Inspired by the government’s long-term aspirations to reduce oil dependency, develop public sector services, and achieve economic diversification, Saudi Arabia has pushed for progress through the remits of the Vision 2030 reform plans and — more recently — the Saudi Green Initiative.
As the Kingdom continues to introduce circular economy initiatives, promote renewable energy production and meet its green goals and climate change commitments, overcoming challenges en-route is imperative. To ensure this, private sector players must come together with their public sector counterparts, backed by robust public-private partnership (PPP) models.
Much like neighboring countries in the Gulf Cooperation Council, efforts to combat climate change and meet emissions reductions targets in Saudi Arabia have yielded positive outcomes through groundbreaking projects.
A prime example is the Dumat Al-Jundal Wind Farm, with a 400 MW capacity, located north of Riyadh. The project is set to become the largest wind farm in the region, generating enough electricity to power as many as 70,000 households every year. Yet for Vision 2030 and the Green Saudi Initiative to achieve long-term success, private Saudi companies require support in their pursuit of related objectives.
It is important to reiterate that successfully overcoming the exacerbating climate challenge and building climate resilience requires contributions from all parties across the public and private sectors. But while there are many reasons to be optimistic about driving the sustainability agenda and meeting green objectives for years to come, varied ways of working, substandard communication, and failure to align on project specifics are all potential issues that will present unnecessary and disruptive tailwinds.
PPPs represent an effective way to execute sustainability plans at scale and with speed. They can focus on efficiency and long-term impacts in equal measure, ultimately overcoming environmental challenges to help realize green goals. The approval of the long-awaited Private Sector Participation Law in March 2021 has also laid the legal foundation, transparency, and governance structure and is expected to accelerate PPP across sectors.
As such, a robust PPP model will undoubtedly position Saudi Arabia to continue meeting its climate objectives. Not only can the public and private sectors avoid the above scenarios and build productive relationships; they can make joint contributions by continuously identifying and assessing both the likelihood and impact of climate risks at each stage of any PPP.
Further, PPPs can apply to any climate-specific project and drive progress in a multitude of areas requiring urgent reform — including major cities, where climate change and greenhouse gas emissions must be addressed and reduced.
Climate change poses a severe threat to urban infrastructure, quality of life, and the entire urban ecosystem. Saudi cities need to adopt an integrated approach to improve city services to adapt to climate change and reduce their greenhouse gas emissions. To implement a successful approach, cities require a robust PPP model. For some time now, the Kingdom has been looking to PPPs as a means to satisfy its immediate energy and infrastructure requirements. Cooperation between the sectors in energy and infrastructure markets is not a new phenomenon in Saudi Arabia.
There have already been several successful build-own-operate and build-operate-transfer projects in the Kingdom, mainly in the power and water sectors. Moreover, areas such as waste management, the metro, and similar mass transit projects have utilized or planned on using the private sector along the value chain.
With this in mind, implementing a PPP model to reduce emissions and drive the climate change agenda is feasible. A climate-smart PPP model will enable strategic projects and services development in a cost-effective, quality-assured manner and environmentally friendly way by integrating energy efficiency and clean energy. Urban infrastructure is also an area where PPP strategies can be implemented effectively and build climate resilience.
For all concerned players in the Kingdom, investments through the PPP route offer an innovative and effective mechanism to meet both the goals of infrastructure development and climate change mitigation. Therefore, it would be prudent to explore this avenue further and without delay. The Kingdom cannot overlook the vast value that climate-smart PPPs can facilitate, especially when considering that they can be deployed to meet not only environmental challenges, but also social and economic issues.
• Bakatjan Sandalkhan is partner and associate director at Boston Consulting Group.
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