Costs still weaken case for small-scale solar plants in Dubai

The Dewa in January announced standards for installing photovoltaic panels that allow customers to produce their own electricity, then feed any excess into the grid in exchange for credit towards their utility bills.

The relatively low level of residential electricity prices in Dubai means the payback for installing a solar system in a home is well over 10 years. Stephen Lock / The National

Costs remain a hurdle for the application of solar energy on a small-scale in Dubai, even after the government issued a new framework allowing customers to install their own solar power generation systems, experts said.

Dubai Electricity and Water Authority (Dewa) at the end of last month announced standards for installing photovoltaic (PV) panels that allow customers to produce their own electricity, then feed any excess into the grid in exchange for credit towards their utility bills.

Saeed Al Tayer, the chief executive of Dewa, said that manufacturers of solar power equipment should begin registering their products with the authority “as soon as possible”.

While Dubai has made headlines with the world’s cheapest utility scale solar PV tariffs, smaller scale applications remain unfeasible, according to Cornelius Matthes, the managing director of the Mena region for Building Energy, an Italian clean energy firm.

“[Residential] solar systems are substantially more expensive than the larger, commercial and industrial systems,” he said.

The relatively low level of residential electricity prices in Dubai means the payback for installing a solar system in a home is well over 10 years, according to Mr Matthes.

Current tariffs amount to 23 fils per kilowatt hour (kWh) under 2000 kWh a month, and Dewa estimates one person uses about 20,000 kWh a year. Based on those statistics, a one-bedroom flat would have an average yearly power bill of around Dh4,600.

“[Regulatory authorities] should increase the price per kilowatt faster – that is the best incentive to begin saving energy, and then to think about residential solar,” said Mr Matthes.

He said that because of the low prices there is not enough of an incentive to incorporate technologies such as small scale rooftop solar PV systems.

In comparison, European power bills are almost four times that price, with the energy information administration reporting an average of 20 euro cents (83 fils) per kWh. In the residential segments of some countries such as Belgium one out of 13 homes is equipped with PV systems, according to the European PV Industry Association.

The high turnover of the mostly expatriate-dominated population is also an obstacle to a return on investment.

Expatriates make up about 84 per cent of the UAE’s total population, according to data from Pew Research.

“Almost nobody in Dubai plans to stay more than five years and the planning horizon you need to purchase a solar home system is much longer,” said Mr Matthes.

Dubai-based MAF Dalkia, an energy management services company, said that most people were willing to wait only three to five years before seeing a return on investment. Francisco Marques, business development and marketing director for MAF Dalkia, said that the company’s current position was to provide corporate customers with short-term paybacks such as optimising the technology already in place to provide immediate energy savings.

The company delivers energy saving solutions to various firms, including optimising seven Dewa-owned buildings across Dubai. Mr Marques said that in today’s current market, incorporating solar PV units for residential or commercial buildings was not a profitable solution.

“With the figures that we’ve had until now, in terms of electricity tariffs and investment costs for PV technology, it just isn’t feasible,” he said.

The development of dedicated financing packages in cooperation with local banks could help, according to Mr Matthes.

“Or with a bold move, even own or co-own residential solar systems, creating a new business line,” he said.

Such a scheme would make small-scale solar projects more bankable, increase jobs and make the overall power system more diversified and reliable.

Mr Al Tayer said in the statement at the end of last month announcing the new framework that “Dewa will periodically review the performance of these systems and their compatibility, and improve the process to ensure the solar power technologies are seamlessly integrated with the current power production systems”.

Recent bids submitted to Dewa for the second phase of the Mohammed bin Rashid Al Maktoum solar park – which will eventually produce 1,000 megawatts – demonstrate the competitiveness of solar PV technology at the utility scale.

A consortium led by Riyadh-based Acwa Power won the contract to build and operate the phase with a final price of 5.84 cents per kWh – the cheapest on record and much lower than the 9 cents for electricity produced from natural gas.

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