Saudi Arabia: SASIA's feedback on the K.A.CARE proposal

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The King Abdullah City for Atomic and Renewable Energy or K.A.CARE has plans to develop 54 MW of renewable energy in Saudi Arabia by 2020. More than US$100 billion is to be channelled into 41 GW of solar power by 2032.

How this mammoth task is to be executed was outlined in K.A.CARE’s white paper, released this February. Feedback on the paper was concluded on April, 5. SASIA members also collectively pooled their comments on the white paper which they forwarded to K.A.CARE. Some key suggestions are highlighted here:

Job localization and local content

The white paper proposes that after 2 years of operation under the PPA (power purchase agreement) from SEPC – the government-backed Sustainable Energy Procurement Company – all developers will be required to submit a job localization plan, which gives the breakdown of the workforce.

The white paper states, "Developers falling in the bottom 20% of job localization within their technology class (after the point at which there are at least 10 developers in the developer class) will be required to pay a fine equal to 40,000 Riyals (US$10,665) per non-Saudi employee over their peer average, unless they are within one standard deviation of the average level of job localization for their technology class."

SASIA states that the job localization requirement after 2 years would be a deterrent for traction as a result of the phasing out process to fulfil the requirement. SASIA proposes the implementation of less than 20% localization of human resources for the initial rounds.

Local content will be scored with points awarded in the evaluation of proposals. Generally as the white paper states, proponents must achieve 20% local content to be able to receive any points at all. The local content requirement stipulates that maximum points are awarded in the introductory round and round 1 when solar PV, for example, has 60% local content. In round 2, this increases to 70%. Proponents who integrate local content into their projects will benefit from strong incentives through the rated criteria evaluation.

SASIA’s take is that the "overall premium of 30% is too low, of which local content is only a part of." SASIA asserts the need to increase the figure specific to local content alone and believes that local content thus should get at least 35% of premium.

The current annual procurement round is also said to not help the development of competitive manufacturing sectors. SASIA states "Local manufacturing needs visibility of several years rather than annual procurement rounds. To stimulate the Saudi supply chain and bankable manufacturing projects, K.A.CARE should create several 500MW multi-year allocations to be built over a 6-year timeframe each. Such allocations would be subject to guaranteed local content and will provide better utilization of local factories."

More evaluation

SASIA makes the suggestion that the governing law be in English as it is currently in place for conventional IPP. The credit and specific details of guarantors related to SEPC also need to be clear and transparent.

Additionally, SASIA believes that the proponents should be given free access to maps of existing and planned conventional power plants and the national grids. The bid timing ought to also be technology specific, for example as photovoltaic plants may require lesser time to develop compared to CSP plants. The technology mixes also need to be reviewed during the initial period, says SASIA, and taking into account the current economic and experience curve, more PV projects be allocated during initial years.

SASIA also had many other suggestions, which can be read here.