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Green energy in the Middle East

PV ‘cheaper than oil’ in Gulf

Falling costs of photovoltaic (PV) technology mean that solar energy is already a more economically attractive option for domestic electric power generation in the Gulf Cooperation Council Region (GCC) when compared to oil-fired electricity production. So said a White Paper published by Bloomberg New Energy Finance, which modeled the use of a 100MW PV project built in 2011 to displace oil-fired power generation, freeing that oil to be sold at world market prices.

The central scenario for PV capital cost was based around the 2010 global lowest price of $3.14 per Watt, but that will fall, with, it’s suggested, the cheapest bankable systems in 2011 likely to be developed and built for $2.73/W with prices falling further thereafter, according to the established ‘experience curve’ for PV technology.

It was calculated that a PV project in the GCC would generate a real internal rate of return (IRR) of 9.4% if oil prices rise to $163/bbl (in real 2010 terms) by 2030. Even in the case of flat real oil prices to 2030, the project would generate a rate of return of 4.6%.

Michael Liebreich, Bloomberg New Energy Finance CEO, commented ‘This exercise demonstrates the clear argument for large-scale deployment of PV in the Middle East region. The continued cost decline of PV will open up electricity markets in the Gulf extremely quickly.’

The study concluded that GCC states should be replacing the use of oil-fired electricity generation with large-scale and distributed photovoltaics, and earmarking their oil for sale on international markets. But even there they may face new challenges.

An expert group on future transport fuels presented a report to the European Commission showing that alternative fuels have the potential to gradually replace fossil energy sources and make transport sustainable by 2050. Expected demand from all transport modes could it said be met through a combination of electricity (batteries or hydrogen/fuel cells) and biofuels as main options. Synthetic fuels (increasingly from renewable resources) as a bridging option. Methane (natural gas and biomethane) as complementary fuel and LPG as supplement.

http://ec.europa.eu/transport/urban/vehicles/road/cleantransportsystems_en.htm The Bloomberg Paper is at www.bnef.com/free-publications/white-papers/

The next stage- exporting solar power

Using solar to replace oil for generating electricity in the Middle East is just the first step. Longer term they could be exporting it. PV is only part of the story. Several large Concentraing Solar Power (CSP) arrays are being built- e.g Egypt has a 150 MW Kuraymat hybrid solar- gas project. And more are planned. For example, Israel and Jordan have been developing CSP, the UAE is planning a 100MW project, and the Egyptian National Plan for 2012 includes a 100MW CSP plant in South Egypt, while the follow-up National Plan for 2018-2022 has 2,550 MW of CSP. Although most plants at present have gas-fired back up, molten salt heat stores can be used to capture some of the daytime solar heat to run the generators overnight- so offering 24/7 power.

Although, inevitably, oil still dominates their thinking, most oil-rich Middle Eastern countries have made commitments to energy diversification e.g. the UAE is aiming to get 7% of its electricity from renewable energy sources by 2020, while Egypt is aiming to get 20% of its power from renewables by 2020, much of which it has already achieved via large hydro (12%), but solar and wind are seen as the main new options.

Exporting power long distances (e.g. to the EU) via High Voltage Direct Current (HVDC) supergrid links is relatively efficient (energy losses are put at around 2% per 1000km) and there is a German led Desertec Initiative to link up CSP in desert areas in the Middle East and North Africa to the EU. It aims to get about 15% of the EU’s power from such sources, with political links being made via the Med Unions ‘Solar med’ programme. Exporting power eastwards is also an option - to India and even China.

Sandinavia?

The Middle East has sun and oil. The first may soon begin to replace the last. It also has sand, and silica can be used to make solar cells. So the Middle East, along with North Africa, could become major producers of PV systems. The UAE’s Masdar project has already established some PV cell production and this could grow rapidly as the world market for PV expands - it is one the fastest expanding areas in the energy field at present.

Indeed, there are plans for a ‘Sahara Solar Breeder’ project, aiming to use desert sand to produce PV solar units and desert sun , using the power generated by the first wave of plants to “breed” more silicon manufacturing and solar energy plants, which would in turn be used to breed yet more, in a “self-replicating” system. www.diginfo.tv/2010/11/24/10-0135-r-en.php

It seems clear that the PV solar market is going to be big, and countries with plenty of sun, land and sand are a good place to exploit it. A big issue is whether the new political regimes emerging in many of these locations will see solar energy as a way forward- rather than just relying on oil.

The political turmoils in Middle East and North Africa may lead to the emergence of more progressive policies, but in the short term some see them delaying or undermining the case for ‘Destertech’ Concentrating Solar Power (CSP) electricity export projects- why would the EU want to become reliant on imported power from (another) politically unstable area? The counter view is that there is no need for the EU to become dependent on this source- all that was being suggested was around a 15% contribution and that could opportunistic i.e. when prices were low there and high in the EU e.g. matching their peak supply and EU peak demand times. In any case, CSP projects (and maybe Concentrating PV projects) are likely to go ahead locally anyway, since there are many local benefits, not just energy and jobs, but also the option of desalination of sea water.

Posted by Dave Elliott on June 4, 2011 11:57 AM | Permalink