4 factors behind the success of Dubai’s solar rooftop program

There is one point on which everyone should agree: Dubai’s solar rooftop program has been a remarkable success. A long-time leader in the adoption and acceleration of solar power in the GCC, Dubai developed a successful solar rooftop framework that encouraged sustainability practices among large electricity consumers, and enabled the flourishing of a vibrant, new ecosystem of talent and businesses focused on distributed solar.

Now that the program has been in place for seven years and more than 400 MW have been connected, it is important to explore the aspects that contributed to its success, and perhaps offer insights to other promising regional markets.

The most successful distributed solar market in the GCC

Launched in mid-2015, Shams Dubai is DEWA’s distributed solar generation programme that regulates the connection of small-scale solar systems to Dubai’s power grid. The initiative “encourages household and building owners to install [solar] panels to generate electricity and connect them to DEWA’s grid”, using the utility grid to export the electricity surplus under a net metering scheme.

As per DEWA’s 2021 Sustainability Report, published in August 2022, the Emirate had installed about 400 MW of rooftop solar systems by the end of last year, with more than 130 MW of the capacity coming from 2021 alone. This achievement demonstrates the strong commitment of a local ecosystem of solar developers, investors, EPCs, suppliers and governmental agencies, that collaborated to deploy more than $350 million of private investment towards Dubai’s energy transition.

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Recently, Saudi ArabiaOman and Bahrain followed Dubai in establishing their own small-scale solar schemes. Although in its early stages, these new markets have the potential to turn the GCC into a significant hub for distributed solar generation across the Middle East and Africa.

Thus, it is crucial to comprehend the factors that led to the success of Dubai’s rooftop solar program:

1. Option for a net-metering scheme

Net metering has been one of the most widely used policy instruments for promoting renewable energy and supporting the global growth of distributed solar. It is a regulated arrangement in which utility customers with on-site solar generators can receive credits for excess generation, typically at the level of the retail electricity price, which can then be applied to offset consumption in other billing periods. Essentially, that excess generation is “stored” in the utility grid for later use, enabling the offset of whole electricity demand of the facility.

Dubai’s large consumers of electricity soon recognised the opportunity to meaningfully reduce their electricity expenses, which spurred their interest in learning more about the new technology and the many investment options it offers.

By leveraging economies of scale, a downward trend in solar panel costs and high solar exposures, distributed solar developers were able to capitalize on this emerging interest. As a result, large consumers were provided with attractive solutions that enabled them to save up to 50% of their annual electricity costs (via solar leases) or enjoy payback periods as short as 3-4 years (via turn-key solutions).

2. Strong commitment from DEWA

DEWA’s support to the solar rooftop program has been a pillar of its success: while establishing a sound regulatory framework, DEWA implemented clear processes and procedures in accordance with international best practices. Customers and solar consultants/contractors benefited from a simple, paperless application process, which expedited the approvals process. In addition, the utility company continuously supported other governmental agencies, encouraging the streamlining of its permits process.

Besides that, DEWA itself has set the example by installing solar panels on rooftops and carports at their own buildings, sponsoring several solar energy projects with other governmental agencies, and promoting the installation of solar systems for more than 5,000 Dubai and Hatta residents.

3. Low electricity subsidies

Energy prices in the GCC countries are low by international standards. Over the last 50 years, these low prices have coexisted with fast economic development in the region, but the costs of subsidising electricity have also grown due to very high energy consumption, prompting the need for reforms.

The UAE stands out among its GCC peers when it comes to taking concrete action on subsidy reform. Dubai was the first Emirate to implement initial electricity and water reforms in 2008, and made further pricing reforms in 2011. Even though the electricity market is still heavily controlled, these pricing reforms have brought utility prices near to international benchmarks, giving a real chance to the unsubsidized distributed solar.

4. Friendly legal environment for business and investment

With healthy investment ratings and currency stability, Dubai is one of the world’s top business and investment hubs, becoming the preferred destination for multinational firms seeking to expand in the Middle East and Africa. Through a strong legal structure and a pro-business regulatory framework, the Emirate has proven to be a reliable option for international investors and businesses.

A contributing factor is the highly successful free zones business model, with 100% foreign ownership and tax-free policies, that attracts worldwide companies and catalyses international investment.

Another element is the establishment of the DIFC Courts, founded in 2004 as an independent English-language common law system, providing swift, independent justice to settle local and international commercial or civil disputes. Through transparent, enforceable decisions rendered by judges with international expertise and adherence to the highest legal standards, the DIFC Courts allowed Dubai to provide certainty to foreign investors.

A launch pad for a broader region

DEWA has recently issued amendments to the net metering policy, effectively reducing the maximum system size allowed per customer. These amendments are likely to slow the rate of distributed solar capacity expansion in Dubai, intensifying the already fierce market competition, or, on the other hand, force the consolidation of distributed solar portfolios.

However, due to that pioneering experience gained over seven years, Dubai-based distributed solar players are now in a unique position to expand into new regional markets, cementing Dubai’s position as a regional hub for renewable energy.

Understanding the factors that led to the success of the solar rooftop program in Dubai is crucial for other regional markets seeking to emulate it. While some factors may be easily replicated, others call for a deeper, longer-term commitment to reform the electricity market and the business regulatory framework. But if done right, the GCC countries may have a great opportunity to become leaders in the distributed solar market in the Midde East and Africa.