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Evaluating the factors that led to low-priced solar electricity projects in the Middle East

Abstract

The past few years have seen the rise of large-scale, low-priced solar energy projects around the world. Oil-producing countries in the Middle East, in particularly the United Arab Emirates and Saudi Arabia, have become unexpected leaders in this movement with record-low power purchase agreement prices, below 3¢ kWh−1, for a number of new photovoltaic installations, beating the cost of fossil fuel generation. In this Analysis, we bring together technical, economic and financial information from global and local sources to study whether these prices can be replicated elsewhere and further reduced. We find that hardware costs, cost of labour, favourable cost of capital, low taxes and low, but positive, profit margins contribute to the reduction in costs. Reduced hardware prices contributed the most and also led to further reduction in cost of capital. We demonstrate how similar costs can be and have been achieved in other markets.

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Data availability

The data that support the plots within this paper and other findings of this study are available from the corresponding author upon reasonable request.

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Acknowledgements

We note the valuable contribution of our colleagues with whom we have discussed this work, in particular I. Almansouri and A. Tuomiranta. We thank M. Kissamitaki for designing the figures.

Author information

M.C. conceived and proposed this analysis, which was further elaborated in collaboration with S.S. and H.A. H.A. carried out the analysis and drafted the manuscript in consultation with M.C. and M.S. S.S. provided insights into the financial aspects of the projects and M.S. provided a utility company perspective on the project development process.

Correspondence to Matteo Chiesa.

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Competing interests

The authors declare no competing interests.

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Supplementary Information

Supplementary Information

Supplementary Notes 1–3, Supplementary Figures 1–2, Supplementary Tables 1–2, Supplementary Discussion, Supplementary References

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Further reading

Fig. 1: The reduction of PV system and electricity prices around the world.
Fig. 2: Bottom-up model for PV costs.
Fig. 3: Modelled LCOE for a sample plant under Abu Dhabi’s weather conditions.
Fig. 4: Modelled CapEx for a sample plant based on assumed costs for UAE large-scale solar.