Abu Dhabi could expand its Sweihan solar project to well over 1 gigawatts after record low bids were submitted on Monday.
Abu Dhabi Water and Electricity Authority’s procurement arm received six bids for the upcoming 350 megawatt solar photovoltaic (PV) plant in Sweihan, with the lowest bid at 2.42 US cents per kilowatt-hour (kWh) coming from an Asian consortium. A local firm bid second-lowest at 2.53 US cents per kWh.
While the local figure is 16 per cent lower than the record lows reached in Chile last month, a whole new offer was put on the table from the Asian consortium. The consortium submitted an offer to expand the plant to 1,170MW at an offer of 2.30 cents, according to sources who did not want to be named.
However, it is important to note that these submissions do not mean that the project has been awarded, as authorities will now evaluate the proposals to ensure thoroughness and economic viability.
The UAE’s solar sector has been playing out on an international arena for a couple of years after Saudi Arabia’s Acwa Power, partnered with TSK of Spain, came to the forefront and delivered a winning bid of 5.84 cents for a 200MW phase of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai.
At the time this was a huge leap from what was considered normal at about 8 to 9 cents.
It seems as though that price is long gone, because in June there were new lows in Dubai at 2.99 cents for 800MW.
It was widely expected that Abu Dhabi would beat that rate, which resulted in many companies pulling out.
In the beginning, 90 companies expressed an interest, with that number dwindling to only 34 becoming pre-qualified. Big names such as Italy’s Enel, TSK and Acwa, and Abdul Latif Jameel all pulled out over the summer, leaving a competition among seven. In the latest move the French firm Engie called it quits.
While some are concerned that these rates will place a squeeze on the industry, Acwa believes that there is still room for further drops.
"We haven’t reached the bottom yet, but we’re close," said Paddy Padmanathan, the chief executive of Acwa.
He said that there will not be drastic drops all at once, but a gradual slide in the future. "Clearly the market is still able to innovate, and given that the interest rate environment is remaining static I’m delighted to see this new normal," he said.
Mr Padmanathan said that the main focus now will need to be on a balance of systems, which should highlight construction and efficiency gains in methodology. However, he did warn of future liquidity concerns for the market.
Frank Wouters, the former director of Masdar Clean Energy, also agreed that the cheap financing was temporary.
"On the one hand I think the low cost of capital plays an important role and that will not remain so low forever, but on the other hand we’re still learning how to further reduce the cost of solar cells and other components as well as operation and maintenance cost," he said. "So there’s no reason why the cost of solar will ever increase again."