Solar prices just dipped to their lowest levels ever -- but don’t expect costs under 2 cents per kilowatt-hour to become the norm just yet. 

The bids, made Tuesday in a 300-megawatt tender in Saudi Arabia, were predicted by a projection GTM Research published back in March. The bids from the United Arab Emirates-owned Masdar smashed records for solar PV prices, but because the first- and second-place bidders are government-funded, analysts believe the bids might be more about publicity for Saudi Arabian solar than profitable project economics. 

“What most people suspect, including us, is that there is some sort of subsidy, either direct or indirect, within the PPA that makes this price possible,” said Benjamin Attia, an analyst in global solar markets at GTM Research. “Or they’re going to lose money on it.”

The PPA is currently under a non-disclosure agreement, he added, so the full details are not yet known.

“It's very unlikely in my mind that Masdar is making money on an unsubsidized 1.79-cent (USD) bid,” he said.

In June, Saudi Arabia launched its National Transformation Program to help realize its Vision 2030 Plan, which envisions a path toward making the country less reliant on the oil that’s defined its economy for so long. One possible area for growth is in renewable energy.

Attia says that for years, solar industry watchers have turned to Saudi Arabia with breathless enthusiasm for its market potential, but have thus far seen little development.

“This time, the program seems to be real and is actually going to go places,” Attia said. 

But the rock-bottom prices could backfire -- impeding competition when later projects can’t meet the “very low precedent” set by this tender. 

“While these tender results will grab headlines, they do not reflect private-sector economic reality," said Browning Rockwell, executive director of the Solar GCC Alliance and founder and executive director of the Saudi Arabia Solar Industry Association. "They do nothing to encourage private-sector solar market development in Saudi Arabia, and they do not create a consistent pipeline that the industry needs to invest for long-term manufacturing and jobs. If anything, these results discourage the B2B solar market.”

The project is not yet finalized, so the record-low price may not come to bear. But, according to Attia, the bids do represent a tariff rate escalation. Bidders will be shortlisted in November, and the winner will be selected in January. 

To meet its goals, Saudi Arabia has to move from negligible installed renewable capacity today to 9.5 gigawatts by 2023. GTM Research predicts 5.5 gigawatts of cumulative solar capacity by 2022, and MAKE predicts 1.5 gigawatts of wind by that year.

The realization of this sub-2-cent project would nudge the country toward its target, but its implications for the solar industry there -- and globally -- shouldn’t be overblown.

“Is this sustainable? No,” said Attia. “It’s probably not even sustainable there.”