The launch of a white paper on 21 February detailing Saudi Arabia’s ambitious renewables programme by the King Abdullah Centre for Renewable and Atomic Energy (KA-Care) has caught the interest of the world’s biggest power developers.

KA-Care outlined the details of the kingdom’s renewables programme, which is scheduled to contribute 54,000MW by 2032. The ambitious nature of the targets are clear when put in the context that the entire Middle East and North Africa (Mena) region produced just 1,530MW of energy using renewable technologies (excluding hydropower) in 2012.

The programme will not only make a major contribution to the kingdom’s power generation capacity in the coming decades, but will also boost the local manufacturing and job markets.

“It is a very exciting programme,” says a regional manager of a major European power firm. “Whether they will complete all of the projects planned, I am not sure, but the white paper is a very good start.”

Power demand

Saudi Arabia faces a huge challenge to expand its power capacity, with increasing demand from a rapidly growing population and an expanding economy. The kingdom has one of the highest per capita electricity consumption rates in the world. According to the latest forecast issued by the Electricity & Cogeneration Regulatory Authority (Ecra), peak demand will climb to 75,000MW in 2020 and to 123,000MW by 2032 based on an average growth rate of 4.5-5 per cent a year. With generating capacity of 57,440MW in early 2012, the kingdom will need to add 65,560MW over the next 20 years.

The release of KA-Care’s white paper signals a significant shift in the kingdom’s power policy. “In the past, the low cost of fuel meant that governments were not placing energy efficiency at the top of their priority list, but today the situation has fundamentally changed,” says Patrick Kron, chairman and chief executive officer (CEO) of France’s Alstom, which has been involved in several major power projects in the region. “Our customers in the Middle East, and in the Gulf in particular, are seeking state-of-the-art technologies to drive efficiencies.” 

Despite having the world’s largest proven energy reserves, Saudi Arabia faces severe feedstock problems in its power and desalination sector. A lack of new gas allocations means the kingdom is burning an estimated 750,000 barrels a day (b/d) of liquids in its power plants, which otherwise could be sold on the international market.

In 2011, the power sector consumed 270 million barrels of liquid product, equivalent to almost 10 per cent of the kingdom’s oil output. If no action is taken, Ecra says the use of liquids for electricity generation would rise to 430 million barrels in 2020 and 850 million barrels in 2030.

Not only would this damage the kingdom’s export capacity and have a significant environmental impact, there would also be a major cost implication. The kingdom’s current steam independent power projects (IPPs) are supplied heavy fuel oil for 20 years at a fixed price of just $4 a barrel, compared with a 2012 average for Brent crude of $112 a barrel. Riyadh is aware that it must begin preserving its valuable natural resources in order to receive maximum returns from oil exports.

To this end, it established KA-Care in 2010 to oversee a renewables and nuclear programme. Until this year, the body had released little information on its plans. The February white paper details the competitive procurement process (CPP) that it will use to tender and award contracts for the first 7,000MW phase of the renewables programme. KA-Care set a deadline of 5 April for the public to submit comments on the white paper.

“We are eagerly awaiting the draft request for proposals and the draft power purchase agreement,” Yara Anabtawi, director of business development for renewables at the local Acwa Power, said in a recent webinar hosted by UK-based law firm Chadbourne & Park. “[The white paper] is a serious step that gives comfort that the programme will launch very soon.”

Under the plans proposed in the white paper, developers will be invited to bid on 20-year power purchase contracts. The programme will be split into three tendering rounds. The initial three rounds will procure a total capacity of 7,000MW.

First round

The first introductory round entails the procurement of 500-800MW using various renewable technologies at five to seven pre-packaged sites, with a minimum 5MW capacity for each contract. The sites will be locations easily connected to the national grid. The technologies that can be utilised for the initial phases are: thermal solar, photovoltaic (PV) solar; wind; geothermal; and waste-to-energy. Hybrid and other renewable technologies are expected be included in future rounds.

“A target of 54,000MW in the next 20 years seems very ambitious for a region that has less than 50,000MW installed to date,” says Erik Voldner, executive director for operations at Abu Dhabi-based Enviromena Power Systems, during the Chadbourne & Park web debate.

“But when we start looking for a breakdown of technologies, for PV, concentrating solar power (CSP), onshore wind, geothermal and waste, you realise that it is not unrealistic.

“On PV, after the introductory round, we would be looking at approximately 800- 1,000MW a year consistently. This is not only good for the industry, as it provides a consistent pipeline, but it is also a very achievable target.”

Riyadh’s commitment to push ahead with renewable energy is further reflected in its promotion of a local solar manufacturing supply chain. In February 2011, a South Korean consortium of Hyundai Engineering & Construction and KCC Engineering & Construction was awarded a contract to build the kingdom’s first polysilicon plant at Jubail. The $500m scheme is due to be commissioned this year, with a first phase capacity of 3,350 tonnes a year (t/y). Two other polysilicon projects are planned, including a 7,500-t/y venture promoted by Bahrain-based First Energy Bank.

Local participation

While international power developers are eagerly watching the development of Saudi Arabia’s alternative energy programme, local companies are also looking forward to the glut of renewables schemes.

KA-Care’s programme has been designed around supporting local companies and creating jobs for Saudi citizens. The white paper suggests consortiums will be required to have participation from local firms. “There is currently a lot of activity among international renewable energy players to find partners,” said Moritz Borgmann, consultant at Germany consulting firm Apricum, during the Chadbourne & Park webinar.

Major local developers include Acwa Power, which was the kingdom’s biggest developer in 2012, with a power equity capacity of almost 2,500MW, which is set to increase further in 2013. Saudi Oger is the second-largest developer. Acwa Power has already shown an interest in renewables, submitting the lowest bid to build a 100MW solar facility for Mecca Municipality in January. The UK’s EDF Energy and the local Al-Gihaz submitted the other bid for the project.

Saudisation targets

Another key feature of the white paper is the strict guidelines for localisation. Developers will be required to submit a job localisation plan to be updated yearly. It will include data on Saudi and foreign employees, including wages paid. When developers use contractors, they will have to provide the same information. This is to ensure localisation targets are met.

In publishing the white paper, KA-Care has set a new benchmark for the renewables sector. With its targets of 23,900MW by 2022 and 54,000MW by 2032, Saudi Arabia is set to become one of the world’s most active renewable energy markets over the next two decades.