Sunny times ahead for Gulf’s solar market

Reuters/Nasser Ishtayeh

• Emirates and Saudi Arabia leading way in solar projects
• UAE home to some of largest solar plants in world
• Market robust in spite of Covid, Ukraine war and inflation

Developers are making the most of an expanding pool of public tenders for the Gulf’s solar market, with the UAE and Saudi Arabia leading the way.

Experts said the sector was in a healthy state despite the coronavirus pandemic and war in Ukraine curbing development, compounded further by the global spike in inflation during 2022.

• Gulf ‘needs to pick up pace’ to hit 2030 solar energy goals
• Dewa extends deadline for bids for sixth phase of solar park
• Saudi to build Gulf’s largest solar power plant near Mecca

“In the last 10 years the renewables sector operated in a deflationary environment, with solar panels and many input materials improving in efficiency and price,” said Andrej Kormuth, a partner in the Dubai office of international law firm Bracewell.

“This trend came to an abrupt end in 2020-2021 following the world’s emergence from the coronavirus consumption hiatus, resulting in a dramatic escalation in prices, including for some vital components, such as solar panels and inverters.”

Kormuth added that while inflation remains the biggest challenge faced today by almost all renewables deals, “the solar sector continues to be robust and the easing of previous inflationary pressures is making developers more keen to participate in an expanding pool of public tenders.”

For its part, Bracewell represented the lenders on the development and financing of the 30mw Saad solar PV independent power project (IPP) in Saudi Arabia which reached financial close at the end of January. 

The firm also recently advised on the Rabigh 300mw solar PV IPP and the 800mw Al Kharsaah solar PV IPP. 

While all Gulf countries are increasingly working to incorporate solar projects into their energy mix, the UAE and Saudi Arabia are ahead in terms of the scale of projects and associated investment. 

Saudi is targeting solar to contribute 40gw to its energy generation by 2030 – accounting for 68.1 percent of its total renewables’ capacity.

This marks a 12.7gw increase from its current levels, with growth to be driven by competitive auctions, bilateral utility contracts, corporate power purchase agreements and state-owned projects. 

Reuters

In November last year, Saudi’s Public Investment Fund and ACWA Power announced that they will build the Middle East’s largest solar power plant in Mecca province. 

Slated to begin commercial operations in late 2025, the 2,060mw solar PV Al Shuaibah 2 facility will generate enough electricity to power 350,000 homes. 

Representing ACWA Power’s sixth solar plant in Saudi Arabia, it will come in at slightly larger than Abu Dhabi’s 2,000mw Al Dhafra Solar PV, which was due to be completed in 2022, but this has not yet been announced. 

Saudi has also announced the development of 10 new solar and wind energy projects in its 2023 budget as part of its strategy to slash oil use in electricity generation. These will have a combined total output capacity of 7gw. 

Meanwhile, the UAE’s cumulative installed solar capacity stood at around 3.5gw by the end of 2022. This will soon reach 6gw upon the completion of solar mega-projects in both Abu Dhabi (Al Dhafra – 1,500mw) and Dubai (Mohammed bin Rashid Al Maktoum solar park phases 4 and 5 – respectively 950mw and 900mw).

“We have launched a number of projects at the Mohammed bin Rashid Al Maktoum solar park,” said Saeed Mohammed Al Tayer, managing director and CEO of Dubai Electricity and Water Authority.

Al Tayer told delegates at the World Government Summit held in Dubai last week that it was the “largest single site solar park in the world based on the IPP model, with investments totalling AED50 billion”.

The solar park’s production capacity of clean energy has reached 2,027 mw, equating to around 14 percent of Dubai’s total production capacity of electrical energy. When completed, it will reduce over 6.5 million tonnes of carbon emissions annually. 

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Valantis Mikrommatis is vice president of key account development at UAE-founded Yellow Door Energy, which provides sustainable energy solutions to businesses in the region. 

He told AGBI: “Dubai has led the way in terms of its development of commercial and industrial solar and has been exceptionally forward thinking in its clean energy strategy, having implemented its Shams Dubai net metering program since 2015.

“Given the success of the programme, it makes sense to have similar initiatives in other emirates and even at the federal level.

‘We were encouraged to learn about the federal law announced in November 2022 about the linkage of distributed renewable energy production units to the electrical grid. This will facilitate the adoption of renewable energy across seven emirates and increase the capacity exponentially.”

Romain Riche, international development director at the Middle East Solar Industry Association, said. “Looking ahead, there is no doubt that Saudi Arabia will record the largest growth in terms of gigawatt capacity.

“However, to date, the UAE has been at the forefront of solar energy development in the GCC – now playing host to a few of the largest solar plants in the world – and, of course, it will be hosting Cop28 later this year.”