Jokes are expected on April 1st, not one month later: the announcement from DEWA, the Dubai Energy Authority, that a bid at 0.0299 USD/kWh was received looks so weird that it might be considered as a pure joke. Or a provocation. Recent tenders showed extremely low bids without financial incentives, and especially the Peruvian one at 0.048 USD/kWh. The question in Dubai is even more interesting that it follows the previous tender that was won with a bid at 0.0585 USD/kWh. Can we figure out the LCOE of PV going down so fast in less than two years?

A simple LCOE modelling shows that such low LCOEs are reachable with the solar irradiation in Dubai under very strict conditions. Low cost of capital (below 4%), a yield around 2000 kWh/kWp, low OPEX costs and of course, the most important to date: CAPEX around 0.7 EUR/Wp. While challenging, all these numbers are achievable under conditions of a high quality installation and a long lifetime. Unfortunately, so far, a part of failures of PV components in the field have been associated to an unskilled workforce, leading to defects in installation and/or maintenance. As a result, this raises questions about the viability of extremely low CAPEX and OPEX costs.

Hence, the conclusions for the development of the PV industry are extremely attractive for several reasons. First, because realistic or not, the recent tenders are all going in the same directions: costs are compressed in order to make PV increasingly competitive. From 3 to 6 USDcents/kWh, PV becomes virtually competitive with almost all clean sources of electricity on earth.

Secondly, even if the components costs implied in such low tenders cannot be replicated for all PV installations – margins are extremely reduced, but still in most cases positive for modules and BoS manufacturers – it shows that the development of PV in developing countries can benefit from lower workforce costs, and in the Dubai case, it could be a genuine explanation of dramatically low CAPEX.

Thirdly, PPAs are not the end of the story. An interesting business model could consist in bringing a PV plant online as soon as possible with a low remuneration fee guaranteed by the PPA and decide to sell part of the production on the electricity markets (or to electricity consumers) once it could become more attractive than the PPA.

DEWA’s decision about the winning bidder will be examined by all electricity providers of all available sources, not only PV ones. Would the 0.0299 USD/kWh be validated, it would trigger a complete change of mindset in the Gulf region… and actually worldwide. 0.0585 USD/kWh was a warning shot, going below 4 cents would be the signal that the end of the fossil fuel era is getting closer than ever. But before congratulating ourselves, one will have to confirm the realism of the 3 cents proposal!