Last year was a breakthrough 12 months for solar power in the Middle East.

To put 2014 in perspective, in the previous 7 years only 70 megawatts (MW) of solar photovoltaic system (PV) projects were awarded across the region. In 2014 alone, that figure stood at 287MW – a fourfold increase – according to a new report published by the Middle East Solar Industry Association (Mesia).

There are two factors fuelling this sharp rise in solar projects in the region.

First, the price of solar systems has dropped dramatically since 2009 when the first large-scale solar project in the Middle East was unveiled by Masdar in Abu Dhabi. The installation cost of utility-scale solar PV power plants have fallen from about $7.00 perwatt in 2008 to less than $1.50 per watt last year. This amounts to more than a 75 per cent cost reduction. It means that for the same budget used to run a 10MW solar PV power plant in 2008, a plant five times larger can be built today without having to spend a fil more.

As a result of this cost reduction, solar energy is now competitive with the wholesale price of electricity in many jurisdictions in the Middle East. One example is the recent Dubai Electricity & Water Authority (Dewa) tender for a 100MW solar PV power plant. Dewa was able to secure a 25-year electricity tariff of approximately $0.06 per kilowatt hour (kWh). This tariff is broadly in line with the price of generating power from natural gas, the staple fuel for much of the region’s power generation infrastructure.

At the same time as solar prices are falling, the cost of generating electricity from natural gas is going up.

Here in the UAE, the government has historically been able to produce or import natural gas for less than $2.00 per million British thermal units (MMBtu) resulting in natural gas-based electricity generation at very low cost.

Today, however, much of the new domestic natural gas production could cost up to $8.00 per MMBtu to deliver to the market due to high concentrations of hydrogen sulphide (H2S) or carbon dioxide (CO2), which are toxic and corrosive. LNG imports, which were introduced in 2010 in Dubai and may begin on a larger scale in Abu Dhabi as early as 2016, cost more than $12.00 per MMBtu.

Meanwhile, in Jordan, the natural gas pipeline that provided the country with 95 per cent of the fuel needed to generate its electricity was repeatedly blown up during the Arab Spring. This pushed up the average cost of electricity to $0.24 per kWh.

When solar developers approached the government and offered solar PV energy at a price that was 30 per cent cheaper, it’s no surprise that Jordan jumped at the opportunity and awarded long-term utility-scale power projects to 12 international consortiums dotted across the countries. Together they will generate 300 GWh of clean electricity, enough to power nearly 1 million households.

Even with the recent drop in oil prices, solar power will continue to grow. For one, oil accounts for only 5 per cent of global electricity production, according to the International Energy Agency. In the Middle East, the majority of the electricity generated comes from natural gas. And as we have seen from the Dewa example, solar power is already in line with the cost of electricity from natural gas.

Moreover, solar and oil operate based on opposite drivers. With fossil fuels such as oil and natural gas, as demand goes up, so do prices. With solar, as consumption goes up, prices come down thanks to economies of scale. And so, as demand for solar continues to balloon in our region, we will see prices continue to deflate, thus creating a whirlwind cycle which will progressively expand the footprint of solar across the region regardless of the fluctuations in oil prices.

Looking ahead to 2015, we will see three trends emerging.

First, we will see projects become much bigger in size. The typical project will go from 1 to 10MW to 10 to 100MW. According to research compiled by Mesia, in 2013 there were only 4 projects awarded that were larger than 10MW. In 2015, we expect that number to reach 40, a tenfold increase.

A good example of the regional move toward solar can be found in Egypt. As its natural gas infrastructure continues to age, it is becoming more expensive for Egypt to generate power using the fuel. Egypt has therefore turned its attention to how it can take advantage of its abundant potential for solar and wind energy.

Just last month Egypt’s ministry of electricity unveiled a landmark programme which will see it introduce about 2,000MW of large-scale solar PV power plants and 300MW of rooftop solar power projects. The fact that about 176 companies responded to the ministry’s invitation to submit proposals for this Feed-in-Tariff (Fit) programme is a clear signal that solar has become a bankable source of energy in all corners of the Arab world.

At the same time, the market is becoming more broad-based. In the past, most of the solar projects were focused on the UAE. This year there will be large-scale solar tenders in at least 10 different markets in the Middle East, a new record, with Egypt leading the way followed by Jordan and then Morocco. Even small Arabian Gulf countries such as Qatar are making progress with solar.

This diversity will become more exciting once Saudi Arabia enters the market. It has so far been held back from achieving its Herculean solar potential due to the lack of political alignment. But in time they too will turn to solar in a big way, following the footsteps of Jordan and Egypt.

This will no doubt herald a new wave of dramatic growth in our region’s emerging solar market. In fact, Saudi Arabia’s most recent plans for solar PV entail building a capacity of 6GW over the next 10 years. 2015 is expected to be the year that Saudi finally starting moving ahead with its ambitious plans.

Finally, we will see niche segments within the solar industry emerging. In the past, the typical profile of the companies was small local installers. But as the market continues to grow we will see more specialised companies. Aside from the traditional installers we will see system operators such as SAT Engineering and solar-diesel hybrid system providers such as Enerwhere rise to the forefront.

Dubai’s landmark unveiling of a grid-connected solar rooftop programme will also foster the growth of specialised rooftop installers. As a result, solar companies that had to endure razor-thin margins to win projects in the past now have the luxury to pick and choose which projects they can chase.

As a specific example, Chinese solar panel manufacturer Chang Zhou Almaden is reportedly setting up a factory in Dubai to produce up to 400,000 PV panels annually.

This year will therefore be a breakthrough year for solar energy in the Middle East. The UAE will do its share leading the industry, with large-scale solar projects awarded in both Abu Dhabi and Dubai. But in 2015 we will also see such mega projects mushrooming across the entire Middle East, ushering in a new era for our region’s most abundant source of energy – solar power.

Vahid Fotuhi is the president of the Middle East Solar Industry Association and director of origination at Access Power MEA.