Despite tremendous potential, the solar energy sector in Saudi Arabia is still in its early stages. “Saudi Arabia is yet to turn its huge solar potential into reality”, says Makio Yamada, Research Fellow at the King Faisal Center for Research and Islamic Studies.
In 2012, the government unveiled plans to invest more than $100 billion in clean energy projects up to 2030 in order to generate 41GW, a third of its power requirements, from renewable resources, primarily solar energy; however, the government drastically scaled back the program in January 2015 and set a more realistic renewables target of 14% of current generating capacity (9.5GW) by 2030. “The installed solar capacity is less than a fifth of that in the U.A.E. which can be attributed to institutional fragmentation and lack of effective collaboration between relevant state and semi-state organizations”, Yamada adds.
The Vision 2030 puts forward a strong regulatory and investment framework to develop the Saudi solar energy sector, financed in part by a $2 trillion sovereign fund. “The Vision 2030 highlights renewable energy as a strategic priority for the Saudi Arabian economy, which would help in economic diversification away from oil revenues, increasing energy security, diversifying energy mix, freeing up oil for export, enhancing the regulatory framework, and supporting the development of the renewable energy industry, paving the way for a low-carbon economy in the Kingdom”, says Eaman Abdullah Aman, a Saudi energy expert and writer.
Saudi Arabia’s long-term goal is to become the leading exporter of solar energy in the Middle East and the Vision 2030 is expected to play a key role in realizing this objective. “What makes the Vision 2030 and the King Salman Renewable Energy Initiative different from previous programs is that they represent the highest level commitment to renewable energy ever seen from the Kingdom”, emphasizes Ahmed Nada, Vice President and Region Executive for the Middle East at First Solar.
Under the initiative, the government will review the legal and regulatory framework for private-sector investment in order to encourage public-private partnerships and promote local manufacture. “The new targets and strategy outlined is very much in sync with fuel mix trends around the world”, observes Paddy Padmanathan, CEO of ACWA Power, one of the world’s leading solar developers.
The first renewable energy initiative from the Saudi government was the establishment of the King Abdullah City for Atomic and Renewable Energy (KA-CARE) in 2010, which is the official agency in charge of promoting clean energy in the Kingdom. One of its major achievements has been the establishment of a 3.5MW PV project at the King Abdullah Petroleum Studies and Research Center.
The Kingdom recently launched its first competitive global tender for utility-scale solar power projects—two 50 MW solar power plants at Al-Jouf and Rafha. Though current installed solar capacity in the country is just 25MW, the world’s leading solar energy companies are already active in the local market, mainly due to the promise and potential of the Saudi solar sector. “We already have two pilot projects in place: the first is a solar-powered irrigation project at Al-Jouf while the other is a carport solar power plant for the Saudia Dairy and Foodstuff Company (SADAFCO) in Riyadh”, says Nada.
In addition to solar PV, concentrated solar power (CSP) is an interesting option for Saudi Arabia due to its strong dependence on desalination plants to meet its water requirement. Waste heat of a CSP plant can be used to power seawater desalination projects. In 2015, the Saudi Electric Company selected CSP to produce electricity with the 550MW Duba 1 project, an integrated Solar Combined Cycle Power Plant located near Tuba. The plant, still in tendering phase, is designed to integrate a parabolic trough unit of around 20 to 30MW.
The Way Forward
Due to its regional dominance, Saudi Arabia can play a vital role in the proliferation of solar energy in the Middle East. “The Kingdom needs to urgently move forward with its renewable energy plans and start the production of solar energy on a large-scale”, says Padmanathan. “The current focus is on increasing levels of efficiency, reducing subsidy and slashing government expenditure and on doing things that truly add value”, he adds.
“The Vision 2030 target suggests that the country will grow its renewable energy capacity in increments, taking advantage of future cost declines and efficiency improvements, while also leaving the door open for emerging technologies”, says Nada. Under the new leadership of King Salman, the country is making a concerted effort to develop its renewable energy sector. “The reorganization of stakeholders and decision makers on energy policy and renewables, under one umbrella, should accelerate KSA’s renewable energy program”, observes Nada. The government restructuring in May 2016 placed necessary administrative functions under the newly-created super-ministry, the Ministry of Energy, Industry and Mineral Resources, which will eventually pave the way for implementation of solar projects.
However, there are several gray areas that Saudi Arabia should tackle for a smooth transition to a renewables-focused energy mix. “Saudi Arabia should take a consultative approach on its renewable energy policy framework by leaning on capable, credible industry partners to share their expertise, which will help the country avoid the steep learning curve that other markets have faced”, explains Nada. Lenders and financiers are an integral part of any industry, and they should be properly informed about green financing. “It will be particularly important for banks and lenders based in the Kingdom to better understand the solar energy industry, ensuring that they’re comfortable with providing competitive financing for the program”.
It is also essential to adapt solar energy systems to meet specific energy-intensive applications. “Saudi Arabia could provide long-term solar energy targets for certain energy-intensive industrial sectors such as cement, steel and petrochemicals”, Nada adds.
Lastly, a well-trained and performing workforce is crucial for the development of the solar market. “Saudi Arabia needs to invest wisely in technical education to overcome the skills mismatch between schools and the labor market and ensure the supply of rightly-trained human resources to the solar industry”, stresses Yamada.