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Saudi’s 2030 clean electricity target behind schedule

The solar plant in Uyayna, north of Riyadh Reuters/Faisal Al Nasser
The agreement seeks to realise the full potential of solarisation across Kezad Group’s built assets, which cover over 400,000 sq m
  • Just 0.2% of electricity in 2021 came from renewables
  • Fairer market-friendly reforms needed for any hope of success
  • Expansion is accelerating, but not fast enough, experts say

Saudi Arabia will fall far short of its goal to generate half its electricity from renewables by 2030, industry analysts warn. 

The kingdom has made bold environmental promises, pledging to become net zero in terms of carbon emissions by 2060, while in March 2021 crown prince and de facto ruler Mohammed bin Salman reiterated the 50 percent 2030 target. 

Yet just 0.2 percent of Saudi’s 356.6 terawatt hours (Twh) of electricity last year came from renewables, according to the BP Statistical Review of World Energy 2022. Solar generated 0.8 Twh, with gas providing 215.9 TWh and oil 139.9 TWh. 

London-based consultants GlobalData forecast renewables will provide 6.8 percent of Saudi electricity in 2030. Fitch Solutions cites a lower figure: less than three percent, although its analysts believe this could be substantially higher were the kingdom to make market-friendly reforms to woo foreign investors and developers. 

“It’s things like regular, predictable auctions, making the business environment more attractive, securing suitable grid connections, and making it a fairer market that isn’t dominated by the fossil fuel industry,” Thomas van Lanschot, head of power and renewables at Fitch Solutions, said.

“Those market forces are still very strong and that plays against renewable growth.”

Saudi’s slow progress comes despite the Gulf possessing vast potential in renewables.

Regional solar power plants can produce double the amount of electricity of a similar facility in Germany thanks to a far higher solar intensity, states a 2022 report by Strategy& that notes the Gulf is home to high wind speeds too. 

The cost of solar or wind-powered electricity is also one-third of the global average, Strategy& estimates.

Saudi Arabia and the United Arab Emirates have set world-record low tariffs for new solar projects in recent years and prices could yet fall further.

“The resource availability and cheap land availability make developing renewables, particularly solar, very attractive,” van Lanschot said.

“The trend is definitely downward and will remain low for solar prices. Wind is different because there isn’t the same sector maturity in the supply chain or the onsite workforce.”

Electricity prices in Saudi Arabia are heavily subsidised, masking the real cost of providing power as oil and gas prices soar.

Without subsidies solar-powered electricity would likely be cheaper, although fuels such as natural gas will remain key to ensuring a stable power supply, van Lanschot added.

In February 2019 Saudi raised its renewables capacity targets, setting a goal to have a capacity of 27.3 gigawatts (GW) within five years and 58.7 GW in 2030.

The country’s capacity will be just 1.5 GW by the end of 2023, according to a recent GlobalData report. 

“Saudi Arabia offers bare minimum support to the renewables industry,” Attaurrahman Ojindaram Saibasan, a power analyst at GlobalData, said.

“There are no major preferences given to renewable power projects, long approval timelines cause a hindrance, incentives are not encouraging enough to enable adoption, and there are no specific loan programmes that will help development of large-scale renewable projects.

“The policies are also not robust, and implementation of action plans are generally not on time.”

Saudi’s 23 planned renewable projects will have a combined additional capacity of around 10 GW, Fitch Solutions estimates, noting current capacity is about 1.2 GW. 

“The pipeline of projects is still quite minimal compared to what they’re looking for,” van Lanschot said. 

“Most of these projects’ target completion dates are mid-decade and a lot are still going slowly through the development process: getting approval and going to FID (financial investment decision).

“Saudi’s near-term renewables target will definitely not be met, and the long-term target looks unlikely too, but capacity expansion is accelerating – it’s just not fast enough.

“Finding a suitable path for renewables to join the (electricity) grid is a problem.”

Using different parameters, GlobalData estimates Saudi has 2.7 GW of capacity under construction or at the financed stage. 

Even if the country was to build the targeted 58.7 GW by 2030, this would only provide about 20 percent of its electricity, said GlobalData’s Saibasan. Saudi would require renewables capacity of 135 GW to hit the 50 percent target, he estimates. 

Saudi had announced a $200 billion, 200 GW solar power project with Japan’s Softbank in 2018 that was slated to be completed by 2030, but the plan was soon abandoned, the Wall Street Journal reported

The initial announcement, although generating global headlines, seems fanciful in retrospect – 200 GW would be nearly one-quarter of 2021 total global solar capacity.

“The country’s history of making unrealistic targets or project announcements have led to low confidence among foreign and local investors alike which has led to slower development of the industry,” Saibasan added. 

“The current rise in energy prices is also a concern for the government which looks to focus on securing supply through domestic fossil fuels rather than making large investments in renewable power.”

More positively, Fitch’s van Lanschot said rising oil prices would spur Saudi to increase crude exports, creating more space for renewables in the kingdom’s domestic power mix.

“The long-term plan is to replace oil in the power sector with renewables,” he said. 

Saudi has expanded its grid interconnection with neighbouring countries, while the European Union is increasingly looking to the Middle East to help replace its reliance on Russian gas to make electricity. Greece and Saudi signed an energy agreement in July. 

“There’s a network emerging of connection projects that might eventually feed into the European grid,” van Lanschot added.

“We think this is part of a wider shift towards Saudi Arabia becoming a larger energy player on the global stage.”

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