Saudi Arabia ramping up renewable energy investments

Early last year Saudi Arabia announced a national renewable energy program with the goal of supplying 10 percent of its power demand with renewable energy by 2023. Recently, the head of Saudi Arabia's Renewable Energy Project Development Office, Turki Mohammed Al Shehri, announced that Saudi Arabia is planning to tender up to $7 billion of renewable energy projects this year as efforts to reach the 2023 goal start to ramp up.

Saudi Arabia plans to issue tenders for at least eight renewable energy projects this year, totaling around 4,100 megawatts of capacity, a large increase from the 700 megawatts tendered in 2017. The projects will total approximately 3,300 megawatts of solar power and 800 megawatts of wind. The winner of the first project in Saudi Arabia, the 300 megawatt Sakaka photovoltaic project initially tendered last year, will be announced in February.

The projects are to be tendered on a build, operate and own basis with a 20 year period for solar projects and a 25 year period for wind projects. The PPAs for the projects will be provided by Saudi Arabia. So far, bidders include companies such as Total, Canadian Solar, local ACWA Power and a consortium led by Japan-based Marubeni- also known for its involvement in a 1.2 GW mega-solar project in nearby Abu Dhabi. Other major companies, such as GE and Mistui & Co., have already qualified to bid for projects as well.

One of the major goals of the renewable energy investment program is creating a local renewable energy industry that can compete globally. Currently, this requires 30% of the content of all projects to be sourced locally, a requirement going up to 60% by 2019. This requirement is believed to be part of the reason behind why a bid by French company EdF and Emirati company Masdar for the Sakaka project was rejected, even though it was the lowest price bid for solar power worldwide (1.79 US cents/kWh). Even with this rejection, power purchase agreement prices for the solar projects are expected to be below 3 US cents/kWh.

While Saudi Arabia is well-known as a petroleum producer, it is also heavily dependent on petroleum for energy generation, something this renewable energy program hopes to lessen. To that end, Saudi Arabia also plans on turning more to natural gas for energy production. It total, Saudi Arabia plans on spending between $30 and $50 billion through 2023 to hit its renewable energy goals. This renewable energy program comes at a time when many Middle Eastern nations are planning to increase investment on renewable energy projects and are announcing renewable energy production targets, from next door UAE to Egypt and Algeria.