Another New Low for Solar Price Seen in the Middle East

Low prices for solar projects have been a phenomenon that we have seen over the past 2-3 years with ever new record lows being bid for solar auctions across the world. After some records, it has lost the surprise factor. However, a recent bid of 1.7 cents/kWh seen in Dubai has again surprised industry watchers as it has pierced the 2 cents/kWh mark. Solar prices have gone much below than what anyone has seen or forecast.

Dubai Electricity & Water Authority (DEWA) announced that it has got a contractor to build a 900 MW solar power plant at its existing Mohammed bin Rashid Al Maktoum Solar Park which has a planned capacity of 5000 MW by 2030. DEWA had earlier also got a record low price at that time of 7.3 cents/kWh from ACWA power in 2017. The drastic fall in prices can be seen over the past two and a half year, where tariffs at the same location have fallen by almost 75% which is massive.

Below 2 cents/kWh, may soon become the norm in a majority of places around the world with interest rates falling sharply. With most of the cost for a solar project now attributed to interest costs, a falling interest regime should see new lows being reached. Developing countries would see relatively higher tariffs because their interest rates are higher otherwise locations in Europe, America and other developed nations should see below 2 cents. It will be difficult if not impossible for any other power source to come even close to the price that solar power plants are selling power at currently.

Not only new power plants but even existing power plants may see a huge threat as solar power prices fall below the variable costs of the existing power plants. Storage is already making the intermittency problem of solar power a thing of the past. With falling storage costs, it is possible to run solar power plants on almost RTC (round the clock) basis. Solar power may also make the overall demand for electricity grow, given the low costs which would enable a number of power-consuming activities which could not be possible due to higher prices.