Industry Sector Focus: Saudi Arabia Pioneers New Solar Power Projects
During the visit by H.R.H. Crown Prince Mohammed bin Salman to New York, Softbank Founder Masayoshi Son revealed plans to develop a 200GW solar project in the Saudi Arabian desert requiring $200 billion of total investment. Saudi Arabia and SoftBank Group signed an MOU for what will be the world’s largest solar power generation project. The first phase of the project would require $5 billion of investment, building 7.2GW capacity by 2019. For this $5 billion, Saudi Arabia and SoftBank would each contribute $1 billion, and debt financing would cover the remaining $3 billion. Individual solar parks would each have a 25-year power purchase agreement (PPA) common for the solar energy industry. Revenues generated by the first solar parks would be used in construction of future projects.
Mr. Son estimates that the project would add 100,000 new jobs to the Kingdom by 2030 and would cut $40 billion from total power costs. The project is large enough to substantively support the Kingdom’s domestic equipment manufacturing industry. Once completed, the solar generation capabilities would triple the Kingdom’s current electricity generation.
Saudi Arabia’s Renewable Energy Strategy
Solar power is just one facet of Saudi Arabia’s broader energy strategy, as the Kingdom makes energy generation a priority given its ever-growing energy needs. In fact, Bloomberg New Energy Finance reported that Saudi Arabian electricity demand has increased by 9 percent each year since 2000. Previously, Saudi Arabia issued a target to install 3.45GW of renewable energy generation capacity by 2020 and for 9.5GW of renewable energy capacity by 2023 as part of Vision 2030.
The creation of the Kingdom’s National Renewable Energy Program (NREP) will certainly help to facilitate renewable projects in the country, though it also represents larger Vision 2030 themes of energy diversification and efficiency.
Despite Saudi Arabia’s long-term ambitions to move towards clean energy, implementation of these projects did not fully begin to take shape until 2017. Heading this implementation is the Ministry of Energy, Industry & Mineral Resources’ Renewable Energy Project Development Office (REPDO). During Q1 2017, REPDO issued prequalification for 700MW as part of its clean energy program. As the first project under NREP, REPDO began collecting bids for the 300-MW Sakaka photovoltaic (PV) solar project in October 2017, receiving 8 bids total. In February 2018, the local firm Acwa power was awarded a 25-year PPA to develop the project at a bid of 2.34 U.S. cents per kilowatt hour (kWh). To allow more efficient operation of its photovoltaic solar plants, Acwa Power plans to integrate digital centralized control and monitoring technology from the Chinese firm Huawei Fusion.
In January 2018, REPDO said that it would issue tenders for another 4GW of renewable energy before the end of the year. The head of REPDO, Turki al-Shehri, noted at the World Future Energy Summit (WFES) in Abu Dhabi that the second 4GW round would be split into 3.2GW of photovoltaic (PV) solar and 800MW of wind tenders.