Abu Dhabi, UAEThursday 23 May 2019

How rooftop solar can boost jobs and nurture new industries

Small-scale solar generation is taking off in the UAE, but it needs more encouragement to ascend further

A rendering of the third phase of the Mohammed bin Rashid Al Maktoum solar park in Dubai. Courtesy: Masdar  
A rendering of the third phase of the Mohammed bin Rashid Al Maktoum solar park in Dubai. Courtesy: Masdar  

In the cloudy UK, solar panels are an increasingly common adornment on roofs. Glancing down as I flew over Dubai one morning, I saw a single villa among thousands that had solar power. Small-scale generation from the sun is taking off in the UAE, but it needs more encouragement to ascend further and faster.

Most headlines have been made by mega-schemes built in open desert, such as the Mohammed bin Rashid Al Maktoum Solar Park and Abu Dhabi’s latest tender for 2000 megawatts of capacity. But falling solar photovoltaic generation costs, combined with initiatives such as Shams Dubai, Abu Dhabi’s regulations on solar net metering, and Oman’s Sahim, have opened the way for rooftop systems. Ordinary customers can contract for installation of solar on their premises, with any excess solar generation they cannot immediately use reducing their monthly bill.

Industries and commercial customers have so far been the main adopters. They have the financial strength to pay up-front or enter into long-term leasing contracts, and they have space on shaded parking lots, the roofs of malls, hotels, factories and warehouses. Their high electricity consumption puts them in the highest tariff bracket, making solar generation more cost-effective.

A villa system might be sized around 3 to 5 kilowatts, while an industrial scheme of 1MW or more, at least twenty times bigger, realises more economies of scale. For this reason, Steve Griffiths, senior vice-president of research at Khalifa University, and I predicted in our 2016 paper that the residential market would take more time to develop.

With about 100MW installed in the UAE by the end of last year, the rooftop solar market is small compared to the utility-scale projects, but it is not negligible. It is not a competitor to giant ground-based generation, but a complement.

Rooftop solar mobilises private capital, so at a time of financial stringency minimising the burden on state budgets or guarantees. It helps achieve national clean energy targets more quickly. As compared to the “lumpy”, winner-takes-all nature of occasional massive utility projects, distributed solar power provides a steady flow of work to numerous companies.

Users do not have to pay up-front for the installation – several firms now offer lease-to-own arrangements, paying for themselves through lower energy bills. The widespread use of solar raises awareness of environmental challenges and positive solutions that are within ordinary people’s reach.

Generating power close to demand reduces the load on distribution systems, cutting the need for costly expansions. Solar can be installed at locations not connected to the main grid, such as telecom towers, farms, water pumps, mines, oil installations, refugee camps, remote construction sites, and military bases, cutting the need for expensive, noisy and dirty diesel generators.

In countries with inadequate power grids, such as Iraq and Lebanon, solar offers at least some respite from blackouts. By 2017, Yemenis had installed 400MW of distributed solar power to help cope with war damage.

Rooftop solar has become a great opportunity for local entrepreneurs to create jobs and build potentially world-class export businesses. Among UAE companies, Enerwhere describes itself as the world’s first distributed solar utility, and provides both off-grid power and rooftop installations. Enviromena carried out the UAE’s first large solar installation – 10MW for Masdar in 2009, small by today’s standards – put panels on the Dubai World Trade Centre, and has expanded since, into countries such as Morocco and Egypt. Siraj Power claims a pipeline of 50 MW of projects under Shams Dubai, while Yellow Door Energy last month raised $65 million to help fund 300MW of projects in Jordan, the UAE and elsewhere.

Rooftop solar could spread much further and faster in the Middle East with some encouragement. Only about half the countries in the region have net metering regulations. If utilities introduce “wheeling” regulations, as in Jordan, users with multiple premises or unused land can generate solar electricity in one location and move it through the grid to use it elsewhere.

Banks need to provide more attractive financing terms. Rooftop solar’s installed cost per kilowatt can be competitive with utility-scale, but the interest rates charged for finance are far higher, inflating the final cost per kilowatt hour generated. Lending rates can be double or more that for a mortgage, even though the borrower and their risk profile is the same in either case.

It is far easier and cheaper to include solar as part of a new construction than to fit it on an existing building. Regulations to mandate solar for all new buildings, intended by Dubai from 2030, would help installers build scale. Germany has historically had rooftop solar installation costs about half the level in the US, because of consistent standards, and because the industry has gained expertise through millions of repeat jobs.

Solar water heating, a simpler and longer-established technology, was made mandatory for new Dubai villas from March 2012, but in contrast to countries such as Cyprus and Jordan, it is still not common in the GCC. Solar heaters save about 7 percent of a typical household’s electricity consumption, and can be combined with PV panels to get the benefits of both.

As battery costs continue to fall, distributed solar plus storage would help meet peak loads more effectively, even in the tricky early evening period when the sun has gone down but electricity use for air-conditioning, television and cooking remains high.

Rooftop and distributed solar is a rising Gulf success story, where sensible regulation has unlocked the power of the private sector. Now improved support can allow solar to generate not just electrons, but jobs and new industries.

Robin Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis

Updated: February 26, 2019 01:01 PM

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