Saudi Arabia will need US$20 billion of investment to meet its renewable energy targets as it looks to diversify its economy away from its dependence on oil by 2020, according to industry experts.
Prince Mohammed bin Salman set an “initial target” for the installation of 9.5 gigawatts of renewable energy when he announced Saudi’s National Transformation Plan on Monday.
In his speech, the deputy crown prince said that while oil and gas remained essential to the economy, Saudi Arabia was laying the groundwork to expand investments into additional sectors.
“We will also seek to localise a significant portion of the renewable energy value chain in the Saudi economy, including research and development, and manufacturing, among other stages,” he said.
The country’s renewable energy heavyweight, Acwa Power, believes that the 9.5GW target will include a blend of solar and wind.
“The plan is likely to be a mixture of solar photovoltaic [PV], concentrated solar power [CSP] and wind,” said Paddy Padmanathan, chief executive of Acwa. “And the 9.5GW would require an investment of around $20bn.”
However, the government’s target is modest compared to Saudi Arabia’s potential, which has an average of 3,000 hours of sunlight annually, almost double Berlin’s 1,700 hours – Germany has been a leader in renewables.
Yet as the deputy crown prince said, the kingdom remains somewhat in the dark without a competitive renewable energy sector at present.
As the country’s energy consumption is anticipated to increase threefold by 2030, renewables present the best option to help the electricity sector, which is almost exclusively powered via crude oil.
But while some may consider the 9.5GW an underwhelming target, Saudi Arabia currently only has a negligible 25 megawatts currently installed. There is also no timeline mentioned which could allude to even greater amounts of renewable energy sources being added to the national grid.
“The reality will be that as the delivered tariffs show how competitive renewables are, Saudi Arabia will very likely roll out much faster,” said Mr Padmanathan.
The German cleantech advisory firm Apricum agrees that the country could easily support a much larger rate of solar and wind installations. “If the political will is there, we expect multiple gigawatts per year to be possible,” said Moritz Borgmann, a partner at Apricum.
The deputy crown prince wants to link the goal of renewable energy with the manufacturing sector and announced that more opportunities would emerge to localise the “renewable energy and industrial sectors”.
Apricum said that a strong renewed interest in local manufacturing would be driven by Saudi’s industrial conglomerates. “Depending on the level of expected demand for renewables and the capabilities available in the country, activities may evolve from light assembly to more complex and capital-intensive activities such as polysilicon and PV wafer manufacturing,” said Mr Borgmann.
Further details of the kingdom’s new strategy are expected in the next few weeks, including more information on the King Salman Renewable Energy Initiative, but others are hesitant as to Saudi Arabia’s commitment to going green after the unsuccessful attempt to incorporate renewable energy as part of the King Abdullah City for Atomic and Renewable Energy (KA Care).
“It will be interesting to see if Saudi Arabia is able to implement the King Salman Renewable Energy Initiative after the failed establishment of KA Care in 2010 and the following white paper in 2013 that never moved beyond paper,” said Browning Rockwell, founder of the Saudi Arabia Solar Industry Association (Sasia). “I think the motivations for success are very different this time.”