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| 24 April, 2017

Private investors key to Saudi Arabia's renewable energy plan

Image used for illustrative purpose.

Image used for illustrative purpose.

24 April 2017

There has been a major shift in Saudi Arabia’s approach to renewable energy.

This was underlined last week when further details of the Kingdom’s renewable energy drive were laid out, which are distinct from earlier recommendations made by the King Abdullah City for Atomic and Renewable Energy (KACARE).

There is a huge difference in the two approaches. The first initiative was considered by many analysts as over-optimistic, given the aim to generate around 62 gigawatts (GW) of power from renewable energy sources. That drive would have required at least $109 billion of investments, according to reports.

Under the current initiative, the Kingdom will only generate around 9.5GW of power from renewables, accounting for 10 percent of the country’s energy needs by 2023. The Kingdom currently has around 200 megawatts (MW) of installed renewable energy capacity and going from there to 9.5GW sounds like a more realistic goal. Moreover, it will only require between $30 to $50 billion worth of investments, Saudi Energy Minister Khalid Al-Falih had said earlier this year in Davos.

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The KACARE initiative was a general plan whereas the new initiative is part of the National Transformation Program (NTP) 2020 and Saudi Vision 2030 reforms.

What is unique about the current renewable energy initiative is that private investors will build, operate and own the solar and wind plants for 20 and 25 years, depending on the nature of the project, Turki Alshehri, head of the renewable energy project development office at the Ministry of Energy told reporters on Monday. The government will not own any of the plants, he said.

Another unique aspect of this initiative is that the ministry wants to create a fully integrated local private industry for renewables. It wants to go beyond that by making that industry export-oriented, meaning that it wants to sell power to other countries and manufacture renewable-energy equipment to sell overseas.

The Kingdom is restructuring its energy sector as part of the Vision 2030 reforms, and a focus on renewable projects is a pillar of this transformation, as it would help develop the private sector and create thousands of jobs.

Saudi Arabia has reportedly shortlisted 27 companies for a solar-power project and 24 firms for its wind project. It is inviting bids for the first round of renewable projects that comprises a 400MW wind farm project in Midyan in the northwest and a 300MW solar project.

The Kingdom also plans to launch a second bidding round for a 400MW wind power project in Domat Al-Jandal in Al-Jouf Province by the fourth quarter of this year, which will be followed by 620MW of solar power, Alshehri said. “This will come in stages. It (the wind power project) will come in the fourth quarter of this year with Domat Al-Jandal, and then the 620MW (solar project) will come immediately after that in phases,” he was reported as saying by Reuters.

© Arab News 2017