Rome-based utility owner Enel SpA is targeting renewables projects in Saudi Arabia and the United Arab Emirates as oil-rich Gulf countries take advantage of the falling cost of solar power to diversify their energy supplies.
“We will wait for the first tenders in Saudi Arabia,” Francesco Starace, Enel chief executive officer, said in an interview in Abu Dhabi, the biggest of the U.A.E.’s seven emirates. Dubai, the country’s second-largest emirate, has also started a renewable program, “so we will try and participate” in that, he said.
Under Starace, Enel is scaling back on large power stations to focus on producing and distributing greener sources of energy. The utility reintegrated its renewable-energy spinoff Enel Green Power last year and plans to cut its generating capacity for power from fossil fuels by 39 percent in the five years ending 2019. Saudi Arabia, the world’s biggest oil exporter, and the U.A.E., the fourth-largest producer in OPEC, are both trying to reduce their reliance on oil and generate more power from the sun, among other sources.
Enel signed a cooperation agreement on Saturday with Dubai Electricity and Water Authority, known as DEWA, to help upgrade the emirate’s power grid, after reaching a similar accord with Saudi Electricity Co. on Jan. 11. Saudi Arabia aims to generate 10 gigawatts from solar, wind and other forms of renewable energy in the next five years, Energy Minister Khalid Al-Falih said last month. DEWA plans to be able to produce 75 percent of its power from renewables by 2050.
Saudi Arabia and the U.A.E., as well as Oman, have natural potential with their plentiful sunshine, “and they have stability that is perceived as better than the North African area,” Starace said. “They are less risky, and therefore, I see no problem with looking at these countries as a great investment.”
Cheaper production costs are creating new growth opportunities for solar power in the region, even as the profit margins of generating companies may narrow in the low-price environment, he said.
A group led by Masdar, Abu Dhabi’s renewable energy company, won bidding in June to build an 800-megawatt solar plant in Dubai to produce what could be the world’s cheapest power generated from the sun. The average cost of electricity from a photovoltaic system is seen plunging as much as 59 percent by 2025, according to a report that month by the Abu Dhabi-based International Renewable Energy Agency.
The downward trend in solar costs isn’t finished, Starace said. “It will continue to go down.”