The United Arab Emirates’s top climate official said countries are lining up to learn about its new clean energy auction system that pays green power generators more during times of peak demand.

Many African and Asian countries as well as European companies met with U.A.E. representatives during climate talks in Marrakech, Morocco, to discuss the model, the U.A.E.’s Minister of Climate Change and Environment Thani Ahmed Al Zeyoudi said in an interview.

The U.A.E.’s latest solar power auction grabbed headlines in September when one group bid a record low 2.42 cents a kilowatt-hour to produce power. That price could only be achieved because the utility running the auction offered higher payments in summer.

“It’s a win-win situation” for a country that is one of the world’s biggest fossil fuel producers,” he said. “For us, it’s a win because it’s competing with natural gas prices.”

Under the model, Abu Dhabi Water & Electricity Co. will apply a 1.6 multiplier to the usual price between June and September when demand for air conditioning spikes in the Persian Gulf sheikdom, said Moritz Borgmann, a partner at Apricum GmbH, a Berlin-based consultancy, in a phone interview.

While many countries from India to Mexico are moving toward a system of auctions to support clean energy projects, most authorities until now have offered generators a static tariff throughout the year. Reverse auction models force companies to compete on price and have already reduced prices to record lows this year in markets from India to Mexico.

The split level payments reflects consumer tariffs in the U.A.E., where customers are charged a higher rate as their demand increases, Al Zeyoudi said.

“We’re applying the same thing here,” the minister said. “During a certain period when we really need the power, for sure it’s going to be extra because otherwise we’re going to burn diesel” which “is very costly and very polluting,” he said.

“At the same time we don’t want that huge quantity when the price is down because demand from the markets won’t be that high,” Al Zeyoudi said. “It’s a model that we are using with the private sector to encourage them to work with us and our needs.”

Solar developers responded to the auction with “some technical tricks” applied to their projects that could produce more energy in the summer months, according to Borgmann.

(Corrects spelling of name in fifth paragraph of story published Nov. 22.)
Source: Bloomberg
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