Saudi Arabia's solar power capacity is expected to grow to just over 5.1GW between 2022 and 2031 on the back of the kingdom's support for its long-term power sector plans, Fitch Solutions said in a report.
Under its National Renewable Energy Programme (NREP), the country introduced a state-driven renewable power capacity auction tendering system, which has awarded contracts to more than 1.7GW of solar power projects to date. Added to that, the kingdom has highlighted hydrogen as a key component of its long-term energy sector strategy, aiming to produce 2.9 million tonnes of hydrogen per year by 2030.
While this strategy does not specify targets for green hydrogen production, the presence of large-scale green hydrogen projects in the pipeline indicates that renewable hydrogen will form a significant proportion of this production, said Fitch.
"As a result, we note upside risk to our solar power forecasts in the burgeoning green hydrogen industry, which will place upward pressure on renewable electricity supplies and drive further investment in solar power over the coming years."
However, the agency is cautious on outlook on Saudi solar power growth as in the past the market has missed its ambitious targets.
"With tangible growth in the solar power sector only appearing in the past two years, policy constraints on foreign private ownership in the industry, as well as the dominance of large incumbent state-owned utilities, will present hurdles to investors seeking to participate in the market."
The mainly desert country has some of the highest solar power potential in the world, with high solar irradiation rates, vast amounts of available and suitable land, and strong electricity demand growth forecast over the next decade.
The focus on solar is also supported by the government's recent friendly stance towards renewables as it aims to reduce crude oil consumption, diversify its power sector and build out its green hydrogen production capacity.
(Reporting by Brinda Darasha; editing by Seban Scaria)