Post on 12-Apr-2017
transcript
SHAMS Dubai
Analytical Elements for Solar Development
Filippo Del Grosso, MBAfilippo.delgrosso@alumni.ie.edu
Executive Summary
SHAMS Initiative is an ambitious and driven plan to deploy PV generation on awidespread scale within the Emirate of Dubai. SHAMS is to be considered a firststep out of three, aligned to a Sustainable Vision and clear environmental goals tobe achieved by 2030
SHAMS presents evident points of strengths as well as criticalities to be tackled. Inparticular, it is yet to be assessed: the upgrade of distribution grid, the scale ofreal estate projects involved in the initiative and the long term achievement ofadequate levels of non-subsidized tariff prices for electricity
A basic, preliminary modelling, allows for the determination of financial flowsaccording to the valorisation of energy as enabled by the Net Metering scheme inplace. Given the available, mature and reliable PV technology, two parametersgreatly affect the economic viability of residential PV: incidence of tariff pricesand dimension (scale) of PV system in terms of peak capacity
Notwithstanding the current decline in real estate prices in Dubai, whose outlookis negative in the short term, some empirical evidence, as analysed in two studiesrealized in the United States, suggests that installed PV system have a potentialpositive effect on housing prices. The SHAMS initiative, besides the obviousindustry and environmental benefits, can therefore be instrumental inaccelerating the recovery of the real estate sector, which represents a relevantshare of the economy of the Emirate
SHAMS DubaiA first step into the Smart Initiative framework
Connecting solar energy to houses and buildings by encouraging households andbuilding owners to install photovoltaic solar panels to generate electricity. The PVsolar system will be connected to DEWA’s grid. Electricity produced will beconsumed within the premises and the surplus will be exported to the network,according to a Net Metering scheme
Make Dubai one of the Smartest City in the world
Achieve 7% of renewable generation by 2020 and 15% by 2030
Generate energy savings of 1.7 TWh by 2030
Generate water savings of 5.6 BIG by 2030
Reduce CO2 emissions by 1 M tons by 2030
Strenghts and Criticalities - 1An excellent opportunity facing different challenges
Strenght Criticality
Policies
Infrastructure
Real Estate
Full commitment from theGovernment and HH theRuler of Dubai, according to2030 long term goals.Synergic and gradualapproach with the threeInitiatives, and gradual roll-out plan
Ambitious plan that requiresa thorough review of manyongoing patterns:• High energy consumption
per capita (~20,000 kWh/y)• Almost total reliance on
fossil fuels• Subsidization of fuels
Dubai power network iscurrently undergoingmodernization, with a total of1669 km of OHL, 3685 km ofunderground cables and29,200 substations)Total installed capacity is9,650 MW vs a peak demandof 7,233 MW
Overall residential andcommercial sector is apowerful driver for thedeployment of solar energy,New projects can be quicklyoptimized according toSHAMS requirements, with amark-up in pricing
It is still to be assessed thetechnology gaps andfeasibility of the SHAMS gridconcept, in particular:• Overall costs• System balance in peak
and off-peak hours• Storage
The real estate sector iscurrently facing a downwardstrend. Moreover, theeconomic feasibility of PVsystems is better optimizedfor bigger properties, withmore installed capacity andhigher consumption levels
Strenghts and Criticalities - 2An excellent opportunity facing different challenges
Strenght Criticality
Electricity Tariff
PV Technology
Alternative Technologies
Electricity tariff allows for 4slab levels of consumption,plus a fuel component to beadjusted according tocommodity price. A potentialdecision to drop fuelsubsidies is likely to increaseprices
Given current price levels,the economic break-even ofthe average PV system ismuch delayed along theyears. The energy fed into thegrid via Net Metering is likelyto move the slab tarifftowards low prices
PV deployment in MEfeatures a series of points ofstrength:• High solar radiation• Mature technology and
steadily decreasing costs• Great receptivity• Building know-how due to
utility scale projects
A Net Metering scheme asenvisaged by SHAMS can besuccessfully applied only tothe PV technology, andavoids the extra costs ofbatteries
Operating expenses are likelyto be higher than average,because of corrosion andabsence of precipitation.The concentration ofconsumption in sunny hoursoverlaps with the capacitypeak of system, with lessbeneficial effects for the grid
In terms of break.evenachievement and overalllevelized costs of energy, thefollowing technologies maycompete with PV:• Solar thermal• Solar cooling• Hybrid diesel + PV
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kWh / yk AED / y12.6 8.6%
Payback (yrs) IRR
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kWh / yk AED / y15.3 5.6%
Payback (yrs) IRR
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kWh / yk AED / y23.2 1.0%
Payback (yrs) IRR
Financial Simulation - 1Tariff price remains the main hurdle for cost recovery
MAIN ASSUMPTIONS FOR FINANCIAL FLOWS
• 10 MW Peak Capacity• 25 years Forecast• 82.5% Performance Ratio• 0.5% Yearly Cumulative PV Degradation• No Tracker / No Batteries• 4.3% Yearly CPI (assumption October 2015)• Net Metering• Electricity valorized according to single tariff slabs
10 MW - Tariff Slab G 10 MW - Tariff Slab Y
10 MW - Tariff Slab O
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kWh / yk AED / y12.0 9.4%
Payback (yrs) IRR
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kWh / yk AED / y8.9 12.7%
Payback (yrs) IRR
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kWh / yk AED / y7.8 15.2%
Payback (yrs) IRR
Financial Simulation - 2Tariff price remains the main hurdle for cost recovery
MAIN ASSUMPTIONS FOR FINANCIAL FLOWS
• 20 MW Peak Capacity• OPEX kept same as 10 MW for simplicity
(increases in hourly maintenance rates are envisaged)
• All Other Assumptions kept flat• Positive Scale Effect compared to 10 MW
20 MW - Tariff Slab G 20 MW - Tariff Slab Y
20 MW - Tariff Slab O
Real Estate in DubaiOutlook is negative, but PV systems may provide markup
Source: Jones Lang LaSalle, Dubai Real Estate Market Overview Q3 2015
Two recent studies, “The Impact of Photovoltaic Systems on Market Value and Marketability”(2013) and “Exploring California PV Home Premiums” (2013) assessed the effects of PV solarinstallations on residential prices in the United States, a mature solar market
The first study used three approaches to assess value (sales, cost and income), providing evidencethat a relevant share of properties with PV systems:
sold for higher had lower marketing times
The second study built a statistical regression model in order to explore sensitivities of PVhome premiums to the age and size of PV systems, with empirical evidence showing a highdegree of correlation among the variables