SEPTEMBER 6, 2023
Solar power spurs shift back to daytime consumption in Oman
Large industrial and commercial customers of electricity who are subject to subsidy-free Cost Reflective Tariffs (CRT) are gradually shifting their demand back to the afternoon period to take advantage of reduced tariffs in the wake of the launch of the Ibri II Solar Power Project two years ago.
It marks a reversal of the trend first witnessed in 2017 when the introduction of CRT prompted large consumers to shift their demand away from the peak afternoon period to the lower-cost off-peak period at night.
CRT tariffs -- representing the actual cost of electricity production, distribution and supply -- apply to large government, commercial and industrial consumers with an annual consumption of over 150,000 kilowatt hours (kWh) per year.
But following the operationalization of the 500 MW solar PV project at Ibri in Al Dhahirah Governorate in 2021, the Bulk Supply Tariff – the key constituent cost of CRT – was revised for 2022 and 2023. Afternoon tariffs were reduced because of the availability of renewable power during the day, while night tariffs were increased relative to 2021. Both tariffs are now quite close, giving large customers the flexibility to switch between the peak and non-peak periods.
But come 2025, the shift to afternoon demand will come full circle when the Manah I and Manah II solar PV projects, with a combined capacity of 1000 MW, are due to be brought into operation, according to Nama Power and Water Procurement Company (PWP), the sole national buyer of power and water output in the Sultanate of Oman.
“By 2025, the afternoon tariff level is expected to be similar to the current off-peak tariff, while the night-time tariff will increase further. PWP expects that many CRT consumers will revert to pre-CRT consumption profiles benefiting from low afternoon tariffs and the initial CRT impact on peak demand may reverse,” Nama PWP – a subsidiary of Nama Group – noted in its recent 7-Year Outlook Statement.
Significantly, further changes in the demand profile of large consumers are anticipated as more solar capacity comes online in the coming years, particularly as Cost Reflective Tariffs are revised.
“The additional solar projects in 2025 and 2027 will further affect the CRT,” PWP noted in its outlook statement. “CRT consumers are expected to begin reacting to changes in CRT by shifting part of their demand back to the afternoon period. This will be observed more starting from 2025 once the Manah solar projects begin operation. These shifts toward the peak period may occur gradually in response to the CRT changes but are expected to represent a persistent increase in peak demand for the remainder of the period,” it added.
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