The role of financing in realizing ultra-low solar electricity prices in the Middle East

This decade has seen the transition of solar energy from a subsidy-dependent "alternative" energy to a mainstream, low-cost generation technology across much of the world. The oil-producing Arab Gulf states have been unlikely pioneers in this transition, with the United Arab Emirates repeatedly setting pricing records for utility-scale solar. Despite having a lower solar resource than many other desert locations, extreme high temperatures and a relatively immature solar industry, the UAE was able to realize record-low solar electricity prices, apparently with no direct subsidies, by emphasizing the financial engineering of the projects to greatly reduce the cost of capital for the project developers. Here we consider the financial details of these projects, and demonstrate using an annual cash-flow model how each component of a typical financial package contributes to reducing the cost of electricity. We consider policies being implemented in other parts of the world that build on the experience of the Gulf, putting financial considerations front and center in the promotion of solar energy expansion.