x Abu Dhabi, UAEWednesday 26 July 2017

Solar power is still a far-seeing strategy

Hard times in the solar-panel business don't mean the industry is fading; the problem is that China is cutting prices to push out competitors.

These look like dark days for solar power. Last week we learnt that the California-based company Solyndra is going bankrupt, taking with it 1,100 jobs; $500 million (Dh1.8 billion) in US loan guarantees; and $1 billion in private equity, including $30 million invested by Masdar, the UAE's clean-energy initiative.

And that was just the latest bad news. Two other US solar firms closed recently, a big German firm is cutting production, and so on. There is a silver lining of sorts for solar-power customers: businesses are going under because of competition from China, which is strongly subsidising solar-cell production in a bid to gain the lion's share of the global market through price cutting.

It's working: prices have fallen 80 per cent since 2008. Private western firms, even with government support, cannot compete. And China now has some 60 per cent of world solar-panel production capacity.

For western countries this is vexing, but lower prices can only boost the demand for solar power, an altogether admirable source of electricity - clean, sustainable, safe, reliable, scalable and quieter than wind power.

The problem is that solar, despite the drop in costs, still cannot compete watt for watt with coal and oil. Technological advances and economies of scale may change that calculation, and in the meantime the price of pollution and climate change should be considered.

For the UAE in particular, solar power makes long-term sense: sunshine is even more plentiful than oil. As part of a far-seeing energy diversification strategy, Abu Dhabi's goal is to generate 7 per cent from renewables in this decade; Dubai's goal is 5 per cent from solar by 2030.

As solar cells become less costly these goals should become easier to reach. But energy pricing is a complicated field: in the UAE, and around the world, energy subsidies can greatly distort the market - hence, China's inordinate government-backed dominance in the field. If subsidised diesel is cheaper than less-subsidised solar, the easy choice will always be to reduce immediate costs.

In the short term, it makes good sense for the UAE to keep up with cutting-edge technology in solar, wind and nuclear power. In the longer term, transition to these forms of energy for many applications will become steadily more sensible.