Renewable Energy 36 (2011) 789e796

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Renewable Energy
journal homepage: www.elsevier.com/locate/renene

The costs and benefits of large-scale solar photovoltaic power production

in Abu Dhabi, United Arab Emirates
Elizabeth Harder*, Jacqueline MacDonald Gibson 1
Department of Environmental Sciences and Engineering, Gillings School of Global Public Health, University of North Carolina at Chapel Hill, 148A Rosenau Hall, CB #7431,
Chapel Hill, NC 27599-7431, USA

a r t i c l e i n f o a b s t r a c t

Article history: The potential for a 10 MW photovoltaic power plant in Abu Dhabi is examined in this paper using
Received 4 June 2010 RETScreen modeling software to predict energy production, financial feasibility and GHG emissions
Accepted 4 August 2010 reductions. Initial results show high energy production potential, generating 24 GWh and saving over
Available online 9 September 2010
10,000 tons of GHG emissions annually, but poor financial prospects yielding a net present value (NPV) of
$51
million. Benefits of reducing GHG and air pollution emissions by replacing natural gas with PV generation are
Keywords:
calculated to have a net present value of $47 million, with a large range of possible values. Results show that the
Photovoltaic
high initial costs and low expected price for electricity generated are driving reasons why photovoltaic systems
Cost benefit analysis
RETScreen
are not being implemented in Abu Dhabi. A feed-in tariff rate of $0.16/kWh is recommended to make large-scale
Renewable energy PV systems profitable.
Solar Ó 2010 Elsevier Ltd. All rights reserved.

1. Introduction into Abu Dhabi’s electricity generation mix. Electricity consumption

The United Arab Emirates (UAE) has an abundance of natural
resources, containing 9.3 percent of the world’s proven oil reserves and
4.1 percent of the world’s proven gas reserves [1]. These fossil fuel
resources helped the country evolve from a rural undeveloped land
populated by nomadic people to an industrial world leader, experi-
encing unprecedented growth in the last four decades. Abu Dhabi, the
largest and wealthiest of the seven emirates, has the majority of these
natural resources, with 95 percent of the UAE’s oil and 92 percent of the
UAE’s natural gas reserves [2]. Looking forward, Abu Dhabi has begun
investing in renewable energy technologies (RETs), hoping to continue
being an energy world leader, but with clean renewable energy.
This research examines the costs and benefits associated with
constructing a 10 MW photovoltaic (PV) power plant in Abu Dhabi.
We estimate the energy production capabilities, air pollutant and
greenhouse gas (GHG) emissions reductions, and costs and benefits
associated with such a plant.
1.1. Potential for PV energy production in Abu Dhabi
The need for increased power generating capacity has created
a window of opportunity to integrate renewable energy (RE) sources
* Corresponding author. Tel.: þ1 520 396 0832; fax: þ1 919 966 7911.
E-mail addresses: LizHarder@unc.edu (E. Harder), macdonaj@email.unc.edu
(J.M. Gibson).
1
Tel.: þ1 919 966 7892; fax: þ1 919 966 7911.
in the UAE has increased exponentially in the last three decades
(Fig.1). Looking forward, the electricity peak demand in Abu Dhabi is
expected to increase more than four-fold in just two decades, from
5616 MW in 2008 to 25,530 MW in 2028, largely attributable to
a booming real estate market in Abu Dhabi [4]. As a wealthy emirate,
Abu Dhabi can afford the high upfront capital costs typical of solar
energy projects. In addition, Abu Dhabi began privatizing its power
sector in 1999 to encourage new foreign investment in power
capacity, another potential supply of capital [5].
Furthermore, investments in RETs will contribute to Abu Dhabi’s
established goal of becoming a world leader in clean energy. The
emirate hosted the World Future Energy Summit in January 2009,
developed a renewable energy target of 7 percent by 2020 for the
Abu Dhabi Energy Plan [6], and called for a 10% renewable portfolio
standard by 2030 in the Abu Dhabi Climate Change Policy Plan [7].
A 10 MW PV power plant outside the city of Abu Dhabi was
completed in June 2009. This plant will provide power for the
construction of Masdar City [8], a multi billion project to build an
ultramodern zero-waste, carbon neutral, car-free city for 50,000
people eleven miles outside the city of Abu Dhabi. The city will
include unique zoning for companies specializing in RETs, in order
to attract innovative industries to the emirate [9]. Furthermore, by
investing in PV, Abu Dhabi will have a first mover advantage in the
PV industry. Investments in PV technology now will help reduce
Abu Dhabi’s carbon footprint, decreasing future climate change
mitigation requirements. Moreover, Abu Dhabi can further develop
its image as an environmentally aware state.

0960-1481/$ e see front matter Ó 2010 Elsevier Ltd. All rights reserved.
doi:10.1016/j.renene.2010.08.006
790 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796

Electricity Net Consumption 1.2. Previous assessments of PV energy in the Middle East
70
Three recent studies (Table 1) have examined the energy
production potential, financial feasibility, and GHG emissions
60 reductions of potential large-scale PV grid-connected power plants
in the Middle East using methods similar to those reported in this
paper. Each study analyzed multiple locations, determining the
Billion Kilowatthours

50
optimal site for the power plant. Table 1 summarizes the results
from these studies. The study reported here is the first such analysis
40 to be carried out for the UAE. In addition, unlike the studies in Table
1, it considers the benefits of air pollution avoided when PV power
30 replaces part of the energy produced by a conventional power
plant.
Rehman et al. [12] examined 41 different locations in Saudi
20 Arabia for GSR levels and sunshine duration (SSD) values, finding
the optimal location for a 5 MW PV plant in Bishah. Rehman
10 highlighted that maximum GSR levels matched peak electricity
demand in the country. El-Shimy [13] examined 29 potential sites
for a 10 MW PV power plant in Egypt, which has a target to produce
0
3 percent of its energy from RE sources by 2010. The study rec-
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
ommended a new 10 MW plant be built in Wahat Kharga, Egypt,
Year the most profitable location with a NPV of US $144.3 million [13].
Hrayshat [14] used 10-year GSR records for 24 locations in Jordan to
Fig. 1. Trend of UAE electricity consumption over time [3]. determine the best location for a 5 MW grid-connected PV power
plant. All three studies found the PV projects to have a positive net
present value (NPV), making all of the projects financially feasible.
Another factor that may favor the increased use of PV is Abu
Dhabi’s very high annual mean global solar radiation (GSR) e the
highest among Arab state capitals [10]. High GSR values correspond
2. Methods
with increased power production from PV cells. Moreover, times of
peak energy demand in Abu Dhabi e during the daytime in August
This analysis has three main components: (1) estimation of the
and September, when air conditioning use is highest e correspond
energy production potential and financial feasibility of the hypo-
with the highest GSR levels.
thetical PV plant in Abu Dhabi, (2) assessment of the anticipated
Replacing energy generated by conventional methods with PV
reductions in GHG and air pollutant emissions if the plant were
electricity could provide further benefits to Abu Dhabi in the form of
constructed, and (3) quantification of the social benefits of these
reduced emissions of priority air pollutants and GHGs. Ambient air
reduced emissions.
pollution is becoming an increasing problem in Abu Dhabi due to the
To estimate the energy production and financial feasibility of the
rapidly increasing population and industrial activity. A recent study
hypothetical PV plant, this study uses RETScreen software.
estimated that particulate matter (PM) and ground-level ozone
RETScreen was created in 1996 by Natural Resources Canada’s
cause 600 premature deaths each year in the UAE [11]. Furthermore,
Canmet Energy Research Center to provide low-cost preliminary
Abu Dhabi’s per capita GHG emission is currently among the highest
assessments of RE projects. Independent reviews of RETScreen
in the world, and with its hot climate and coastal location, Abu Dhabi
software validate its results [15e17], all reporting RETScreen
is highly vulnerable to the effects of climate change. Thus, reducing
calculations to be within 0e6% of actual energy production. For
GHG emissions is an area of concern for the government.
a more detailed introduction to the RETScreen program, see www.
In summary, Abu Dhabi is an optimal location for investments in
retscreen.net or Thevenard et al. [18].
PV energy production. The emirate’s increasing capacity needs,
To estimate the amount of GHG and air pollutant emissions
high solar insolation rates, large capital resources, synergy between
avoided, the RETScreen predictions of the energy production of the
times of peak energy demand and peak solar radiation, increasing
PV plant are used to estimate the amount by which energy
concerns about air pollution and climate change, and desire to
production could decrease at Abu Dhabi’s Umm Al Nar power plant
become a world leader in renewable energy technologies are all
if the PV plant were built. Umm Al Nar is a 1550-MW gas-fired
compelling reasons for Abu Dhabi to invest in PV energy.
power plant located near the Abu Dhabi International Airport.

Table 1
Summary of results from three studies of PV power potential in the Middle East.

Saudi Arabia [12] Egypt [13] Jordan [14]

Capacity (MW) 5 MW 10 MW 5 MW
Location Bishah, S.A. Wahat Kharga, Egypt Talifa, Jordan
Global solar radiation 2.56 (MWh/m2/year) 2.13 (MWh/m2/year) 2.46 (MWh/m2/year)
Daily sunshine duration 9.2 h 12.1 h 9.6 h
Tracking system Fixed Two-axis Fixed
Module type BP 90 W Sanyo 205 W BP 90 W
Internal rate of return 16.7% 24.9% 20.1%
Net present value $74 million (US) $144.3 million (US) $40.5 million (US)
Cost of energy 20 cents/kWh 20 cents/kWh 123 cents/kWh
GHG reduction 10,007 tons/year 14,538 tons/year 9317 tons/year
Annual generation 12.4 GWh 29.5 GWh 11.9 GWh
 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796 791

Annual emissions data obtained from the power plant are used to Table 3
estimate the air pollutant emissions avoided when a portion of the Initial, periodic, and end-of-life cost for the PV power system.

plant’s energy production is replaced with PV energy. RETScreen Type of cost $USD % of initial Reference
emissions factors for the fuels that power Umm Al Nar are used to (In thousands) costs
estimate reductions in GHG emissions if the PV plant were con- Feasibility study $200 0.22% [12e14]
structed. The benefits of avoided air pollution and GHG emissions Development $165 0.18%
Engineering $150 0.16%
are estimated with economic information from previous studies.
Equipment $55,000 59.77% [17]
The following sections discuss the various inputs used for the Balance of plant costs $36,500 39.67% [17]
RETScreen calculations, the information used to quantify emissions Tracking system $10,500
reductions, and the basis for the assessment of social benefits of Inverters $10,000
reduced emissions. Electrical components $7000
Installation $9000
Total initial costs $92,015 100.00% -
2.1. Energy production estimation Inverter replacement costs $2000 Every 5 years [12e14]
Operation and maintenance $335 Annually
Salvage value
$9202 10% [32]
The key input data needed to calculate the expected energy
production from the PV plant using RETScreen are the location,
GSR, weather, PV module type, and miscellaneous energy losses
data. The 10 MW power plant is assumed to be located at 24.43 N, system studies, equivalent to an average annual loss of 5% [25].
54.45 E, near the Abu Dhabi International Airport. GSR values, Thus, we assume that dust and soiling will decrease annual
which represent the energy from the sun striking a horizontal production by 5 percent. Table 2 summarizes the input values used
surface, are drawn NASA’s Surface Meteorology and Solar Energy to estimate the energy production potential of the PV plant.
database, measured at Abu Dhabi International Airport.
Weather data, taken from Abu Dhabi International Airport, are
used to help calculate the module efficiency. RETScreen adjusts the 2.2. Financial feasibility assessment
energy output given the temperatures in exceedance of the
nominal operating cell temperature (NOCT). This is especially RETScreen’s financial analysis calculates the benefits of the
important in the UAE as hot summer temperatures decrease energy electricity produced and the costs of the PV power plant. These
output significantly. The model assumes the PV cells lose approx- estimates are then used to show financial statistics, like net present
imately 0.4% efficiency for every degree Celsius above 45  C (the value (NPV), simple payback period (SPP), and internal rate of
NOTC). return (IRR) of the project.
The proposed PV power plant uses mono-silicon BP Solar 90 W The cost estimate is made up of the initial costs, annual costs,
modules. This module also was used as the basis for the previously periodic costs, and end-of-life costs (Table 3). Numerous studies
described PV studies in Saudi Arabia and Jordan [12,14]. To produce and reports were consulted to develop estimates of these costs
10 MW of energy, the plant needs 111,111 modules for a total area of [21,26e31], as the economics of photovoltaics are constantly
69,980 m2 (17.3 acres). PV modules are mounted on a one-axis changing and differ around the world.
tracking system, which maximizes electricity production by The module price is assumed to be $5.50/Watt, for total equip-
rotating the PV modules to follow the sun’s daily path, increasing ment costs of $55.5 million [17]. The feasibility study, development,
direct sunlight to the panel. and engineering estimates (totaling $515,000) follow predicted
Power production can decrease significantly with the accumu- values in previous studies [12e14]. The balance of system (BOS)
lation of dust or sand on the surface of the PV cell, often called costs are estimated to be $36.5 million. BOS costs include the
“soiling.” Numerous studies have examined the soiling effect on PV tracking system, inverter, electrical components, and installation,
cells [19e24]. The soiling effect is especially important in the desert which are assumed to cost US $300/m2, $1000/kW, $700/kW, and
conditions of Abu Dhabi, where sandstorms can deposit large $900/kW, respectively [17]. The total initial cost is predicted to be
amounts of dust and sand. However, increased cleaning can occur $92 million (Table 3).
in the summer months and after dust storms when it is needed Annual costs consist of regular operation and maintenance
most [19]. Also, the tracking system can protect against destructive (O&M) costs and periodic costs of replacing inverters. O&M costs,
sandstorms as modules are higher above ground and can be rotated estimated to be $334,500 annually, are relatively small because PV
away from the dust and wind [24]. A study conducted by the US systems are low maintenance [12e14]. Replacing inverters is esti-
National Renewable Energy Laboratory of derate factors (the mated to cost approximately $2 million every 5 years [13].
percentage decrease in output due to soiling) reported an average The PV system’s salvage value is estimated to be $9 million,
derate factor of 0.95 (range of 0.75e0.98) for soiling among 24 PV consistent with International Energy Agency’s 2009 study on the

Table 2
Input values for RETScreen’s energy production worksheet.

Input Description Input value

Solar tracking mode The tracking mode can be fixed (stationary) or on a one-axis, two-axis, One-axis
or azimuth tracking system.
Azimuth The orientation of the PV module. If facing directly south, azimuth is zero. 0.0
Annual solar radiation e The amount of solar radiation (MWh/m2) striking a horizontal NASA 22-year monthly
horizontal surface in one year. averages for Abu Dhabi
International Airport
Miscellaneous losses Energy production losses from dust accumulation and sandstorms. 5%
Inverter efficiency The percentage of electricity the inverter successfully converts from DC to AC. 95%
Inverter capacity The output of the inverter in AC kW. 9500
Inverter misc. losses Any miscellaneous losses from the inverter or other system components. 0%
792 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796

Table 4
Input values for financial feasibility analysis.

Financial parameter inputs

Input Description Input value Reference

Electricity export rate The price the utility pays for electricity generated $0.0816/kWh [5]
by the PV exported to the power grid.
Electricity cost escalation rate The assumed escalation in electricity prices per year over 4% [12e14]
the lifetime of the PV plant.
Inflation rate Annual rate of increase in the price of goods/services 2.5%
Nominal discount rate Rate used to discount future cash flows after inflation. 5.0%
GHG emissions reduction The expected revenue from GHG emission reduction credits. $0/ton CO2 eq. e
Project Lifetime Estimated project lifetime 30 years [32]

Table 5
Baseline composition of emissions from the Umm Al Nar power plant. Fuel consumption (Abu Dhabi Water and Electricity Company, 2009) as well as emission factors for
various fuels (RETScreen International, 2001e2004) are reported.

Fuel 2003 fuel Percentage of CO2 emission CH4 emission N2O emission Fuel conversion
consumption fuel consumed factor (kg/GJ) factor (kg/GJ) factor (kg/GJ) efficiency
(MBTu)
Natural gas 129,343,968.54 99.93% 56.1 0.003 0.001 45%
Crude oil 74,008.63 0.057% 77.4 0.0030 0.0020 30%
Gas oil 1675.14 0.001% 63.1 0.0010 0.0010 45%
Fuel oil 15,171.42 0.012% 74.1 0.0020 0.0020 30%

financial feasibility of large-scale PV systems, which assumed the
system is worth 10% of its original value after 30 years [32].
RETScreen calculates annual income by multiplying the net
energy production from the PV plant by the electricity export rate
(EER). The EER is the price paid by the utility for electricity from the
PV plant that is dispatched to the power grid. This rate is assumed to
be equivalent to the cost of electricity production, which is estimated
in the UAE to be 30 fils (equivalent to US $0.082) per kWh [5]. The
electricity export rate is assumed to escalate at a 4% rate annually.
RETScreen also can account for the monetary value of GHG
emission reductions. The proposed PV project is assumed to receive
no GHG emissions credits. However, one sensitivity analysis
scenario discussed later assumes GHG emissions credits are
received for the plant.
All taxes are assumed to be zero, since the UAE does not have
a tax system. We assume that foreign direct investment and the
government of Abu Dhabi fund the PV plant, without the need for
a loan. The inflation rate, nominal discount rates, and other finan-
cial indicators are shown in Table 4.
2.3. GHG emissions analysis
To calculate GHG emissions reductions, the plant’s projected
annual energy production is assumed to replace an equivalent
amount of conventional electricity generation. The base case GHG
emissions rate (kg/GJ) is calculated by inputs of fuel consumption of
the Umm Al Nar power plant and baseline transmission and distri-
bution (T&D) losses. T&D losses are reported to be 2% and 8%,
respectively [4]. RETScreen’s default emissions factors for the fuel
types used at Umm Al Nar are used in the analysis and listed in Table 5.
RETScreen compares this baseline GHG emissions case with the
case when a portion of the energy from the conventional plant is
replaced by energy from the PV plant, which emits no GHGs. The
T&D losses for the proposed new electricity system are assumed to
be 10% as well. Table 6 lists the input values (in addition to fuel type
and volume) for the GHG emissions analysis.
2.4. Air pollutant emissions analysis
The rate of emissions of air pollutants from the Umm Al Nar power
plant (Table 7) was determined by dividing total reported annual
emissions (Table 5) by gross electricity production for the Umm Al Nar
power plant in 2003. Emissions data were obtained directly from an
inventory of air pollutant emissions prepared for the Environment
Agency-Abu Dhabi [33]. As for the estimated reductions in GHG
emissions, the reductions in air pollutant emissions were computed
by assuming that a portion of Umm Al Nar’s energy production would
be cut with installation of the PV plant, yielding a proportionate
reduction in emissions. The PV plant is assumed to produce no air
pollutant emissions during its operating phase (Table 6).

2.5. Quantification of benefits of emissions reductions

Table 6
Inputs for the GHG emissions reduction analysis.
Tol et al. [34] reviewed 103 cost estimates of damages from GHG
Input Descriptions Input Reference
emissions and found that for peer reviewed marginal cost
value
Baseline The current makeup of the See e Table 7
electricity electricity sector in Abu Dhabi. Table The avoided emissions from the Umm Al Nar power plant with the addition of the PV
systems 5 power plant.
Baseline T&D The losses of electricity from 10% [4]
losses transmission and distribution. Pollutant 2003 reported Emissions
PV emissions The PV project is 100% solar and 0% e annual emissions rate (g/kWh)
does not emit GHG. (tons/year)
Proposed Transmission and distribution losses 10% [4] NOx 86,483.40 15.26
system T&D in the proposed electricity system, into SO2 34.16 0.01
losses which the PV plant is integrated. Total suspended particulates 398 0.07
 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796 793

Table 8 Table 9
Summary of social damage estimates from a variety of air pollution valuation studies Summary of financial indicators for the PV power plant.
worldwide. Estimates scaled up to present 2010 dollars.
Net present value $
50.8 million
Pollutant Minimum Mean Maximum Reference No. of Energy production cost 16.18 cents/kWh
($/ton) ($/ton) ($/ton) studies Benefit-cost ratio 0.45
NOx $4396 $345 $14,915 [37] 9 Annual life cycle savings $
3.3 million
SO2 $3140 $1208 $7379 10 Internal rate of return 0.5%
PM10 $6751 $1491 $25,434 12 Simple payback period 55.4 years
GHG $-10 $57 $277 [34] 28 Years to positive cash flow 29.5 years

the solar cells. Nonetheless, as Fig. 2 shows, the peak PV plant

estimates, damages had a mean of $50/ton with minimum and
maximum (5% and 95% probability) values of $
9/ton and $245/
ton. This estimate is used to determine the present value of benefits
from avoided GHG emissions damages.
Numerous studies have quantified the social costs of air pollu-
tion [35e38]. One study by Matthews and Lave [37] examined
a number of economic valuation studies around the world and
summarized their cost estimates for various pollutants. The mean,
minimum, and maximum cost estimates for NOx, SO2, and PM10 are
scaled up from $1992 to current $2010 and shown in Table 8.
The mean cost of each pollutant is used to quantify the benefits
of avoided air pollutant emissions. Total suspended particulates are
assumed to be equal to PM10, consistent with the US EPA’s PM
emissions factor estimates, which assume all PM emissions from
natural gas combustion is less than 10 mm in diameter [39].
3. Results
3.1. Projected energy production
The proposed power plant is projected to produce approxi-
mately 24.4 GWh annually of (alternating current) electricity
available for export to the electricity grid. This accounts for 0.07% of
Abu Dhabi’s total generation of 34,500 GWh in 2008 [40], or 2.3% of
the energy generated by the Umm Al Nar power plant. The PV plant
could meet the needs of about 1975 people, given the UAE’s per
capita consumption of 12,375 kWh/year [41].
The PV power plant capacity is estimated to be 28%, repre-
senting the ratio of actual energy output compared to optimal
nameplate capacity. The specific yield, which represents the total
annual energy delivered by the PV plant per unit of plant area, is
350 kWh/m2. The peak electricity export occurs in the month of
May, when production is 2500 MWh (see Fig. 2). The decrease in
electricity production from May to August is likely due to the fact
that extreme high summer temperatures decrease the efficiency of
production approximately coincides with peak monthly demand.
3.2. Financial indicators
Table 9 summarizes the results of the financial analysis for the
project according to several metrics:
 The net present value (NPV) for the project, which compares
the total cash inflows discounted to present value against all
costs for the project, is $
51 million. As Table 10 shows, the
initial cost and income from exported electricity are the two
most influential factors. In order to yield a positive NPV, the
electricity export rate e the price paid by the utility company
for electricity exported to the power grid e would have to be
$0.16/kWh or greater, or the initial capital costs would have to
be lowered to below $41 million e a decrease of 55%.
 The energy production cost, which measures the total cost for
producing 1 kWh of electricity, is estimated to be 16.18 cents/kWh.
 The net benefit-cost ratio, comparing the project’s total costs to
the benefits (excluding environmental and other social bene-
fits) of all income over the 30-year lifetime, is projected to be
0.45. From the standpoint of financial investors, ratios larger
than 1 (i.e., financial benefits exceed costs) are desired.
 Annual life cycle savings (ALCS) represent the yearly benefit of
the PV plant, taking into account net present value, project
lifetime, and discount rate. The ALCS for the project is projected
to be $
3.3 million annually.
 The internal rate of return on investment (IRR)e the interest
earned by the project over its lifetime e is projected to be 0.5%.
If the IRR is greater than the investor’s required return on
investment, then the project is financially worthwhile.
 The number of years to positive cash flow e the length of time
to recoup the initial investment only, excluding periodic
investments e is 29.5 years.

Comparison of Monthly Peak Demand and Projected

Elelctricity Production from PV Plant
6000 3000
Peak Monthly Demand

5000 2500
Projected Electricity
Production (MWh)

4000 2000
(MW)

3000 1500
Demand
2000 1000 Production

1000 500

0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month

Fig. 2. RETScreen’s monthly projected electricity production compared with ADWEC’s monthly peak demand.
794 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796

Table 10 4. Sensitivity analysis

Elements of the NPV of the PV power plant.

Cost element Table 12 shows the effects of altering key input variables (one at
Initial Electricity O&M Inverter Salvage
a time, while holding all others constant) on the project’s energy
costs income replacement value production level, cost per unit energy produced, and NPV. The cost
PV ($US million)
92.0 þ51.8
7.1
8.0 þ4.5 and NPV estimates for all but the last row of the table, which shows
the effects of considering environmental benefits as described
Note: The NPV of the PV plant is determined from the cost elements shown above, using
the following equation. NV ¼
Initial Costs þ PV½Electricity Income
Operating
above, exclude environmental benefits. Explanations for the alter-
and Maintenance Cost
Inverter Replacementþ Salvage Values native input values are provided below.
The current GSR values reflect the 22-year averaged insolation
Table 11 data from NASA. However, a recent study [10] produced GSR values
Calculation of the monetary benefit of reduced air pollution emissions with addition for the entire year of 2008 that were lower than the NASA data, likely
of a 10 MW PV power plant instead of conventional power production from plants
due to the fact that the measurement locations are different and 2008
like the Umm Al Nar power plant.
was a time of low solar radiation during the sun’s 11-year solar cycle.
Pollutant Emissions Mean damage Annual benefit Present value RETScreen predicts a less favorable energy production potential (7.8%
savings cost ($/ton) ($ thousands) of benefits
less than under the baseline scenario) with these 2008 GSR values.
(tons/years) ($ thousands)
The electricity escalation rate is the projected amount of annual
NOX 372.85 $4396 1.639 $34,305.8
SO2 0.15 $3140 0.5 $9.9
increase in the electricity export rate. The UAE became a net
TSP 1.72 $6751 11.6 $243.0 importer of natural gas in 2007 [42] and could face the possibility of
GHG 10732 $57 611.7 $12,803.6 purchasing gas at significantly higher prices in the future [43]. Thus,
Total benefit $14,344 $2262.9 $47,362.2 a scenario is examined in which the electricity export rate is changed
from 4 to 8 percent. As shown, this would have a very large impact
The results summarized in Table 9 demonstrate that without on the profitability of the project, increasing it by nearly 86%.
including the benefits of reduced GHG and air pollutant emissions, The value for miscellaneous losses, “soiling effect,” was changed
the proposed PV plant is too expensive to be justified economically. from its original value of 5% to both 2% and 10% in order to examine
effects on resulting values. As Table 12 shows, these changes
3.3. GHG and air pollutant emissions reductions produced relatively small changes in the estimated energy
production potential and NPV.
Table 11 shows the mass reductions in air pollutant and GHG The initial cost of the project was also examined as PV costs are
emissions predicted to occur if the PV plant is installed, as well as currently decreasing with time. Average costs for PV modules were
the estimated monetary value of these emissions reductions. The only $3.70/W in the US in 2009 [26] in contrast to our assumed
total present value of all air pollution and GHG reduction benefits module price of $5.50/W, which was based on previous studies using
for the 30-year PV plant lifetime, with a 2.5% real discount rate, is RETScreen and information provided by solar power providers. One
estimated to be $47.4 million, with a range of $0.5 million to $179.5 3.5 MW PV power plant in Tucson, Arizona, reported costs of modules
million (representing uncertainty in the economic valuation of at $3.33/W and a total system cost of just $6.50/W [29]. Assuming
pollution damages). Note that the estimates for the mean damage these same costs, a price of $65 million is assumed for all equipment
costs of GHG emissions consider not only the costs of abatement and balance of system costs, for a total initial cost of $65.5 million. This
but also of damages due to climate change. has a very large impact on the NPV, increasing it by more than 52%.
When the mean present value of these benefits is included in The electricity export rate, the price paid by the utility company
the financial analysis the project’s overall NPV increases to $
3.5 for electricity produced by the PV plant, is one of the most
million. Thus, rather than requiring a 55% reduction in capital costs important factors for determining the financial feasibility of this
for the project to be profitable, capital costs would only need to project. The current electricity export rate is $0.082/kWh, the
decrease by 3.8%, from $92 million to $88.5 million, which may be estimated cost of electricity production in the UAE [5]. However,
feasible with existing technologies and modifications to the project other similar RETScreen studies in Egypt and Jordan have assumed
design assumptions. This issue is discussed further in the sensitivity an electricity export rate of $0.42/kWh [13,14] and $0.50/kWh for
analysis, below. Saudi Arabia [12]. These higher estimates are likely a result of

Table 12
Effects on key indicators of the PV plant of changing key predictor variables.

Sensitivity analysis results for RETScreen estimates

Input variable Value change Results* (% chance from original)

Original value New value Net energy Production cost NPV

production (GWh) (cents/kWh) (US $ million)
Global solar radiation Avg. ¼ 5.97 Avg. ¼ 5.58 22.3 (
7.8%) 16.9 (
4.4%)
53.2 (
4.6%)
(kWh/m2/day) (kWh/m2/day)
Electricity escalation rate 4% 8% NC 8.8 (
45.6%)
7.2 (þ85.8%)
Losses from dust and sand 5% 10% 23.2 (
4.5%) 17.1 (þ5.7%)
53.6 (
5.1%)
2% 25.2 (þ4.0%) 15.7 (
3.0%)
49.2 (þ3.2%)
Initial costs $92 million $65.5 million NC 12.0 (
25.8%)
24.4 (þ52.1%)
Electricity export rate 8.16 (cents/kWh) 42 (cents/kWh) NC NC 163.7 (þ421.9%)
Market value of GHG emissions $0 $16/ton NC 15.6 (
3.6)
47.4 (þ6.8%)
reduction credit
GHG and air emissions total 0 $47.4 million NC 8.66 (
46.5%)
3.1 (þ93.9%)
social benefits

*NC ¼ No change.
 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796
250
$221.35
200
US $ Million
150
100
$58.40
50
$0.58
0
0.01
Discount Rate
Fig. 3. Effects of changing the real discount rate on the predicted monetary benefits of avoided air pollution and GHG emissions.
assuming a premium will be paid for electricity generated by
renewable sources. A feed-in tariff is a policy tool that essentially
guarantees that a utility will purchase all of the electricity gener-
ated at a predetermined price, often at a premium. Many countries
have feed-in tariffs for renewable energy sources. Examples include
Germany ($0.68/kWh), Spain ($0.49/kWh), and Portugal ($0.67/
kWh), where high tariff rates have resulted in now sizable RE
generation capacity [44]. It is likely that these previous RETScreen
studies assumed that a feed-in tariff would be established.
If we assume the electricity export rate to be $0.42/kWh, we find
the same energy production and GHG emissions reduction but
a vast difference in financial feasibility. The NPV increases to $163.7
million. The ALSC, internal rate of return, and cost benefit ratio each
increase to $10.6 million, 1.4%, and 2.78, respectively. In effect, the
project is now projected to be profitable. The NPV and electricity
export rate are linearly related, so that NPV increases by 6.34
million for each increases of the electricity export rate by 1 cent/
kWH. Thus, it is essential to further evaluate the electricity export
rate to ensure the project will be profitable. Any export rate above
$0.16/kWh would result in a positive NPV, making a feed-in tariff of
at least $0.16/kWh highly effective.
In the baseline analysis, GHG emission credits are currently
valued at $0/ton CO2 eq. However, currently two solar projects in
Abu Dhabi, funded by MASDAR, are registered for funding from the
Intergovernmental Panel on Climate Change’s Clean Development
Mechanism and receive marketable GHG reduction credits.
Assuming the plant would receive GHG emissions credits of US $16/
ton CO2 eq. (the average January 2010 price of credits on the
European Union’s Emissions Trading Scheme) with a 5% escalation
rate for 20 years [45] results in a 6.8% increase in the plant’s NPV.
Note that this calculation includes only the market value of GHG
credits and does not consider total social damages from GHGs,
which as described above could have a much higher value than
reflected in the current market price.
As the last row in Table 12 shows, when total avoided social
damages from air pollution and GHGs are included, the NPV of the
PV plant increases by $47.4 million (93%).
It is important to note that the discount rate is very important in
calculating the future benefits of air pollution and GHG emissions
reductions. The real discount rate of 2.5 percent was chosen to be
consistent with RETScreen. However, lower discount rates for health
benefits have been advocated as disease prevention measures have
increasing benefits with time and because otherwise the benefits of
better air quality to future generations would be severely devalued
[46]. The impact of changing the discount rate is shown in Fig. 3. The
795
$179.52
$148.31
M in
Max
Mean
$47.36 $39.13
$0.47 $0.39
0.025 0.04
ranges of damage cost estimates for air pollutants and GHGs greatly
impact the value of these benefits estimates as well. Results in Fig. 3
show the calculated present value of air quality benefits for the
minimum, mean, and maximum values reported by Matthews and
Lave [37] and Tol [34] at 1%, 2.5%, and 4% discount rates. Clearly,
there is substantial uncertainty as to the true value of reducing air
pollution and GHG emissions.
5. Conclusion
Abu Dhabi has high energy production potential for large-scale
PV power plants, with a capacity factor of 27.9%. However, large-
scale PV power plants are currently not profitable in Abu Dhabi, with
an estimated NPV of $
50.8 million for a 10 MW facility. This
negative NPV demonstrates why solar power is not being imple-
mented on a wide scale around the world: the costs are still too high.
Conclusions would be different if environmental damages were
taken into account. There is a potential replacement of 24.4 GWh of
conventional thermal power production annually with the
construction of each 10 MW PV power plant built, saving an esti-
mated 10,732 tons of CO2 eq., 372.8 tons of NOx, 0.15 tons of SO2,
and 1.7 tons of total suspended particulates annually. Rough
calculations of these benefits are estimated to have a present value
of approximately $47.4 million, with a large range from $0.4 million
to $221 million. It is important that decision makers choosing how
to meet Abu Dhabi’s rising electricity demand with new power
capacity take these benefits into account. These findings confirm
the need to support PV projects with subsidies, as utility companies
will not account for these positive externalities.
While the PV project considered in this analysis is not currently
economically viable, the estimated system cost of $9.20/W is
quickly becoming outdated. Without a feed-in tariff or accounting
for social benefits of reduced air pollution, a drop in the initial costs
from $9.20/W to $4.10/W (55%) is required to make the project
viable. From 2003 to 2004, installed cost of PV systems in California
decreased from $8.00e$9.00/W to $7.00/W with prices as low as
$6.00/W for bulk purchases [47]. A 3.5 MW PV plant built in 2001 in
Arizona, USA had a total system cost of $5.40/W [29]. The Inter-
national Energy Agency’s study of very large-scale PV systems lays
out a roadmap which shows the average system costs at $4.50/W in
2010, decreasing to $2.34/W and then $1.33/W in 2020 and 2030,
respectively [32]. Thus, as total PV plant costs decrease to below
$4.10/W, the project might soon become viable.
Additional research is highly recommended, as there are limi-
tations to the RETScreen model. RETScreen requires fixed values for
796 E. Harder, J.M. Gibson / Renewable Energy 36 (2011) 789e796
inputs, yet ranges of possible values should be used in cases where
uncertainty exists. Future research should examine the political
feasibility of installing PV in Abu Dhabi and establishing a feed-in
tariff. The calculation of benefits of reduced air pollution should be
updated with specific Abu Dhabi values by modeling the damages
($/ton) from existing power plant emissions in Abu Dhabi, specif-
ically. Lastly, other RE energy sources should also be studied to see
what energy source would be the most beneficial economically and
environmentally.
Abu Dhabi currently has a window of opportunity to invest in RE
sources. The emirate’s clean energy goals, needs for new power
generation capacity, substantial cash reserves, and high GSR levels
make RE projects ripe for development. This study shows, however,
that government incentives are needed to make these projects
profitable and prompt PV power plant construction in Abu Dhabi.
Acknowledgements
The authors would like to extend special thanks to Dr. Jason
West, Assistant Professor, Department of Environmental Science
and Engineering, UNC Chapel Hill; Dr. Richard Andrews, Professor
of Environmental Policy and Chair of the Department of Public
Policy, UNC Chapel Hill; Zac Adelman, Emissions Modeler, UNC
Institute for the Environment; Trond Bohler, Branch Office
Manager, Norwegian Institute for Air Research. This research was
funded by Environment Agency e Abu Dhabi in conjunction with
the UAE Environmental Health Strategy Project at UNC Chapel Hill.
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