So far, the boldest solar power story this year was the "DEWA deal," ACWA Power's record-low bid for a solar project with the Dubai Electricity and Water Authority. A relatively new Saudi firm, ACWA stunned the solar industry by winning the 200MW solar project with a bid of just 5.84c/kWh over 25 years, which is way below the cost of natural gas in the region.
The low price was a matter of heated debate at the World Future Energy Summit in Abu Dhabi the following week. Many attendees (competitors) were incredulous that the project would ever make money, but nonetheless, the deal has made a huge impact. Michael Liebreich, the founder of Bloomberg New Energy Finance and one of the world's most prescient observers of renewables, also attended the conference and had a very bullish take on the deal, saying "it's making money."
Paddy Padmanathan, head of $25 billion Saudi firm, explained to reporters that he was able to make the DEWA deal because the financing dropped below 4%. While most projects get 80% debt, and 20% equity, this project got financing for 86% of the project, while more expensive equity was just 14%.
“It completely changes the economics," he told Reneweconomy. And it will go lower – to 4c/kWh within “four to five years”, as the cost of finance continues to fall, along with increased cell and module efficiency.
140,000 MW's built during the next twenty years
Perhaps even more interesting, Padmanathan said costs are falling so quickly that soon combining solar PV and solar power towers with storage will compete with base-load fossil fuels. If he'd said this five years ago, people would have thought he was either crazy or a con man.
Padmanathan also thinks this potent combo could make up at least half of the 140,000 MW built in Middle East North Africa (MENA) region over the next twenty years. So his company, which already has 15GW of mostly fossil-fueled generation and is completing work on two coal-fired plants, has enthusiastically jumped into the market.
As a matter of fact, he just got the go-ahead first his first combo PV-with-towers-and-storage project, a 100MW solar plant in Redstone, South Africa. It will use power tower and molten salt technology from California-based Solar Reserve.
Picking up the pace, ACWA is investing in other solar thermal projects. It owns the Bokpoort project in South Africa, which will be 50MW of parabolic trough with 9 hours of thermal storage, and it's building three plants at the Ouarzazate project in Morocco, also known as Noor, a 160MW parabolic trough installation with 3 hours of storage.
Are Paddy Padmanathan and ACWA Power the vanguard of solar power?