Solar Solutions for Commercial and Industrial Sectors in Dubai

Within the GCC, Dubai has been at the forefront of solar PV adoption, having been the first city to launch a net-metering program (Shams Dubai). Although there were a limited number of installations between the program’s introduction in 2015 and the summer of 2018, the market has grown tremendously since then. As of December 2019, 164 MW of distributed solar systems were connected to DEWA’s grid.

Customers in the Commercial and Industrial (C&I) segment of the market have been the driving force behind solar energy adoption under the Shams Dubai initiative, mainly because of their desire to offset large amounts of expensive electricity sourced from DEWA’s grid with cheaper, cleaner solar electricity generated on-site. C&I customers operate across a broad range of industries, including but not limited to Logistics, Manufacturing, Real Estate, Retail, Oil & Gas, Educational and Automotive.

The commercial proposition that local solar developers and contractors can offer C&I customers has recently become more attractive, mainly due to:

• Decreased solar panel prices/solar system costs, resulting in improved ROIs and pay back periods
  • Solar panel prices have decreased by 50% since 2015
• Improvements in panel technology
  • Solar panel power output and efficiency levels tend to increase every year, meaning that on a per square metre basis, solar plants can generate more electricity and hence provide a greater % of a customer’s electricity requirement
• Standardized policies and procedures
  • DEWA has refined its internal processes over the years, resulting in shorter lead times for project approvals and faster completion of projects

Thus far, customers in Dubai have typically installed solar systems using either solar leasing or solar EPC solutions.

Solar Leasing (Build Own Operate Model)

This a zero-capex solution in which a solar developer will offer to invest in, build, own and operate a solar plant on a customer’s premises from anywhere between 15 to 20 years. The developer will then charge the customer a mutually agreed upon tariff for the electricity generated by the solar plant, typically at a significant discount to DEWA’s prevailing grid tariff, for the duration of the lease. Solar leasing allows customers to save on their electricity bills the moment a solar plant becomes operational.

Solar EPC (Ownership Mode)

Using this option, customers opt to purchase the entire solar system upfront. Therefore, unlike the solar leasing option, customers do not pay a fixed electricity rate to a developer or contractor but instead start saving directly against DEWA’s electricity tariff. However, due to the initial capital outlay, customers will realize ROIs anywhere between 6-10 years after the system starts operating.

Once local financial institutions become more familiar with solar technology and better understand the associated risks, more innovative financing solutions are expected to emerge and provide potential customers with greater access to capital. However, considering the damage COVID 19 has inflicted on company balance sheets, C&I customers are, at least in the short term, unlikely to invest their own money in solar projects and more likely to opt for solar leasing solutions instead. Despite the economic impacts of the pandemic, corporate customers are now more eager than ever to deploy solar projects and improve their bottom line, therefore, the C&I solar market in Dubai is expected to remain on an upward trajectory with no signs of slowing down.