Saudi Arabia's renewable energy target and the opportunities for foreign players

Saudi Arabia aims to install 54 GW of low carbon power by 2032, of which 41 from solar. How will the country reach its goal? Which opportunities can this new market offer for foreign renewable energy companies? We asked Yahya Shakweh, Vice President at Saudi' Arabia's Advanced Electronics Co.

Not only oil: Saudi Arabia aims to obtain one third of its power from renewable sources by 2032, installing 54 GW of low carbon power of which 41 from solar. How will the country reach its goal? Which opportunities can this new market offer for foreign renewable energy companies? We asked Yahya Shakweh, Vice President at Saudi' Arabia's Advanced Electronics Co., who on November 28th in Milan will also be the key note speaker at the OIR organized seminar "Renewable Energies in the Gulf Countries. Business Opportunities for the Foreign Investors".

Dr. Shakweh, Saudi Arabia is very rich in fossili fuels, why has it decided to bet on renewable energy?

The decision of Saudi Arabia to diversify its oil-dependent economy by investing in renewable energy sources is a logical step, since it will free-up finite oil & gas resources for export and for other industrial uses. This will also extend the availability of the Kingdom’s natural resources for future generations and help meet Saudi Arabia’s own, ever growing, energy needs. For example, in 2000 twenty four percent of the country’s oil and gas production was used to cover domestic needs and ten years later, this had increased to thirty five percent. Estimates suggest that more than forty percent of the Kingdom’s oil and gas production would be required to cover the domestic demand by 2020. Renewable energy will also accelerate the development of long-term sustainable power and water supply capacities, which is an important priority given the country’s current supply and demand imbalances. It is worth noting that Saudi energy consumption per capita amounts to over 7,000 kWh annually, and as a whole the Kingdom is estimated to be within the twenty highest electricity consumers worldwide. The establishment of a national renewable energy industry will contribute strongly to the strategic goals set out by the Saudi Ministry of Commerce and Industry, as well as promoting Saudi Arabia’s industrial centers and future projects. Renewable energy industries are expected to create employment for locals, while assisting in the national development of human capital that is required to build a sustainable knowledge-based economy, with industrial activities in research and development (R&D) and manufacturing. Furthermore, committing to such clean energy sources will also benefit the country’s environmental conservation efforts.

Which renewable energy sources are more suitable for the features of the country?

Detailed studies, commissioned by national institutions, indicate that the most sustainable sources of renewable energy for Saudi Arabia are photovoltaic (PV) and concentrated solar power (CSP), geothermal, wind energy and waste-to-energy. Saudi Arabia is an ideal location for both CSP and PV power generation. This is due to the remarkably high solar radiation of around 2,550 kWh/m2 per year, which is almost double the average radiation in Germany for example, as well as the availability of vast areas of empty desert that can host solar installations. Additionally, Saudi Arabia has huge deposits of the type of clear sand that can potentially be used in the manufacture of silicon PV cells. The Kingdom has viable wind energy potential, with close to five hours of full-load wind per day on average, which is one of the highest in the Middle East and North Africa (MENA) region. The Arabian Gulf and the Red Sea coastal areas are Saudi Arabia’s main regions with potential for wind energy development.

Saudi Government has announced a plan to reach 41 GW of solar power by 2032: which policies will it introduce to achieve this target?

Saudi Arabia’s policy has not yet been announced, but it is anticipated to be a mix of competitive bidding and a feed-in tariff. Recently, the King Abdullah City for Atomic and Renewable Energy (KA CARE) announced the establishment of the Sustainable Energy Procurement Company (SEPC). This Saudi government-backed body will be responsible for administering the procurement rounds and managing the Power Purchase Agreements (PPA) awarded under the Competitive Procurement Process (CPP). The CPP will consist of an introductory round of five to seven projects, followed by additional rounds over a two to three year period. These projects will target 7000 MW of capacity, with each being no less than five MW. KA CARE has also announced a renewable energy target of fifty four GW of renewable energy including solar, wind, geothermal and waste-to-energy projects, by 2032. KA CARE will publish the form of the proposed PPA for comment from interested parties and for public feedback. It is expected to provide for a term of twenty years and will be entered into with SECP, though details are yet to be clarified. The decision on whether or not to introduce a Feed-In Tariff (FIT) will be made after the second full-scale procurement round. If such a FIT were adopted, it would probably be used initially only with smaller-scale projects involving proven technologies. In terms of investments, Saudi Arabia has the most robust and well-proven Independent Power Producer (IPP) framework, supported by a strong and liquid financing industry, which has demonstrated its capability to locally finance major infrastructure projects.

Does distributed generation also have a role in the plan?
Although the main focus is on utility-scale renewable power plants, distributed generation will be limited to remote locations that are not grid-connected. Small villages represent an excellent potential for micro generation with hybrid designs including solar energy, desalination, cooling, and more.

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