Saudi Arabia is seeking investment of up to $7 billion of investment in the coming year to build about 4,000MW of renewable energy capacity, as part of its plan to supply 9,500MW, or 10% of its power demand, from renewable sources by 2023.
Speaking at the Abu Dhabi Sustainability Week conference, Turki Mohammed Al Shehri, head of the Renewable Energy Project Development Office (Repdo), said that the ultimate aim of the National Renewable Energy Programme is to create a globally competitive local industry. To this end, it has imposed demanding rules requiring 30% local content for projects awarded last year. In 2018, this requirement rises to 40-60% and from 2019 onward, Repdo wants to see more than 60% of equipment being made domestically.
Al Shehri conceded that there are trade-offs between local content, a low levelized cost of energy (LCOE), meeting deadlines, complying with renewable energy targets and creating jobs. “If we go for the lowest LCOE, we will have to sacrifice local content, for example.”
However, the Kingdom’s priorities are becoming clear. The shortlist for the first project in the kingdom, the 300MW Sakaka photovoltaic project in the Al Jouf region in the north of the country, was announced earlier this month. Local company ACWA Power and a consortium led by Marubeni were chosen as the final two bidders, even though a consortium led by the UAE’s Masdar and the French company EdF entered a bid that, at 1.79 US cents/kWh, was the lowest price offered for solar power anywhere in the world and some 24% lower than ACWA Power’s bid, the second-lowest. In an indication of how important developing a local industry is to the Kingdom, it is thought that Masdar’s bid may have been rejected because it did not have enough local content.
“The initial rounds of tenders will focus on job creation while future rounds will have the objective of being able to meet our export potential through a competitive local industry,” Al Shehri said.
The winner for the Sakaka tender will be announced in February, and a second project will be awarded in July this year.
Even the huge growth in capacity planned between now and 2023 will not be enough to attract investment into local manufacturing facilities, Al Shehri added. “We have to look beyond the 9.5GW. To capture local content, we need a 10-year pipeline of projects.”
Saudi, the world’s largest oil producer, is looking to generate more energy from renewable sources, in part to reduce its greenhouse gas emissions as part of the Paris Accord on climate change, but also to allow it to sell oil abroad at full price rather than use it domestically where it is heavily subsidised. Developing a renewable energy industry is also part of its Vision 2030 efforts to diversify its economy away from a dependence on oil and gas.
In a sign of how rapidly the kingdom’s renewable energy sector is developing, it will tender for 3,200MW of solar power and 800MW of wind, this year, compared to 700MW in 2017. It will also look at other sources of power, including concentrated solar power (CSP) and waste-to-energy. “We want to see results from 2018 onwards. The Kingdom of Saudi Arabia has a very strong industrial base and we want to expand it,” Al Shehri added.
