Chinese solar developer Jinko Power and French energy giant EDF this year announced a new world record low price for the solar power to be generated at the 1.5 GW Al Dhafra solar project in Abu Dhabi.
Commissioning utility the Emirates Water and Electricity Company (EWEC) accepted the tariff price offered by Jinko and EDF of $0.0135/kWh.
With the Chinese developer having now claimed its second world record for cheap solar power – following the Sweihan project win in Abu Dhabi in 2017, now rebranded the Noor Abu Dhabi project – pv magazine spoke to representatives from the Jinko Power International Business: president Charles Bai, VP for investment Ian Tu and managing director for the Middle East and Africa region Mothana Bahjeat Qteishat, about how the Shanghai Stock Exchange listed company with a 3 GW operational portfolio in its homeland has again managed to screw down on solar’s levelized cost of energy (LCOE).
The Jinko executives also touch on the energy-weighted levelized electricity cost – or EWLEC – criteria applied to ranking the competing project proposals, which attempts to go beyond merely considering the lowest price to also include the maximum energy yield.
Summing up the Al Dhafra solar tender, Jinko Power stated: “The success, transparency and fairness of the authorities in Abu Dhabi, based on our experience in the previous project of Sweihan, lead us to be engaged again in [the] Dhafra project, setting new benchmarks in the industry.”
pv magazine: How could Jinko Power deliver this world record price?
Jinko Power: The bid our consortium submitted is a collaborative effort and [was made in] consensus with our partner EDF Renewables. [With] the Al Dhafra project, we will sell power to EWEC under a 30-year PPA [power purchase agreement]. Jinko Power’s conviction to propose a competitive charge rate to EWEC is a result of our great experience to have had finished, on time and under budget, the world’s largest standalone project [at] Sweihan [with a capacity of] 1.17 Gwp in 2019, and [which is] currently selling power to EWEC. The Abu Dhabi regulatory authority, in our experience, has shown unprecedented fairness and support to facilitate the completion of the Sweihan project. The experience drove our determination to repeat the success again in Abu Dhabi with the Al Dhafra project, which is 2.1 GWp. [The] Sweihan project bid, back in 2016, has been a world record in terms of size and charge rate. We are very proud that we are setting a new record again and new milestone in … PV industry history, in addition to our credential of having developed … standalone gigawatt-scale PV solar projects.
We priced our investment return based on successful precedents and [the] risk profile of the project, among other things. The highly-credit-rated Abu Dhabi sovereign investment [of] 60% of the Al Dhafra project under [a] public private partnership scheme, has again created a delicate risk-reward profile that [encouraged] us to be competitive.
We are also attracted by the tendering philosophy of EWEC, which sets [a] clear boundary of obligations and responsibilities for both EWEC and bidding consortia and weighs both quality and cost in parallel, as a procurer. As a leading global developer, the success of [the] Sweihan project which we partially own and [which is] fully operational, has set a unique benchmark to influence the policy makers of other countries which Jinko Power invests in, specifically in the aspect of how policy makers should work with sponsors to make a project work [in] timely [fashion and] with robust quality.
Talking about technicalities, a novel design, allowing for optimization, was chosen. In terms of the technology of the modules, it is not a secret that we have utilized the bifacial models to enhance the annual yield and lower the LCOE, which both comprise [part of] the award criteria. The other design concept that was applied is single-axis trackers. However, to maximize the performance in the huge project area of 20km2, the tracker design is not similar to what we see typically in other projects, especially in terms of spacing. In our case, significantly lower spacing is considered between the rows to maximize the energy generated per square meter.
Also, the operational lesson of using robots to clean modules – that are used in Sweihan – was further promoted in [the Al] Dhafra project. This technical excellence of Jinko Power allowed us to keep soiling losses in check within the targeted values, all in a sustainable manner, without wasting the scarce source of water.
To sum up, the success of the consortium has proven our capability to pre-arrange financing, manage [the] bid process and procure EPC [engineering, procurement and construction services] at [an] optimal quality-to-cost ratio, which is a key for us to stand out amongst [the] competition.
There was more than one price component to the final bid price. Can you please clarify the differences?
The Abu Dhabi PV tender is designed in a way that offers submitted by bidders are ranked based on energy-weighted levelized electricity cost, or [the] so-called EWLEC. EWLEC shows the quality and strengths of a bidder’s proposal relative to [the] competition. The mathematical design of EWLEC ranking prevents malignant competition and ensures the procurer buys energy from the best-quality asset at the best price.
This innovative evaluation criteria mixes between both the cost of electricity and the amount of energy produced. From an off-taker perspective, it allows incorporating costs of infrastructure enhancement and the potential savings from shifting away from other expensive means of power generation, such as natural gas. In that sense, the off-taker is also keen to maximize the power plant generation.
Can you tell us more about the storage facility coupled with the project? Do you think such arrangements will become standard for future projects in the region?
The optional storage facility of a maximum of 225 MW and 300 MWh for Al Dhafra, is yet to be decided by the procurer … for now, the PPA has been signed for the PV project only. But, doubtless, combined storage with [a] PV solution is becoming the trend in many large scale tenders in the world. One of our proposals submitted to EWEC [envisaged] storage capacity with committed engineering support and attractive economics. We do agree that storage facilities could proliferate in the region in order to allow renewable energy becoming a key source of power load. But we remain at the procurer’s discretion regarding whether or not storage will be integrated into this project.
It is clear Jinko Power is particularly successful in the Middle East and Africa (MEA) region. How do you see this market and how different is it from other regions? [The] MEA region is our key growth focus. The region is equipped with excellent irradiation, financial liquidity … either from commercial lenders or bundled with ECA [export credit agency]/multilateral participants. In addition, there is a strong desire for large scale EPCs to undertake finishing the works on time.
We started looking after the Gulf region back in 2015 and have participated in all major tenders. [A] total of seven bids have been submitted to date, [of] which three have been ranked as lowest [-priced] bidder and have been awarded [contracts].
We have built a strong track record and experience, we have a top-notch, fully-dedicated team [in] the region and we will continue to capitalize [on] our strong network and access to key stakeholders in our home market and globally, including lenders, suppliers, EPC contractors and partners, to best serve the upcoming tenders and projects in the region.
With our engagements in Abu Dhabi and the concentration of technical innovation and financial engineering, we aspire to create a benchmark of transformation, a word-class example with our partners. From both a strategic perspective as a center of green energy innovation and a commercial perspective with a steady revenue stream, we position ourselves as a long-term investor in Abu Dhabi and the GCC [Gulf Co-operation Council] area. [The] GCC still has a lot of potential to go in terms of volume and value growth. The benchmark that we have set has attracted many regimes – not only in the GCC – who want to duplicate the experience and price offered to Abu Dhabi. Even with the current wave of gigantic projects, the market is just starting in the entire region. This project is only the second one in Abu Dhabi and we expect another two to three rounds to follow with similar size and structure. Saudi Arabia is now moving ahead with [its] second round of projects, with expectations of many projects to come. The same in Oman, [which] is waiting for its first utility scale PV project to be connected.
What impact do you expect Covid-19 to have on the project timeline? Will it be difficult to arrange finance within months?
We expect reasonable support from [the] local authority, along with commitments from our [finance] vendors to reach [financial closure] on time … we have [not] yet seen any major blockage to the progress to reach closing nor mobilization.
For a country with such [a] good credit rating, and also such great payment history, we expect the financial cost to be extremely competitive and the project to be over-subscribed by lenders. Currently, we are in discussions with big players from Europe and northeast Asia also.
The Covid-19 situation created a kind of delicate balance in the finance market. [On one hand] interest rates have dropped to a level unseen before, however the risk margin didn’t increase aggressively. Moreover, and as a requirement for the bid, we were in contact with banks to secure the desired margin beforehand.[To] praise modern technology, we have never been as busy and productive as we are in executing the Al Dhafra project through the internet-based means of communication. Every day we see constructive progress [has] been made, which triggers the aggressive atmosphere to the spirit of working together with EWEC, our partner, lenders and vendors, as a team.
We all look forward to making achievements, milestone by milestone. [Thus far] we are on the right trajectory.
What about Covid-related supply chain and logistical problems – could these delay the project?
Mobilization of construction is currently being arranged. Under the pandemic situation, sponsors need to be extremely careful about supply chain logistical planning. We have [not] yet seen any major disturbances which deviate our original proposal in terms of [the] construction schedule. Having said [that], the entire sponsor working team is seamlessly interacting with our supply chain partners, who also [understand] the absolute strategic importance of Al Dhafra, the biggest PV project in the world, planned to be completed in 2022.
Many people confuse Jinko Solar, the module manufacturer and Jinko Power. Are both companies affiliated or completely separate?
The two companies are completely separate and each focuses different business and under respective governance. Listed on [the] NYSE, JinkoSolar manufactures solar modules and Jinko Power is listed on the Shanghai Stock Exchange and focuses on solar IPP investment. Both companies have clear disclosure, transparency and governance [practices] to investors, based on regulations. We have repeatedly proven to our partners and the market that Jinko Power procures modules on [an] arms-length basis under our mandate and governance, to optimize investment returns. Risk-adjusted investment returns and arms-length procurement of key equipment is purely based on commercial/technical merits and collective decision within bidding partners.
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