May 30, 2016 (LBO) – Dubai, in the United Arab Emirates, received a bid for an 800-megawatt plant at a power price of 2.99 cents per kilowatt-hour last month, cheaper than a coal-fired power plant commissioned in October, reports said.
This is down from a record-low price of 5.85 cents per kilowatt-hour Dubai contracted for a 200-megawatt solar plant in January 2015, Bloomberg reported. The record bid in Dubai is 15 percent lower than the previous record set in Mexico last month.
With the price of solar energy plunging, renewable energy will account for 40 percent of the world’s electricity output capacity by 2030, almost double today’s capacity, the International Renewable Energy Agency (IRENA) said.
But plunging costs along with the bankruptcy for the biggest developer, SunEdison Inc., has spurred questions about whether the cheapest projects will be profitable.
The collapse of the world’s largest renewable energy company made some banks wary of financing projects. The winners of recent auctions in Mexico, Peru and Chile were diversified power companies like Enel SpA, which may have prioritized market share over profit maximization.
MEED reported that it’s a group including Masdar Abu Dhabi Future Energy Co., Spain’s Fotowatio Renewable Ventures BV and Saudi Arabia’s Abdul Latif Jameel behind the record low bid that Dubai received.
The 2.99 cents bid for the solar project is a third lower than the electricity that will be generated by a coal plant commissioned by Dubai in October. That facility, set to begin generating in 2020, is expected to feed power onto the grid at 4.501 cents per kilowatt-hour under a 25-year power purchase agreement.
Falling crude prices have made alternative fuels less economically attractive, curbing investment in biofuels, according to IRENA. “There is a lot of momentum looking at electric mobility powered by renewables, but we’ve seen a real negative impact has been on biofuel investment,” Adnan Amin, Irena’s director general, said.