By Paddy Padmanathan, President & CEO of ACWA Power
Given that electricity is an essential input to not only all economic activity but to sustaining life itself, reliably providing adequate electricity at the lowest possible cost is a key to maintaining the health, wealth and happiness of communities and nations. Throughout the world, the focus is on stimulating growth without compromising the health of the planet, our home.
Not surprisingly much attention is now being paid to how we generate and use electricity. The decisions by certain governments to fuel research into both the supply and demand sides of the energy spectrum on subjects ranging from alternative energy to increasing the efficiency on the consumption side and then to aggressively drive utilization of the emerging solutions by adopting some bold polices have now brought the world to a point where a transition is now underway – that in time to come will be comparable to the shift from biomass to coal and coal to oil.
Also, this transition has taken a life of its own, now led by the rapid advances in technology and consequent reduction in cost. Here in the MENA region, the electricity sector is undergoing a paradigm shift. This is a direct result of the Governments in the region prioritizing efforts to take advantage of the phenomenal reduction in cost of generating electricity with renewable energy to diversify the energy mix to achieve energy security while at the same time lowering dependency on fossil fuels.
Simultaneously, countries are also tackling the pressing issue of how to meet rising electricity demand caused by population growth and increased industrialisation and urbanisation, while keeping down energy costs and subsidies by also concentrating on energy efficiency on the consumption side, in effect reducing electricity consumption whether be it for lighting, refrigeration and air conditioning or for complex industrial processes all the while improving quality of life and not compromising on economic expansion.
By introducing policies such as banning the manufacture or importation of white goods such as air conditioners, fridges and washing machines below a certain level of efficiency and by reforming tariffs to progressively reduce and ultimately eliminate subsidies and thus significantly impact consumer behaviour and instill discipline and conservation and by taking advantage of now common place technologies that permit the traffic of electrons and data down the same wire and with the advances in extraordinary levels of computing power at a fraction of what it cost before, even in a world that is increasingly becoming ‘electric’, the rate at which demand for electricity is starting to reduce and more significantly is reshaping the daily load demand curve itself, reducing the amplitude and duration of peak electricity demand.
On the supply side, the evidence of the compelling value proposition of clean energy as a solution to the region’s power dilemma is the 70% fall in prices for solar PV modules between 2009 and 2013. The most competitive utility scale solar PV projects can now deliver electricity for just USD 0.03 per kilowatt-hour (kWh), compared to the required USD 0.045 to USD 0.14/kWh for fossil fuel power.
Onshore wind is also now one of the most cost competitive sources of electricity available delivering electricity for as low as USD 0.05/ kWh. ACWA Power has played a monumental role contributing to reducing prices down and making renewable energy a competitive alternative to fossil fuels. One example of this contribution is the world record ACWA Power set towards the end of year 2014 for solar electricity at 5.89 cUSD/kWh for the 200 MWe PV of Phase II in the Sheikh Mohammad Bin Rashid Al Maktoum Solar Park, against a tariff level of 9 cUSD/kWh prevalent at that time in the world.
Another example of ACWA Power’s cost leadership and promotion of renewable energy technologies in the MENA region has been the company’s involvement in the Morocco NOOR projects at the city of Ouarzzarte. Our winning tender for use of the Concentrated Solar Power technology using a parabolic trough with 3 hours of energy storage in molten salts for use at night for the NOORo I project at 18.9 cUSD/kWh, 29% lower than the second bid and reduced the lowest CSP tariff known at that time by half thus revitalizing a very valuable technology which is able to deliver solar energy not only during both day and into the night but also with the ability to move the collected solar heat back and forth to the molten salt store, can dispatch electricity to cater for fluctuating daily demand profile.
On subsequent projects we have been able to bring the cost down by a further + 20% to 15 cUSD/kWh level and remain confident that the cost of dispactable solar energy throughout the day and night can be brought down to below 10c USD/kWh in the not too distant future.
As a developer, investor and operator of power plants, ACWA Power strives to optimise use of technology to deliver electricity and desalinated water at the lowest possible cost.
We support governments, companies and communities in the region in their efforts to diversify the energy mix, increase efficiency and reduce carbon emissions. Our commitment to delivering electricity reliably at the lowest cost has meant a rigorous focus on each component that contributes to that cost– including the cost of developing and delivering the power generation plant itself – in the case of fossil fuel power plants, the efficiency of the plant and thus the amount of fuel consumed per unit of power, cost of operating and maintenance the plant throughout its technical life, the cost of insuring the plant, the cost of financing the investment and the cost of operating the venture itself.
We deliver fit for purpose solutions, where risks are identified, analysed, compartmentalized and allocated to those best able to mitigate and manage them. We will work with partners and a supply chain which is willing to align with our philosophy of not market pricing inputs but establish cost and apply reasonable margin we are able deliver significant value to our customers, our partners, the supply chain and to our staff and shareholders all the while contributing to this dynamic industry that is truly changing the world.
ACWA Power will continue to focus at reliably delivering electricity and desalinated water at the lowest possible cost. We will support the Governments and the people of the countries in which we are privileged to invest to diversify the energy mix, increase efficiency and reduce carbon emissions to fit into each countries national transformation agenda, and to support each countries commitment to the international community to contain the increase in earth’s temperature to below 2 degrees centigrade.
