| Saudi Arabia | Oct 03, 2017
Saudi Arabia is preparing to invest heavily in its green energy sector with the intention not only of cushioning itself against the fall in oil prices, but becoming an outright global leader.
In November 2016, Saudi Arabia’s Energy Minister, Khalid Al Falih, took a pledge to confront the biggest challenge to global energy prices in a generation by committing to a 1.8 million barrel-per-day, OPEC-led supply cut. Having witnessed its most-prized commodity in free-fall for the better part of two years, the Kingdom was taking a proactive role in challenging crude’s “new normal” by curbing iats own production. At the same time, to the surprise of observers and ianvestors alike, the world’s biggest exporter of crude is putting a plan into action to shift the Kingdom’s dependency on oil and look to a far greener future.
Speaking at the World Future Energy Summit in Abu Dhabi in mid-January 2017, Al Falih revealed the Kingdom’s ambition to launch “the most attractive, competitive, and well executed government renewable energy investment program in the world.” Headed by the Ministry’s Renewable Energy Project Development Office, the program is expected to attract up to USD50 billion in renewable-related investments by 2023 and effectively transform the nation’s energy matrix.
Due to a rapidly rising population and its impact, above all, on local desalination and cooling demand, Saudi’s power needs grow at an average of 8% each year. As such, the Ministry of Energy, Industry, and Mineral Resources has been exploring ways to diversify the matrix, thereby freeing-up more of its oil for export. As outlined by the Vision 2030, wind, solar, and nuclear energy are set to play a fundamental role in this as the Kingdom targets renewables to contribute up to 9.5GW to the national energy mix by 2023, or approximately 10% of total usage. According to the plan, upcoming projects to be launched by the Ministry could develop 3.45GW of power from renewable sources by 2020, nearly 4% of consumption. Such ambitions, however, represent a drastic transformation in Saudi’s energy sector, as establishing a framework and timeline for such reforms is a daunting task; renewables’ production currently stands at a mere 25 MW, contributing less than 1% to the energy mix.
Thus, on February 21, 2017 Minister Al Falih officially kicked-off the USD50 billion renewable push by inviting investors interested in developing up to 700MW of wind or solar power in the Kingdom to submit their bids by March 20. This round will focus on two specific projects: a 400MW wind plant in the northeast province of Tabuk and a 300MW solar farm at Sakaka, Al Jouf province. In an emailed statement, the Ministry explained that bidders who qualify past the first round would be able to present their proposals from April through July.
One company almost certain to take advantage of the upcoming renewable energy tender is Acwa Power. Based in Riyadh, the provider has branched out of the Kingdom to become a leader in power, water, and renewable energy across the Middle East and today conducts over half of its business in the wider region. Yet, looking ahead, the company is eager to tap-up the vast opportunities that the government’s renewables push could bring. Speaking exclusively to TBY, Acwa Power CEO Paddy Padmanathan explained, “for Saudi Arabia, this year is a dramatic change from the last five. In 2016, there was a clear vision being set out in the form of Vision 2030, which was quickly followed through with the 2020 transition plan. What is exciting is that it is a detailed plan with a lot of key deliverables. In terms of new tenders, we expect to see a few new big renewables (projects) launched here in the Kingdom. There is a lot going on and it is an exciting period.”
With the OPEC supply cut in full-swing, crude prices stabilizing above the USD50 mark, and following a record renewables investment program just launched, Saudi’s energy strategy suggests that the grass may just prove greener on the other side.