with a variety of technologies and widely differing strategies and market focuses. First Solar, with an eye on a long-term play opted to invest heavily in research and development, successfully pushing our thin film Cadmium-Telluride semiconductors to unprecedented levels of conversion efficiency, while continuously attacking the entire value chain to drive down LCOE. We are not alone as many other competitors have also been advancing their technology and improving cost competitiveness.
The cumulative result has been a global decline in the cost of PV modules, which has made solar more accessible and affordable than it had ever been before. The cost levels achieved, not just by First Solar, but also by many participants, are proving to be one of the primary triggers behind the global energy transition.
Policy support has been and will be important, but the scale of the change that is occurring is only possible with the dramatic evolution in the cost structure. One sign of the far-ranging impact of this transition is the growing recognition by hydrocarbon-rich nations that their renewable resources may be just as important in the long term and that leadership in this transition is in their best interest.
Abu Dhabi was one of the first to lead the charge, as early as 2009, when it commissioned the region’s first grid-connected PV power plant in Masdar City and then followed it up with Shams I which was, until recently, the world’s largest Concentrated Solar Power (CSP) plant. Equally important is Abu Dhabi’s extensive investment, through Masdar and the Abu Dhabi Fund for Development, in promoting renewable energy in other parts of the world — as near as Jordan and as far as Fiji. And now, the Abu Dhabi Water and Electricity Authority is planning a 350 megawatt (MW) PV plant in Sweihan, which will be one of the biggest projects of its kind in the region.
Staying in the UAE, Dubai doubled down on an initial 100MW second phase of the Mohammad Bin Rashid Al Maktoum Solar Park, thanks to the record-low tariff and is now in the process of tendering an 800MW third phase of the Park.
In other parts of the Middle East, Saudi Arabia has plans for multi-gigawatts of solar, while Egypt and Jordan have both recognised that they need to tap into their most abundant resource in order to achieve energy security. Oman, Kuwait and Qatar, all have initiatives to exploit solar energy on varying scales.
Let us take a step back to take it all in — these investments, backed by experienced investors and financiers, are worth billions of dollars. Without exception, the key metric for these projects is profitability and these solar power plants are treated as valued assets, capable of delivering long-term value. From this, it is evident that the critical difference between solar energy in 2006 and 2016 is that solar is now capable of positively affecting the bottom line for investors, lenders, independent power producers and utilities. This is the real tipping point in the energy transition and an important step towards eventual ubiquity.
What will the next 10 years look like? This is something that I am looking forward to discussing with Saeed Mohammad Al Tayer, managing director and CEO of the Dubai Electricity and Water Authority (Dewa) and Dr Ahmad Belhoul, the CEO of Masdar, when we talk about the future of renewables at the World Future Energy Summit in Abu Dhabi.
— James ‘Jim’ Hughes is the chief executive officer of First Solar. With over 10GW of PV modules installed worldwide, First Solar is a leading global provider of solar energy solutions.