Interview with Paddy Padmanathan, CEO of ACWA Power (Part II)

In a recent Clean Energy Business Council event in Dubai I had the privilege of interviewing live Paddy Padmanathan, CEO of ACWA Power at the Clean Energy Business Council 6th Annual Renewable Energy in MENA Summit. He is one of the most inspirational leaders in renewable energy today. If you weren′t part of the 250+ strong audience, this article is a way to pay forward what we learnt from Paddy to the wider industry. This piece is part II of the article. Read Part I here: https://goo.gl/yByr2g

?The key to 100% renewables

Without a doubt the biggest issue of renewable energy is the intermittency. For PV and wind to become serious challengers to fossil fuels, and even replace them altogether, they need to be able to reliably dispatch power. There is an enormous opportunity for batteries, which will be a huge player in the future. But according to Paddy today ‘nobody has invented a 24h battery, the maximum is probably 6 hours, and most not more than 4 hours. Cycling is also limited’

Which is the reason why ‘from the day we got involved in Concentrated Solar Power (CSP) we recognized the transformative power of the technology'

'When I look back and think of all the exciting projects we worked on, there are a couple of wonderful moments that I will never forget. One of the projects that sticks in my mind is Noor [510MW CSP in Morocco], as it is one of the projects I am most satisfied and proud of'

The Noor Projects in Morocco are three CSP plants of 160, 200 and 150MW respectively, totalling 510MW in the same complex. The first 2 (Noor I and II) are parabolic trough and have 3 & 8 hours of thermal storage respectively, Noor III is a tower with 8h of thermal storage. 

That wasn′t the first time ACWA Power tried their luck with CSP. In fact, they bid the Shams project in Abu Dhabi, but they lost. ‘Not joking, we literally googled what was CSP. We lost the project and we were disappointed, but in retrospect it was probably a good thing’

By the time it got to bid on Noor, ACWA Power pushed very hard. ‘We tried to get the supply chain to forget the market price and we delivered a tariff that was at that time shockingly different to what was expected’. They did deliver. Their tariff was 6 cents below the next bidder.

Their CSP project in UAE, a tender of the Dubai Energy & Water Authority (DEWA) has come to mark a before and an after in the history of CSP when it announced a tariff of USD7.3cents Kw/h in 2017. ‘Right now, in this region, CSP is the cheapest dispatchable technology. If you take CSP like this and blend it with PV and wind that together should be able to run at 5cts Kw/h 24h-renewables. Average energy prices here are 8 cents at the moment, so it′s a win-win’

Furthermore, Paddy believes that the fact that the price of solar energy is fixed; unlike fossil fuel plants, where a good proportion of cost comes from purchasing fuel and fluctuation risk.

‘That′s the reason why we go after every single CSP tender there is, we think it′s a key enabler, a gateway technology’

The USD7.3cents Kw/h tariff came as a big surprise to the industry due to the relatively low solar resource [Direct Normal Irradiation]. ‘We were equally surprised during the last week of preparation of the DEWA CSP tender, shocked in fact, that it had come down so much to the level it had. And now that we are in it, and we can see the numbers, the breakdown of each component… I can tell you this is not a one time price, this is where it is going’

‘Take that same plant and move it somewhere else, say in Chile, Uppington or even certain areas of Saudi Arabia, just because of the higher solar resource available there – and considering the same or similar credit condition; which would definitely be for KSA – the number for this very same project would be more like US$5.9ct Kw/h. It′s shocking! This is for stable, unsubsidised, fixed electricity cost going forward’

And across the MENA region it is much the same story. A country like Jordan does have different credit conditions to UAE, but also has better DNI resources. ‘The same result as DEWA CSP would probably be achieved today, depending on the tender conditions’.

‘Let the numbers speak’

The energy industry changed only in small increments for more than 100 years. It is as if all the change that didn′t happen for all this time is happening now, at an ever-accelerated pace. So governments are at a bind of uncertainty making decisions today, oftentimes with yesterday′s energy hindrances and decades of bad planning and decision-making.

‘My advice to governments is that they have got to adapt and accept what the reality is TODAY. Technology has taken us to a new paradigm. Everything in an economy requires electricity and water, so the primary objective of governments is to deliver electricity reliably and at the lowest possible price so that it aids growth'

So start by calculating the true cost of what you are doing today compared of what you could do with the new technology. You will be shocked! Don′t believe you are stuck to what′s already there. We are at a time when the cost of scrapping the old projects and substituting with new generation [and adding the scrap cost onto the tariff] is going to be cheaper than keep running old stuff just cause you have it. The foundation is really honest accounting. Money doesn′t lie. Check the real numbers’

When asked about the future Paddy is clear ‘Renewables cost will continue to come down to about 3-4cts average across technology’. The next quantum leap in cost reduction will come from the Internet of energy, smart grids, artificial intelligence and blockchain among other new technologies ‘which would have the chance to half the cost again’

'I see the average cost electricity certainly by 2050, but probably much earlier, getting to 2 cents on average across the world. If you were to calculate it, it may be at perhaps 12cts today, although the numbers need to be crunched. Can you imagine the amount of value that would be liberated to be allocated elsewhere?’

You can check Part I of this article here: https://goo.gl/yByr2g

I would like to thank the Clean Energy Business Council for the opportunity to interview Paddy Padmanathan.