Solar Market Potential in Saudi Arabia

When 13 MW of renewable capacity is installed in the United States, understandably, no one bats an eyelash. When 13 MW of renewable capacity is installed in the Gulf, there’s a multimillion-dollar inauguration party, in true Gulf opulence.

At the end of October 2013, the UAE celebrated the inauguration of its second utility scale power project. Located in Dubai, this first phase of a project slated to total 100 MW marks a significant, albeit very gradual, shift in the global renewable energy game.

As the world increasingly looks to renewable energy to satiate growing global energy demand, the Middle East is no exception. Across the region, decreasing costs and evolving markets have led to a priming of the Middle East as potentially the next big front for renewable energy.

Whether states are working towards decreasing dependency on hydrocarbon imports or diversifying economies and offsetting domestic consumption of oil, the region is abuzz with clean energy development. And yet, there is one prize everyone is anxiously awaiting – the Kingdom.

Blessed with some of the highest solar irradiation levels in the world, averaging between 1,800 to 2,200 kWh/m2/yr, Saudi Arabia stands out as the largest potential solar market in the region. Not only do the solar irradiance levels make PV cost competitive in the Kingdom, the opportunity cost of domestic oil use provides a very compelling argument for the Saudis to go green. According to a report by EuPD research, the opportunity cost for oil used in domestic electricity generation is estimated at $139 per MWh.  With peak power demand estimated to triple in the next 20 years, from 40 GW to 120 GW between 2010 and 2028, there is speculation that Saudi Arabia could become a net importer in the next decade if current trends persist.

In an effort to offset the skyrocketing fossil fuel usage and develop new local knowledge-based economies, the Saudi government created the King Abdullah City for Atomic and Renewable Energy, or K.A.CARE.  This entity was created with the mandate to develop and deploy the Kingdom’s renewable energy goals. In 2011, K.A.CARE announced lofty targets of 54 GW of renewable energy by 2032. Of this, 16 GW will be devoted to PV, 25 GW to CSP, and 8 GW of nuclear energy. Following the announcement, a white paper, which is still under development, was produced with input from international industry experts, to outline the proposed implementation strategy for the procurement process to develop renewable energy projects in Saudi Arabia.

Despite eager industry enthusiasm, the Kingdom has yet to formally initiate the first round of tendering, as outlined in the K.A.CARE white paper. Industry fatigue may be starting to set in as international players anxiously wait on the sidelines for their chance to bid on projects. The biggest challenge in development over the last 2 years has consistently been identified as policy frameworks. On a panel at the Solar Middle East conference in Dubai this past February, experts suggest that regulatory support is still lacking, and continues to be the main inhibiting factor, not only in Saudi Arabia, but across the region as well.

In addition to the policy impediments that are halting renewables development, technology is another a critical make-or-break issue in the region. Although sun is plentiful, the harsh desert environment causes dust storms, sand accumulation, and haze, which greatly reduce module efficiency. As such, technologies like CSP and CPV that require direct sunlight are still not deployable on a large scale. Implementable grid connectivity technologies for the harsh desert environments continue to be extensively researched. State-of-the-art research facilities like the King Abdullah University for Science and Technology have devoted millions of dollars to explore these challenges domestically.

Although utility-scale projects are still slow to develop, KACARE has, however, made significant progress in the Renewable Resource Monitoring and Mapping (RRMM) program. This atlas provides pre-project data on solar patterns, dust levels, and other meteorological information, which will provide optimal information for project planning and R&D efforts. The RRMM program will undoubtedly be a very valuable resource for all future developers and investors, giving them the ability to develop accurate and reliable power production models, once the competitive bidding process is initiated.

For now, the renewable energy grid connections in the Kingdom remain scarce, as either test sites or residential-size installations. The first grid-connected PV project in the KSA was undertaken by KAUST, and was an on-campus 2 MW rooftop project. Although quite small, the system has been creating valuable learning for the solar sector in the Kingdom

Just this past January, The Saudi Electric Company (SEC) announced the first Integrated Solar Combined Cycle with 20-30 MW CSP plant, known as DUBA 1, with total capacity of 550MW.  The Expression Of Interests (EOI) are now being solicited by SEC to build, own, and operate this plant.

Saudi Arabia’s very ambitious renewable program is going through anticipated growing pains, though perhaps slower than the industry would like. International solar stakeholders continue to lobby for policy clarity as the domestic players debate appropriate frameworks and region-specific technologies. At the World Future Energy Summit in Abu Dhabi this year, there was speculative consensus that 2014 may be the year Saudi finally goes green. Tangible sector development remains to be seen.

Energy Collective