Arab gulf firms set their sights on the region’s growing appetite for solar power RSS Feed

Arab gulf firms set their sights on the region’s growing appetite for solar power

Some of the world’s top oil exporters want to be major players in solar power, too.

Middle East and North African countries, blessed by ample sunlight and open space, are increasingly adopting solar power. But it’s not European, Chinese or American companies taking the lead on some of the region’s largest solar parks. It’s local firms that are relatively new to renewable energy.

Analysts say meeting solar demand at home is just the start. Some of these companies could become global competitors in the fast-growing market for large solar power plants.

“There’s going to be more projects throughout the Middle East, and we certainly see these guys as some of the market leaders in the future,” said Moritz Borgmann, a partner at Apricum, a strategy advisory firm specializing in renewable energy.

The price is right

Regional companies have attracted attention by setting solar costs at record lows.

A group led by Saudi Arabia’s ACWA Power International put in the then-lowest-ever bid of 5.85 cents per kilowatt hour in January 2015 in winning a contract to build part of a huge solar plant plant for the Dubai Electricity and Water Authority.

Abu Dhabi-based renewable energy company Masdar and Saudi Arabia’s Abdul Latif Jameel shattered that record in May when they offered to operate 800 megawatts of solar energy at 2.99 cents a kilowatt hour for another phase of the same Dubai plant.

Analysts warn that those ultra-low prices won’t likely set a new global standard. The economics are somewhat unique to massive Middle East projects and are not feasible elsewhere.

Companies like Masdar and ACWA can submit the super low bids in part because they have access to low-cost capital from regional banks and sovereign wealth funds.

Middle East firms are trying to grab market share and establish a track record for building solar projects in the region, said Josefin Berg, senior solar power analyst at IHS.

They are also entering the market at an opportune time. The cost of providing utility-scale solar power has plummeted in recent years. In the United States, it fell about 60 percent from the 2007-2009 period to 2015.

“No one would have thought a few years ago to tender an 800-megawatt project like they did in Dubai, and so it’s really created a new environment where these countries can actually benefit from being a bit late to the game,” Berg said.

Read full article at CNBC