The Middle East benefits from some of the best solar irradiation levels in the world. While there are issues relating to interference from sand and haze, most experts believe these can be mitigated through the development of technology and operation practices specific to the region.
International developers, particularly those based in Spain, Germany and the US, are keen to take on this challenge. The problem is they claim the current government-driven model of negotiating power purchase agreements (PPA) on a project-by-project basis is a deterrent.
International developers, particularly those based in Spain, Germany and the US, are keen to enter
Much of Europe encourages investment in renewable power through the provision of feed-in tariffs, universal long-term PPAs, whereby power is bought at an above-market rate.
The UK, Japan and California use an alternative system of renewable certificates that acts as a ‘top-up’ payment to allow renewable power to compete with traditional sources of power. In the US, a combination of tax incentives and grants operate at a federal and state level.
These frameworks effectively offer inroads to foreign developers. This is because the potential revenue streams from a project are more transparent with a structured regime. With a transparent source of revenue available, developers that have previously shied away from the Middle East may move in.
Governments may also be able to convince international developers with grants and individually negotiated PPAs. The handful of solar projects that have been tendered till date have attracted a significant level of interest from international players.
France’s Total and Spain’s Abengoa were selected in June to build Abu Dhabi’s Shams 1 concentrating solar power project. This project, together with similar schemes in Oman, Dubai and Kuwait, should draw a similarly high level of interest.