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Study on Renewable Energy Resources, Oman - authority for ...

Study on Renewable Energy Resources, Oman - authority for ...

Renewable Energy Resources in Oman Fig. 7.2 Sector overview, including renewable energy facilities, MIS Other measures that could be used by the Government of Oman to reduce the cost for renewable energy installation are: • Long Term power purchase agreement, including priority to renewable energy production; • Free provision of land for wind farms and solar applications; • Grid connection free of charge; • Preferential loans for investments from Oman Development Bank; • Exemptions of local taxes, customs and import duties for a period. 7.9.2 RAECO - Rural Areas RAECO is a fully integrated vertically integrated company covering generation, transmission and distribution. The production and consumption in RAECO is small compared to the other areas. The cost of supplying the rural areas is very high with large variations. There is probably room for inclusion of small scale renewable energy at some of the locations. Experience shows, however, that there is also a need for a mechanism ensuring efficient operations in general and also of possible renewable energy sources. Given its cost structure, RAECO should be motivated to identify opportunities to substitute or combine diesel generation with solar applications. It must be expected that there are systems/locations where it is viable with current cost levels to use hybrid applications instead of diesel generation. The cost level in some of the system indicates that there might be economic benefits from using PV or hybrid applications in this system and it should be considered using stand alone solar systems to supply the most remote customers instead of extending grid structures. Page 118 of 134 .

Renewable Energy Resources in Oman It is concluded that a financial mechanism is not required in RAECO as there seems to be economicaly viable opportunities to utilises renewable energy without subsidization. It is recommended to initiate a process that identifies the systems with highest cost and investigate the reasons why. It is also recommended that RAECO introduce a standard procedure when designing new systems and purchasing new capacity to make a comparison between diesel and a hybrid system to ensure that the consideration it always done. 7.10 Level of Subsidy Required In order to asses the cost of exploiting the renewable resources in Oman with today cost structures, this section combine the resource assessment from Chapter 5 with the cost evaluation in Chapter 6. The methodology is to compare the LRMC of the cheapest power generation technology, i.e. natural gas fuelled GT, with the LRMC of wind power and solar thermal. The cost difference is the required subsidy per MWh, which must be provided to the system in order to attract investments. In Table 7.2 this calculation has been made depending on the gas price and with a discount factor of 7.5% p.a. The table shows the subsidy required to equalise the return for an investor in a gas turbine and in a 20 MW wind farm, respectively. Table 7.2 Subsidy scenario for wind power Natural Gas Price USD/MMBtu Generation Cost per MWh Gas Turbine USD Generation Cost per MWh Wind Power USD Difference Subsidy per MWh USD Annual subsidy required to support 750 MW Mill USD 1.5 28 67 39 90 3.0 43 67 24 55 3.0 with depletion premium 56 67 11 25 6 .0 73 67 -6 -14 Total costs are sensitive to actual installed capacity. It is assumed that 750 MW of wind power capacity could be established with an annual production of 2300 GWh. The annual subsidy to support this capacity is shown in the right hand column. It varies between USD 25 Mill and USD 90 Mill depending on the natural gas price, used in the calculation. If the natural gas price is above 6 USD per MMBtu, electricity based on gas is more expensive than the proposed wind energy scenario. Page 119 of 134 .

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