After a successful round of securing fresh investment from a consortium, renewable energy firm, Enviromena, looks poised to shine even brighter in its push towards the expansion of solar power projects in the region. Sander Trestain, VP Technical, Environmena, shared with Samantha Keck what the future holds for the company in the sun-kissed Gulf region.
Sander Trestain
Can you elaborate a little bit more about the financing that Enviromena received recently?
This is our second round of financing and we have reached a successful closing with several Tier One investors. Masdar and Good Energies have become shareholders joining zouk Ventures and New Energies Invest. The investment totals $15 million in equity and equity warrants. The financing round will see Masdar become the largest shareholder of Enviromena followed by Good Energies and zouk.
How would you rate the current state of solar power in the UAE as well as the region?
It’s still very early in the game, so to speak. But it serves to remember, that it was only a couple of years ago, that there was nothing in solar power in the country. But now, the UAE has the largest solar power plant in the Middle East, which is our 10MW plant in Abu Dhabi. In terms of installed capacity and projects going forward, the future looks bright.
There is incredible solar resource in the country. The amount of sun that you see in the UAE is about double what you see in Germany. Literally, it means that the same amount of solar power investment here will produce twice the amount of energy. In terms of return on investment, that’s excellent. On top of that you got real tangible shifts in government policies. Virtually every GCC (Gulf Co-operation Country) government is talking about bringing renewable energy into its portfolio.
Here is where the bad news starts. There is no formal programme for renewable energy, like feed-in tariffs. Take for instance in Germany, they establish this incentive programme that either pays a portion of the system or contributes towards the purchase of the electricity from the solar power system. None of that framework is here. We can see that Abu Dhabi, in particular, and many of the GCC countries are moving in that direction.
But it will take some time. But it is heartening to see that Abu Dhabi continues to be at the forefront for the governments getting involved in this sector.
Is there a target set for electricity from renewable sources in the UAE?
There is a government mandate for seven per cent of electricity to be produced by renewable energy by the year 2020. This amounts to a couple of gigawatts of power. This also means a pretty substantial investment in solar power energy. Not all seven per cent will be solar, but it will be a substantial amount. We are going to see very substantial solar infrastructure in the near future
How hard is it to feed electricity generated from solar power into the current grid?
Technically, it is no different than connecting conventional energy to the grid. The three projects that we have recently completed are all connected to the Abu Dhabi municipal grid. The project on the Yas Island tower is actually connected to the building’s electrical panel. That power is consumed by the building of course, but when the system is producing more power than the building needs, that extra power is actually exported out to the grid. In fact, ADWEA and ADDC are very open to grid connections.
Where do you source for your solar panels?
We are open to all technologies and all suppliers. To date, we have used Suntech, which I believe is the largest manufacturer of crystalline solar modules in the world. They are based in China and listed on the NY stock exchange. We also use ThinFilm as well as products from Sun Power. Those are the three that we have integrated into our projects so far.
We are certainly always open to emerging technology. Solar power is very cost driven. Cost is the main driver for the decision to adopt a certain technology. Of course, other factors, like reliability, also play a part.
How much does one megawatt of electricity from solar power actually cost?
The best way to look at the cost of solar is to amortise the cost of the investment over a period of time. In this case, it’s 25 years, which is roughly the lifetime of the system. Renewable energy is different from conventional energy.
Renewable energy needs a very large initial investment and then, there is almost no running costs for the power production. For conventional energy, you need to make a reasonably large initial investment, and feed whatever it needs to produce the energy.
This translates into, possibly very high running costs, depending on the price of your feed material.
The best thing to do in the estimation of the cost of production of electricity from renewable energy, is to take some reasonable financial assumptions, in terms of a large bank loan or some equity investors, and see how much it would cost to construct the plant. Then you amortise the amount over the lifetime of the hardware.
Generally speaking, it would cost you about $3.5 million to build a one megawatt solar power plant. In this region, based on the solar resource that we have, that amortises out to $0.25-0.27/Kwh.
Now to understand that in perspective, you can compare that figure to Hawaii, where it is US$0.30/Kwh. Though, it serves to remember that energy in Hawaii is expensive when compared to mainland American where it’s about US$0.13/Kwh.
What are the O&M (operation and maintenance) costs involved in a solar power plant?
Again, it’s remarkably little, typically in this region.
O&M comes in at about one per cent, per year, and that’s for everything, including the dust build-up. Dust settles on things, and if left unchecked, obscures sun from the solar modules. We have been operating a largescale solar power system for quite a while now, and have addressed this modulecleaning issue. They do need to be cleaned, and the method is extremely simple and cost effective. The solar modules are simply swept clean with a large broom. The timings vary through the year, somewhere between once weekly or once monthly, depending on the time of the year.
In an OPEC country like the UAE, wouldn’t cheap oil be an obstacle to the adoption of solar energy?
Cheap and readily available oil is indeed a valid argument against solar energy. But there are two good reasons to move towards solar power. First, among global leaders, there is growing awareness about climate change and the necessity for carbon free and low carbon electricity production. There is a sense in the GCC countries that they want to contribute to this overall greening of the world’s power portfolio.
But on top of that, the countries that have put in substantial investment into solar energy have also seen substantial development and diversification of the local economy. Hence, the argument towards development renewable energy is a particularly strong case in this region where the economies are already very energy based.
There already exists a group of well-trained professionals, infrastructure, knowledge and labour market that are running a very effective energy economy. Diversifying into renewable is a very logical step. Abu Dhabi, in particular, is in the process of making itself the centre of renewable energy excellence as well as the regional hub.
Many established renewable energy companies, and startups, are headquartered here in this emirate. Our company is a small, but excellent, example of the effect of this type of programmes. Enviromena is a start-up We started in 2007, and as a result of government support and the projects that we have executed, we have grown in size. Eventually, we brought in foreign capital. It is probably the first time in the renewable sector that a MENA-based company has received international capital. We hire people, we create jobs, we grow. Together with the government support for the solar programme, we are achieving economic growth
The third, and related, issue is that there is a lot of population and economic growth in this region. Hence the Middle East demand for power is only going to grow substantially, They have to literally be building power plants of some sort, so doing it through renewable is a logical choice.
