Solar Energy in Saudi Arabia: Perspectives

Saudi Arabia, the epicenter of global oil industry, has been showing keen interest in solar energy in recent years. Saudi Arabia has one of the world’s highest solar irradiation in the world, estimated at approximately 2,200 thermal kWh of solar radiation per m². The country is strategically located near the Sun Belt, in addition to plentiful availability of empty stretches of desert that may accommodate infrastructure for solar power projects.

Vast deposits of sand can be used in the manufacture of silicon PV cells which makes Saudi Arabia an attractive location for solar industry. “The resource is stunning; land is abundantly available; the transmission grid system is relatively new, highly resilient and capable of accommodating intermittent loads; and the creditworthiness of KSA is unbeatable as demonstrated by response to the nation’s first ever international bond offering”, explains Paddy Padmanathan, CEO of ACWA Power, one of the world’s leading solar developers.

Another important driver for solar energy deployment in Saudi Arabia is astonishingly high per capita primary energy consumption, four times higher than the global average. The total energy consumption in the Kingdom is rapidly rising at a rapid rate of 6 percent per annum which also presents a strong case for diversification of energy sources.

Slow Progress Yet Ambitious Goals

Despite its tremendous potential, solar energy sector in Saudi Arabia is still in early stages. “Saudi Arabia is yet to turn its huge solar potential into reality”, says Makio Yamada, Research Fellow at King Faisal Center for Research and Islamic Studies (Riyadh). In 2012, the government unveiled plans to invest more than $100 billion in clean energy projects till 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 14% of current generating capacity (9.5GW) by 2030.  “The installed solar capacity is less than a fifth of that in the UAE which can be attributed to institutional fragmentation and lack of effective collaboration between relevant state and semi-state organizations”, adds Yamada.

The newly launched Vision 2030 document puts forward a strong regulatory and investment framework to develop Saudi solar energy sector, financed in part by $2 trillion sovereign fund. “Vision 2030 highlights renewable energy as a strategic priority for Saudi Arabian economy which would help in economic diversification away from oil revenues, increasing energy security, diversify energy mix, free up oil for export, enhance regulatory framework, and support development of renewable energy industry, thus paving the way for a low-carbon economy in the Kingdom”, say Eaman Abdullah Aman, a Saudi energy expert and writer.

Infact, Saudi Arabia’s long-term goal is to become the leading exporter of solar energy in Middle East and Vision 2030 is expected to play a key role in realizing this objective. “What makes Vision 2030 and 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 Nada.

Under the King Salman Renewable Energy 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 in Vision 2030 and National Transformation Plan is very much in sync with fuel mix trends around the world”, observes Padmanathan.

Winds of Change

The first renewable energy initiative from the Saudi government was the establishment of 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 3.5MW PV project at the King Abdullah Petroleum Studies and Research Center. 

Saudi Arabia’s long-term goal is to become a leading exporter of solar energy

Saudi Arabia’s first competitive global tender for utility-scale solar power projects was recently launched – two 50 MW solar power plants at Al-Jouf and Rafha. Though current installed solar capacity in the country is a measly 25MW, world’s leading solar energy companies are already active in the local market, mainly due to the promise and potential of Saudi solar sector. “We already have two pilot projects in place: the first is solar-powered irrigation project at Al-Jouf while the other one is a carport solar power plant for the Saudia Dairy and Foodstuff Company (SADAFCO) in Riyadh”, informs Ahmed Nada, Vice President and Region Executive – Middle East at First Solar.

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, Saudi Electric Company selected CSP to produce electricity with 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. 

Outlook for the Future

Due to its regional dominance, Saudi Arabia can play a vital role in the proliferation of solar energy in the entire 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.

“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 critical areas which Saudi Arabia should tackle for a smooth transition to 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”, stresses Nada.

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”, says Nada.

Lastly, a well-trained and performing workforce is crucial for the development of solar market. “Saudi Arabia needs to invest wisely in technical education to overcome the skills mismatch between schools and the labour market and ensure the supply of rightly-trained human resources to the solar industry”, stresses Yamada.