Masdar, the Abu Dhabi Government's clean energy company, has shelved plans to make solar panels in the emirate because of a lack of local demand.
The company's solar-panel manufacturing unit, Masdar PV, had planned to begin construction of a plant in Taweelah, between Abu Dhabi city and Dubai, by the end of 2009.
Last yearit said it was delaying those plans in light of oil and gas subsidies that had stifled local demand for renewable energy.
Frank Wouters, the director of Masdar Power, the energy unit that includes Masdar PV , said yesterday that a domestic solar panel plant was no longer under consideration.
"You need scale and you need a regional market for that to make sense," he said.
The price of solar panels is dropping all over the world as the market becomes oversupplied.
The falling prices have hit Masdar PV's foreign operations, including a solar panel factory in Germany.
"We have worked extremely hard to increase efficiency," Mr Wouters said, adding that the German plant was now operating at a profit after improving efficiency.
The US$160 million plant (Dh587.6m) in the German town of Ichtershausen makes thin-film amorphous silicon panels.
"We are selling at competitive prices," said Mr Wouters, who added that its customers were in Canada, Germany, Spain and the relatively unexplored Indian market.
Worldwide, the supply of solar panels is projected to be double global demand this year, a huge market imbalance that will further hit prices and is likely to lead to a consolidation of manufacturers.
Masdar Power is going ahead with renewable energy projects in Abu Dhabi, including a 20 megawatt to 30mw wind farm on Yas Island for which it is now evaluating construction bids, as well as work on a solar-power plant and plans for a second plant in the emirate.
Abu Dhabi's Executive Affairs Authority is working on energy laws and a financing mechanism in a bid to make possible the emirate's goal of sourcing 7 per cent of its energy from renewables such as solar and wind by 2020.
To drive the emirate's renewable energy ambitions, such a plan is likely to need to include a feed-in tariff, a system in which utility companies are required to buy a percentage of energy from solar producers at extra cost, Mr Wouters said. The Masdar Power director was part of a group of solar power experts who gathered yesterday at Yas Island to mark the launch of the UAE's first solar industry group. Members of the Emirates Solar Industry Association, BP Solar and other companies are hoping to attract international investors to the emirate.
Masdar's renewable energy strategy was noted yesterday by Hillary Clinton, the US secretary of state, who visited the company's carbon-neutral development, Masdar City, during a tour of Abu Dhabi. "We are betting that this incredible investment being made by Masdar will pay off," she said at the Masdar Institute, the company's academic centre for energy research. "UAE is positioning itself to be a centre of innovation and entrepreneurship for years to come. You will have the model that will demonstrate to others what it takes to achieve renewable energy and sustainable growth."
The US hopes to play a role in bringing more jobs and an entrepreneurial spirit to the UAE, she said.
Clean-energy development, she said, "will bring good jobs to UAE, more income and the ability to create and spin off businesses."