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I think that's part of the reason the bids are so cheap, though. They're probably counting on some cost reductions over time so that even if they lose some mon

I think that's part of the reason the bids are so cheap, though. They're probably counting on some cost reductions over time so that even if they lose some money up front, the long-term profitability will be there. I doubt that anyone can actually deliver solar power at a profit today for the bid prices listed.

andy_ppp 11y ago
It's some factor of both things are cheaper now and things will be cheaper in the future. I'm betting these companies know what they are bidding for and it's likely technology will continue to make incremental improvements in this area. Compound interest works well here too and even modest decreases in costs compounded over 20 years will be very worthwhile.
epistasis 11y ago
Given that the vast majority of solar costs are upfront, and that the lifetime of a solar install is greater than 20 years, how would future cost reductions help with a project that's starting soon?
- tim333 11y ago
  In this case: >DEWA invited developers to submit bids for configurations made up of three sub-phases: a mandatory 200MW to be commissioned in April 2018, and another two optional 300MW tranches in 2019 and 2020, respectively,” the firm said in an analysis of the results. so it's not being built for 2 or 3 years and they are probably hoping costs will continue dropping during that period. The details of the situation are quite complicated, more details here http://www.apricum-group.com/dubai-shatters-records-cost-solar-earths-largest-solar-power-plant/ http://www.apricum-group.com/dubai-shatters-records-cost-sol...
  - epistasis 11y ago
    As far as energy goes, that's still very near term. But costs will continue to drop in that time period, without a doubt. Perhaps as important, they're hoping that interest rates remain low for the next few years.
    - tanderson92 11y ago
      Don't see why they would need to hope that interest rates remain low. Interest rates are already low, so they can sell debt at current interest rates for the term needed. I do think you're correct that low interest rates are a factor.
      - tim333 11y ago
        An unusual feature in this case is >One can suspect that Masdar had access to long-term financing through the wealthy emirate of Abu Dhabi that no commercial banks, the primary source of capital for the other bidders, could match in cost.
        nimish 11y ago
        Bingo. They're being subsidized by a government with access to cheap funds, and in Abu Dhabi's case, a lot of oil wealth. In contrast the unsubsidized bids are much higher

andy_ppp 11y ago

It's some factor of both things are cheaper now and things will be cheaper in the future. I'm betting these companies know what they are bidding for and it's likely technology will continue to make incremental improvements in this area. Compound interest works well here too and even modest decreases in costs compounded over 20 years will be very worthwhile.

epistasis 11y ago

Given that the vast majority of solar costs are upfront, and that the lifetime of a solar install is greater than 20 years, how would future cost reductions help with a project that's starting soon?

tim333 11y ago
In this case: >DEWA invited developers to submit bids for configurations made up of three sub-phases: a mandatory 200MW to be commissioned in April 2018, and another two optional 300MW tranches in 2019 and 2020, respectively,” the firm said in an analysis of the results. so it's not being built for 2 or 3 years and they are probably hoping costs will continue dropping during that period. The details of the situation are quite complicated, more details here http://www.apricum-group.com/dubai-shatters-records-cost-solar-earths-largest-solar-power-plant/ http://www.apricum-group.com/dubai-shatters-records-cost-sol...
- epistasis 11y ago
  As far as energy goes, that's still very near term. But costs will continue to drop in that time period, without a doubt. Perhaps as important, they're hoping that interest rates remain low for the next few years.
  - tanderson92 11y ago
    Don't see why they would need to hope that interest rates remain low. Interest rates are already low, so they can sell debt at current interest rates for the term needed. I do think you're correct that low interest rates are a factor.
    - tim333 11y ago
      An unusual feature in this case is >One can suspect that Masdar had access to long-term financing through the wealthy emirate of Abu Dhabi that no commercial banks, the primary source of capital for the other bidders, could match in cost.
      - nimish 11y ago
        Bingo. They're being subsidized by a government with access to cheap funds, and in Abu Dhabi's case, a lot of oil wealth. In contrast the unsubsidized bids are much higher