Market research group IHS has scaled down its outlook for PV installations in Saudi Arabia after the country revised its renewable energy target.
According to IHS, Saudi Arabia postponed the milestone for its 16 GW PV goal from 2032 to 2040. The target corresponds to an average annual capacity additions of 640 MW over 25 years. As a result, IHS has halved the five-year outlook for PV installations in the country from 1.6 GW to 800 MW.
The slump in oil prices has weakened the argument for Saudi Arabia to replace oil as the main source of power generation in the near term, says Josefin Berg, senior analyst at IHS Technology.
Saudi Arabia heightened expectations across the solar industry when it announced renewable power targets in 2012. Plans included the launch of tenders, which attracted a hoard of developers and manufacturers to one of the world's wealthiest nations in the hope of developing new business.
"As regulators have not progressed on the planned tenders, and PV installations have stagnated at less than 20 MW, the PV industry is growing restless," IHS writes. "The latest announcement from K.A.CARE to postpone the target year to 2040 deflates further expectations of near- to mid-term growth."
IHS has gradually lowered its PV demand outlook for Saudi Arabia since the country announced PV targets in 2012. From a forecast of 1-2 GW of tendered PV projects to be completed over five years, IHS now predicts less than 1 GW to come into operation through 2020. "This outlook hinges on the roll-out of a regulatory framework for PV, whether through tenders or feed-in tariffs," the company says, adding that an additional factor that will determine the amount of PV deployment is the evolution of local manufacturing, given Saudi Arabias emphasis on supporting local industry.
IHS stresses that the "extraordinary decline in global oil prices" in the past months is likely to reframe the Saudi position toward new power generation sources. "At current global oil prices, the incentive to save oil for export weakens for near-term deployment. In the long-term, the argument to reduce oil consumption remains valid, for which IHS expects Saudi to deploy the bulk of new PV capacity in the period from 2020 to 2040."
K.A.CARE announced in May 2012 ambitious plans to deploy 41 GW of solar power, 17 GW of nuclear power and 13 GW of wind, biomass and geothermal power capacity by 2032. The solar plan targets 16 GW of PV and 25 GW of concentrated solar power (CSP). K.A.CARE initially planned to start with two rounds of capacity tenders in 2013. The planned tenders were then postponed to 2014, but no further details have been published to date.
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