Saudi Arabia’s solar market

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The Saudi Arabian government has taken significant steps in recent years to address the challenges and encourage the development of renewable energy projects. These efforts include the establishment of the Saudi Renewable Energy Project Development Office to oversee the development of renewable energy projects and the launch of the Solar Energy Plan, which aims to install 27.5 GW of solar capacity by 2030. Additionally, the Kingdom plans to launch the greenhouse gas certificates market in 2023 as part of its efforts to reduce carbon emissions.

Saudi Arabia is expected to add 10 GW of renewable capacity between 2022 and 2027, with solar PV leading the way. This growth will be driven by four procurement mechanisms: competitive auctions, unsolicited bilateral utility contracts, corporate power purchase agreements (PPAs), and state-owned projects. The forecast for this growth has been revised upward from previous estimates due to progress made under all four business models and the announced climate commitments during COP27.

For competitive auctions, PPAs have been signed for half of the projects in the third round, and the fourth round opened in September 2022, with higher-than-expected volumes on offer. The country's first corporate PPA project was commissioned in 2021 after the implementation of a new Private Sector Participation Law that allows developers to sell directly to consumers. This regulatory change Is expected to facilitate the growth of future corporate PPA projects.

Additionally, the government has announced plans to develop another 2.3 GW of renewable capacity through bilateral contracts under the Public Investment Fund and build state-owned projects in industrial cities. However, the pace of auctions for onshore wind remains to be determined, as it took four years to commission the Round 1 projects, and the capacity earmarked for wind in the third round is yet to be awarded.

The total generating capacity of the National Renewable Energy Program projects in the kingdom is expected to reach approximately 56 million megawatt-hours, with clean electricity generation. capacity increasing to around 58.7 GW by 2030. Of this, 40 GW will come from solar energy, 16 GW from wind energy, and 2.7 GW from other renewables.

Saudi Arabia is actively working to increase the use of renewable energy as part of its goal to reduce reliance on fossil fuels and achieve net zero carbon emissions by 2060. Although there may be challenges in the future, such as competition with fossil fuels and the pace of the adoption of net billing system by consumers, the government has taken steps to improve legislation and increase the self-consumption limit to include large capacities over 2 MW in order to boost the distributed generation (DG) market. The utility-scale market in Saudi Arabia is currently one of the most important in the Middle East and North Africa region, with annual additions of approximately 1-15 GW. Overall, Saudi Arabia is making progress in increasing the use of renewable energy and reducing reliance on fossil fuels.

16 projects are in the plans for the kingdom including the launch of five Energy Projects Totalling 3,300 MW including two solar projects (1,500 MW), distributed in Al Hanakiya – 1,100 MW and Tabarjal – 400 MW. The kingdom, by leveraging its unique geographical and climatic characteristics, is creating an environment economically favorable for renewable energy sources have become economically attractive. By diversifying the country's energy mix, KSA’s renewable market is becoming more competitive and achieving the world's lowest prices for renewable energy projects.

This extract from MESIA’s Solar Outlook report gives an At a Glance View of Saudi’s recent progress and its pipeline. MESIA together with Solarabic will further explore the strategy of the kingdom, its projects and policies in an upcoming event to be held in Riyad on May 23d&24th.

Author: Hinde Liepmannsohn

Contact info@mesia.com for more information.

The Middle East Solar Industry Association- MESIA, is the only non-for profit solar association bringing together the entire solar sector across the Middle East and North Africa (MENA) region.

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