Abu Dhabi
government-owned Masdar, the renewable energy initiative, Wednesday
appointed France's Total S.A. (TOT) and
Spain
's
Abengoa Solar (ABG.MC) as partners on a $600 million solar power project in the
Gulf emirate--the world's largest concentrated solar power, or CSP, plant.
Shams 1 will have an approximate capacity of 100 megawatts and will be
developed on a build-own-operate basis in a joint venture. Masdar owns 60% of
the project, while Total and Abengoa each hold a 20% share, the companies said
in a joint press release.
"We expect construction to start in a few weeks," Mohamed Al Zaabi,
the project's manager, said in a presentation in
Abu Dhabi
.
Commercial operations are due to start in the third quarter of 2012, Al Zaabi
said.
The CSP plant will extend over a 2.5-square kilometer area, situated at Madinat
Zayed about 120 kilometers southwest of
Abu Dhabi
,
the capital of the
United Arab Emirates
. It will have enough capacity to supply 20,000 households.
The project is the first of three CSP plants that will feed green power into
the
Abu Dhabi
grid, Al Zaabi said. The plant will help meet rising power demand in
Abu Dhabi
emirate, which is expected to reach up to 20 gigawatts in 2020, from a current
8 GW, he added.
Abu Dhabi
launched Masdar in April 2006 to establish the sheikdom as a hub for
renewable energy and green technologies at a time of rising concerns over
global warming, fueled by increased consumption of hydrocarbons. The emirate,
the largest of seven that make up the U.A.E. and producer of almost all the
country's crude oil, has a plan to generate 7% of its power capacity from
renewables by 2020.
"We believe it's the first step in the region, but it will be a
cornerstone going forward," said Abengoa's chief executive Santiago Seage.
"We think that the Mena [Middle East North Africa] region in general can
be a very important part of our generation portfolio, a high percentage."
LEAP FORWARD
Nick
Carter, director general of
Abu Dhabi
's
regulation and supervision bureau, said the project was "a massive leap
forward for the sector."
"This is the first time in the emirate we can supply a significant amount
of capacity without relying on fossil fuels," Carter said.
Shams 1 will be the first utility-scale, commercial solar power project in the
U.A.E., and the first CSP plant to be registered under the United Nations'
Clean Development Mechanism and is eligible for carbon credits, according to
today's statement. It will displace about 175,000 tons of carbon dioxide per
year, the equivalent of taking 15,000 cars off
Abu
Dhabi
's roads.
The plant has been held back as the global financial crisis hit projects in
Abu
Dhabi
, with contracts for the project originally due to
be awarded about a year ago.
Total and Abengoa will invest in the project alongside Masdar according to
their respective equity shares, with the plan to borrow via project financing,
Masdar Chief Executive Officer Sultan Al Jaber said.
"We always try to leverage on project financing to raise funding," he
said, adding that specific borrowing plans haven't been outlined yet.
"We are going to start construction in July with our own financing
resources, and we will be leveraging in the future," said Abengoa's Seage,
adding that he believes Shams "will be highly attractive" to banks.
The solar plant is being built under the independent water and power producer,
or IWPP, model that
Abu Dhabi
already uses for power generation and water desalination.
Under the model, the project company will sell power to state utility Abu Dhabi
Water and Electricity Co., or Adwec, under a power purchase agreement.
Abu Dhabi
's government will pay a
"green tariff" to compensate Adwec for the difference between average
domestic power generation cost and generation cost for the CSP project, the
regulation bureau's Carter said.
Although the cost of generating electricity from solar plants has come down in
recent years, it remains still more expensive than conventionally generated
electricity.
"It's a way for the government to compensate the cost of renewable
energy," Carter said, adding that the cost gap is expected to narrow over
the next 10 to 15 years.
Masdar, which is also building a $22 billion carbon-neutral city on the
outskirts of
Abu Dhabi
, has
had to review its project plans as the global financial crisis hit the oil-rich
emirate.
Al Jaber said Wednesday that the company was not scaling back its plans--though
it has become "more capable" and "smarter about doing
business"--and plans for
Masdar
City
remained intact.