Saudi Arabia’s efforts to alter its energy mix should see major investments in renewable sources. At the forefront of recent moves in the sector are solar and wind projects, with Khalid Al Falih, minister of energy, industry and mineral resources, announcing in early 2017 that at least 10 GW would be generated from both energy sources by 2023. The overhaul of the sector will require sizeable investment, perhaps as much as $50bn, according to Al Falih. As a result, renewables represent one of the biggest opportunities for investors in Saudi Arabia.
The major expansion planned for renewable energy will build on a relatively humble current stock of solar and wind projects in the Kingdom. The only solar plant in operation at the beginning of 2017 was the 10-MW facility at Saudi Aramco’s headquarters, with previous plans to roll out major solar and wind projects having largely stalled.
However, there is now a much stronger drive to utilise renewable energy sources, as doing so is a key part of the diversification efforts of the Vision 2030 master plan and the National Transformation Programme (NTP) 2020. At the same time, boosting renewable generating capacity could help trade, with oil-fired plants (see overview) depleting crude reserves that could otherwise be exported.
The Ministry of Energy, Industry and Mineral Resources is the key state body responsible for renewable energy. Its Renewable Energy Project Development Office is working on bringing the Kingdom’s solar and wind programmes in line with the National Renewable Energy Programme (NREP), a long-term initiative that launched in early 2017 and also part of the wider Vision 2030 framework, which sets a number of targets for renewable energy expansion, including the generation of 3.45 GW from renewable energy by 2020 and 9.5 GW by 2023. Further targets include obtaining 30% of the country’s power from renewable sources by 2030.
Since 2011 many solar energy businesses operating in the Kingdom have been brought together with academic and governmental bodies under the umbrella of the Saudi Arabia Solar Industry Association. Part of the Solar GCC Alliance, the association is also open to related trades in the field, such as glass manufacturers and engineering outfits.
The initial target of the NREP involves three rounds of tendering for wind, solar photovoltaic (PV), concentrated solar power (CSP) and waste-to-energy projects. “If Saudi Arabia quickly moves ahead with the development of waste-to-energy plants, it could be a leader in the region for this type of power production,” Fadil Fouad Basyyoni, president of engineering and consultancy firm DFB Group, told OBG. These energy sources will also be targeted in the next phase of the NREP up to 2023.
The first round of tendering saw 27 companies qualify for a 300-MW solar PV project at Sakaka in the Al Jouf region and 24 companies for a 400-MW wind farm in Dumat Al Jandal, in the same region, in April 2017. When bids for the Sakaka plant were opened in early October 2017, they saw the lowest prices ever pitched for a solar PV plant. Abu Dhabi’s Masdar and Electricité de France (EDF) offered to supply power for as little as $0.0179 per KWh, which was $0.0063 less than the previous all-time low, and broke the $0.02-per-KWh barrier for the first time.
Prices for solar PV hardware have been on a downward trend for some time now. China is likely leading the downward charge in prices and costs, with large-scale projects and major production there spurring competition on the global market. According to the International Energy Agency of France, this has made solar PV projects comparable to or even lower in cost than similar fossil fuel plants, boosting global solar PV capacity by around 50% in 2016 alone.
Nonetheless, the Masdar/EDF offer is an exceptionally low figure, with the prices potentially meaning a loss for the supplier. This has prompted speculation that there may be some price escalator involved, or other unknown factors. The low offer price may also be an indicator, however, of how keen international solar PV players are to get a foothold in the Saudi market, given the growth potential and the pipeline of future projects. Sakaka is set to be the first new plant to come on-stream, with the latest two rounds of bidding taking place in January 2018.
The government is also keen to encourage smallscale solar power projects. In August 2017 the Electricity and Cogeneration Regulatory Authority announced that as of July 1, 2018, solar PV facilities of under 2 MW in capacity will be able to offset any excess electricity against their future consumption. After one year, such suppliers will receive a cash payout at a tariff approved by the authority. Take-up of this offer is likely to prove increasingly popular as electricity charges rise. A planned hike for mid-2017 was shelved due to concerns over its impact on economic growth, but many individuals and businesses see this as merely postponing the inevitable. “Everybody is convinced electricity prices are going to be reformed over the next three years,” Paddy Padmanathan, CEO of ACWA Power International, told Reuters in October 2017. “That means only one thing: that tariffs are going to go up.”
Another major project nearing completion is the Al Khafji solar-powered desalination facility, one of the first large-scale plants of its kind worldwide. According to the latest estimates the plant is due to open in 2018, and will supply 60,000 cu metres of desalinated water per day to the city of Al Khafji in north-eastern Saudi Arabia. The development is being jointly built by Spain’s Abengoa and Advanced Water Technology, a subsidiary of Taqnia, the investment arm of the King Abdulaziz City for Science and Technology, at a cost of $130m. With higher demand for water (see overview), the plant – and the segment in general – is set to be a key contributor to the Saudi economy. “The Kingdom is aiming to become a global leader in desalinated water technologies, and the Al Khafji facility uses solar energy supply and advanced technology – such as ultra-filtration and pulse dosing – in its pre-treatment processes,” Abdullah Abdulaziz Al Shaikh, CEO of Advanced Water Technology, told OBG. “Given the size of the Saudi water market, localising technologies and leveraging sustainability in desalination is intended to be a key driver for the Saudi economy.”
In addition, by 2020 the Kingdom plans to reduce water and electricity subsidies by $53.3bn, with this already motivating many businesses to install solar PV. Saudi Dairy and Foodstuff, for example, has placed an SR2m ($533,000) thin-film solar PV system at its production facility, with this delivering around 40% of the plant’s daytime electricity requirements. Elsewhere, FAS Energy, part of the retail Fawaz Al Hokair Group, is currently fitting rooftop solar systems on 18 malls around the country, producing a total installed capacity of some 100 MW. Residential use will, however, be one of the key areas for future development, as 49% of the Kingdom’s total energy and water subsidy cost goes to this segment. Allowing small-scale projects to sell on surplus generation is thus a major step forward.
Saudi Arabia has huge potential capacity for solar projects, with a September 2015 study in the journal Solar Energy showing that most areas have sufficient solar resources for CSP as well as PV, with an average annual global horizontal irradiance of between 5700 and 6700 watt hours per sq metre. Western inland sites were found to be most suitable for CSP developments, while direct normal irradiance rates were more variable elsewhere. One issue for solar PV is elevated temperatures, with units having to be able to withstand extreme heat, as well as low nighttime temperatures. As a result, new PV standards are being developed for the elevated temperatures by a consortia including the King Abdullah City for Atomic and Renewable Energy (KACARE) and the Saudi Standards, Metrology and Quality Organisation.
While the country’s wind energy potential is still a relatively new area of research, wind speeds average 6-8 metres per second at 80 metres above ground level. Higher speeds occur in the more mountainous areas in the north-east and central regions. The first 400-MW wind plant under the NREP was initially intended to be at Midyan on the coast of the Gulf of Aqaba, but with this falling behind schedule and still in pre-development, a project at Dumat Al Jandal – near Sakaka – is going forward instead. The companies shortlisted for Midyan are being carried over to the new work. Dumat Al Jandal will also generate 400 MW under a build-own-operate contract with no state funding, but backed up by a 20-year power purchase agreement. The main tender is due for final submission in January 2018.
The Kingdom has also been keen to develop its research and development (R&D) capacity in wind. King Abdullah University of Science and Technology has had recent success with tethered wind turbines that can take advantage of more constant higher-altitude wind speeds. A team from the university has mapped high-altitude winds around the region, with this now a promising area for further development.
The Saudi government is also looking to localise and develop the renewable energy value chain with a focus on R&D and manufacturing, alongside wider economic diversification goals. The NTP sets a clear target to achieve this through the use of locally developed technologies, and the hiring of domestic technicians and engineers. KACARE will play a central role in this under the Localisation and Commercialisation Initiative, an NTP-funded project, for which both partners have set targets collaboratively. These include increasing the proportion of local content used in renewables from 25% to 35%, and raising the number of jobs in the segment from 500 to 7774, by 2020. As a result, increased government investment in training and education, as well as R&D, is also expected in the years ahead.
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