SoftBank’s Mega Solar Deal in Saudi Arabia Faces a Rocky Future

Announcing the world’s largest PV plant may have created a huge problem for Saudi Arabia’s solar market.

Saudi Arabia’ssolarmarket looks headed for a major setback following concerns over the future of the world’s largest PV project.

Earlier this month, the Financial Times reported that a $200 billion deal to build 200 gigawatts of solar PV in Saudi Arabia by 2030 is facing uncertainty because top officials in the kingdom had been excluded from negotiations.

The newspaper said the energy ministry, which runs the country’s renewable energy program, and state-owned energy firm Saudi Aramco had not been briefed on Crown Prince Mohammed bin Salman’s plans to sign a development memorandum of understanding with Japan’s SoftBank.

The Financial Times said the affair “laid bare a struggle for influence” between Khalid Al-Falih, the energy minister controlling the country’s Renewable Energy Project Development Office (REPDO), and Yasir al-Rumayyan, head of the Saudi Public Investment Fund (PIF).

The PIF was due to join Japanese financial powerhouse SoftBank in investing in the 200-gigawatt project and pushed to get the memorandum signed without involving REPDO, it is claimed. As previously reported by GTM, though, the SoftBank deal was short on details.

The emergence of a power play between one of the PV plant’s financing entities and those responsible for signing off critical assets, such as grid connections, puts the future of the project in grave doubt.

“The plan’s feasibility was already in question,” said Benjamin Attia, global solar analyst with GTM Research, “but the fact that REPDO and Aramco were upset they weren’t looped in shows they fully recognize the myriad challenges associated with this project.”

The plan could also end up posing a challenge even if it doesn’t get built, Attia noted. The mere fact that it was announced outside of the formal bid process hosted by REPDO put developers on alert.

“The memorandum already injected a massive amount of uncertainty into the Saudi market, likely limiting participation in the 3.3 gigawatts of REPDO tenders scheduled to take place in 2018,” Attia said.

Developers that had been looking to take part in the tenders might now be tempted to hang back and see what remuneration structures would go to an eventual Saudi-SoftBank program, he said.

If the SoftBank project fails to materialize, which seems increasingly likely, it will be yet another sign that Saudi’s solar market is big on promises but low on real opportunities.

Solar developers have been wistfully eyeing the market for more than half a decade. Over that period, the Saudi government has repeatedly sent encouraging messages about developing solar power.

In 2013, for example, the nation’s King Abdullah City for Atomic and Renewable Energy had set a target of installing 16 gigawatts of PV by 2032. By 2015, the target had gone up to 41 gigawatts, including concentrated solar power, but had been pushed back to 2040. As of last year, Saudi Arabia had installed a paltry 50 megawatts of PV.

Things finally began to look more promising, however, when the country tendered a 300-megawatt plant that made headlines with a record-low rate of less than two cents a kilowatt-hour. Building momentum, in January REPDO announced 3.3 gigawatts more of solar to be tendered this year.

But the SoftBank deal appeared to blow this careful planning out of the water, with a proposal to tender an additional 7.2 gigawatts of power this year, across two solar parks that would constitute the first phase of the project, and have it connected to the grid in 2019.

The news that the proposal might end up as another footnote in Saudi Arabia’s haphazard solar market history is “honestly not too shocking,” Attia said.

“Both the Saudi state and SoftBank have previously announced grand plans for massive solar investment that have been canceled or have yet to materialize. And this is not the first time national entities have been at odds in renewable energy program planning in Saudi Arabia.”

Realistically, GTM Research expects the Saudi Kingdom to install just over 9 gigawatts of cumulative solar capacity by 2022, he said. But that figure was calculated before the SoftBank memorandum of understanding rocked the boat. It might well be lower now.

Source: greentechmedia