Dubai businesses can now generate solar power with a lease-to-own option as a the industry’s first financing company in the UAE opens its doors.
Yellow Door Energy, the brainchild of the clean energy investment firm Adenium Capital, will finance solar systems in Dubai for commercial entities such as businesses, schools and government offices.
This is in line with Dubai’s Shams Initiative, the first phase in a three-pronged approach that will connect solar energy to homes and buildings to make the emirate one of the world’s smartest cities.
“We believe that the Dubai market will be an exciting place to grow, with many expansion opportunities into the nearby markets,” said Jeremy Crane, the chief executive of Yellow Door. “We have already signed contracts with customers here in Dubai, and we are targeting 200 megawatts of projects in the next five years.”
Averaging about 1 megawatt per installation, the plan is to have 200 companies throughout the emirate using this solar financing option to generate power by 2020.
Solar power systems can have high upfront costs, not only for the purchase of the technology but also for the installation and maintenance.
While the price of units has decreased over the past decade, many potential users are still deterred by the initial investment required. The UAE solar equipment supplier Qmega Energy Innovations has tried to establish a similar system for its customers in Ras Al Khaimah and Fujairah.
“My customers are mostly small businesses and my investors were uncomfortable with the credit risks,” said Omer Ghani, the chief executive of Qmega.
Yellow Door invests about Dh5 million per solar unit, taking on much of the risk from interested buyers.
Without any upfront charges, customers pay a monthly bill according to the amount of kilowatt-hours of power generated.
The leasing agreement will be for 15 to 20 years on installations between 200kW and 10,000kW, after which the customer goes from renter to owner.
Mr Crane said that customers would save 5 per cent per month for every kWh generated. That may not seem like much at first, but the annual savings could make a difference for smaller companies with less access to capital.
Yellow Door’s programme offers an alternative to the high upfront costs. However, as a result of a system’s costs averaging around Dh5 per kilowatt, the company said it has tight lending policies in place.
“The exact terms [of the leasing agreement] will vary depending on the [credit rating] of the customer,” said Mr Crane.
“We are very careful with who we choose as customers.”
Mr Ghani remains hopeful that Yellow Door will be the start of more solar financing options in the regional market.
“It’s a step in the right direction, as any form of solar financing is good,” said Mr Ghani. “You need to start somewhere, and I’m happy they’re starting.”