Fossil fuels can no longer compete with solar technologies on price, according to one of the biggest banks in Middle East, in a report that predicts the vast bulk of the $US48 trillion needed to meet global power demand over the next two decades will come from renewables.
The report from the National Bank of Abu Dhabi says that while oil and gas has underpinned almost all energy investments until now, future investment will be almost entirely in renewable energy sources.
“Cost is no longer a reason not to proceed with renewables,” the 80-page NBAD report says. It says the most recent solar tender showed that even at $10/barrel for oil, and $5/mmbtu for gas, solar is still a cheaper option.
The report illustrates that major financiers in the Gulf region – which will need to add another 170GW of electricity in the next decade – recognise that the cheapest and most effective way forward on energy is via solar and wind.
It also highlights how even the biggest financial institutions in the Gulf are thinking about how to deploy their capital.
The NBAD report, prepared in conjunction with Masdar, the Abu Dhabi government’s renewable energy arm, The University of Cambridge and PwC, says the Gulf has a real opportunity to lead the world in renewables, deploying its considering financial weight, and by exporting its technology know-how.
It notes that solar PV and onshore wind power have achieved grid parity in many areas, particularly those in need of energy additions, and will be at parity in 80 per cent of world markets within two years.
“The latest solar PV project tendered in Dubai returned a low bid that set a new global benchmark and is competitive with oil at US$10/barrel and gas at US$5/MMBtu,” it said.
This refers to the 200MW solar tender won by Saudi firm ACWA Power, a $23 billion energy major, which bid $US0.0584/kWh (5.84c/kwh), without subsidies, which is the lowest in the world to date.
This is already one third below the cost of gas-fired generation and ACWA believes costs will continue to fall. Much of Saudi Arabia and other Gulf states rely exclusively on oil (34 per cent) or gas generation for their electricity.
Given that the Gulf countries are expected to increase their energy demand three-fold over the next 15 years, or 170GW, the NBAD report notes:
“As Government and utilities are driven to bring new generation capacity on stream, this new reality presents a significant opportunity to make savings, reduce fuel cost risks, achieve climate ambitions and, at the same time, keep more oil and gas available for export.
“This could herald an era of increased focus on solar PV as the future generation technology of choice to tackle the challenge of how best to meet current daytime peaks in demand. Once this has been done, there is the potential for exporting this expertise to neighbouring countries and along the West-East Corridor more broadly.”
As for intermittency, the age-old argument against renewables, the report says intermittency and variability are not an issue.
“There has been an historic concern that renewables are an unreliable option, because the wind blows only intermittently and the sun does not shine all the time, but that is proving to be less of an issue,” it says.
In the Gulf region, it says, demand peaks tend to occur in the middle of the day, and grids “can now easily cope” with at least 40 per cent of renewable input before requiring modifications. And gas is an ideal complement to deal with the intermittency where it occurs.
“Furthermore, developments in storage technologies are progressing rapidly, and in the next few years utility-scale solutions will be deployed that further minimise concern around what was until recently seen as a major inhibitor to the uptake of renewable generation.”
© 2015 Solar Choice Pty Ltd
