Lowering solar PPA
The Mohammed bin Rashid Solar Park is the largest single-site solar park in the world; it uses an Independent Power Producer (IPP model) and a build-own-operate project structure
The UAE Vision 2021 includes the Green Economy for Sustainable Development Initiative. This includes sourcing 75% of Dubai’s power from clean sources by 2050, and 25% from solar power. The Mohammed bin Rashid Solar Park is the largest single-site solar park in the world; it uses an Independent Power Producer (IPP model) and a build-own-operate project structure. The solar park is owned by DEWA, but is being constructed in five phases, with each phase bid for independently by developers.
- The UAE has traditionally imported natural gas for its energy needs. However, rising costs made solar power generation more attractive.
- The Mohammed bin Rashid Solar Park has a lower solar resource compared to similar solar parks under construction. This would typically lead to reduced investor enthusiasm in a solar project.
- Concentrated solar power (CSP) is still a relatively unproven technology.
- A long-term PPA of 35 years has helped Mohammed bin Rashid Solar Park achieve lower PPA for both CSP and photovoltaic solar power.
- The park has gradually increased its capacity through five phases between Q3 2014 and Q4 2021, so that it will eventually reach 5GW by 2030 with a total planned investment of USD13.6 billion.
- The ACWA consortium, which was awarded Phase 2, was a joint Chinese-Saudi effort with close state ties and experience in the solar construction / energy sector.
- Dubai Electricity and Water Authority (DEWA): The government entity that commissioned and owns the project
- First Solar: Constructed the first phase (13 MW)
- ACWA Consortium: A consortium formed of Chinese and Saudi Arabian investors, which constructed Phase 2 (200 MW) and Phase 5
Results and impact
- The 200-megawatt Phase 2 of the project drew a record-low tender tariff of only USD0.589 per kilowatt hour, which is 20% lower than any other unsubsidised PPA for a solar photovoltaic plant
- The 700-megawatt Phase 4 of the project drew a tender tariff of only USD7.30 c per kilowatt hour, which is the lowest levelised cost of electricity for a CSP plant globally.1
- Upon completion, the park will reduce carbon emissions by 6.5 million tonnes annually.
Key lessons learnt
- Exceptionally long PPA timelines (such as 35 years for Mohammed bin Rashid Solar Park’s Phase 4) provide investors with certainty, leading to a lower cost of capital and potentially to correspondingly cheap tariff bids.
- The falling cost of CSPtowers – 60% in the five years leading to 2018 – has made the technology commercially viable on a large scale. The size of the station may help create economies of scale during construction phases, which can drive down costs and further contribute to PPA cost savings.
- Building unproven technologies in stages helps to prove viability and allow for technological development that helps lowers cost later in the project lifecycle.