Thoughts On Saudi Arabia’s Big 9.5 GW Renewable Energy Target For 2023

Following the April and May announcements from Saudi Arabia concerning its ambitious 9.5 GW renewable energy target, Apricum, a cleantech advisory and strategy consulting firm, has published an initial response to this news.

“Over the weekend, we received additional clarity on the timing of the target – it applies to 2023, not 2030 as previously thought – and the Saudi government made the first and very significant step toward dispersing the deadlock that has plagued all Saudi renewable-energy efforts so far. King Salman undertook the most comprehensive reshuffle of Saudi ministries and senior government positions in years, if not decades, on May 7, which streamlines responsibility for all energy-related activities under the former Saudi Aramco CEO Khalid Al-Falih, the new energy minister.”

Saudi flag shutterstock_292559549

According to Apricum, the “Saudi Arabia Vision 2030” analysis states an initial target of 9.5 GW of renewable energy, now known to be deployed by 2023, translating to annual installations of 1.6 GW. Dr. Moritz Borgmann, in his analysis of recent Saudi developments, sees a promising sign for renewable energy in Saudi Arabia.

“As part of a wide-ranging economic and social policy vision for the Kingdom of Saudi Arabia, deputy crown prince Mohammed bin Salman, son of King Salman bin Abdulaziz al Saud, announced the first cornerstones on April 25, 2016 for the deployment of renewable energy in the country.”

While the Saudi Arabia policy paper posits an “initial” target of 9.5 GW of renewable energy, no specific quotas for solar and wind were mentioned. Because no explicit timeline was originally announced, most industry observers assumed this original target applied to the year 2030, a fairly conservative scenario given the size and energy consumption of the country, writes an Apricum spokesperson.

This perception quickly changed on May 5, when the Saudi government further detailed its plans, advancing its 9.5 GW target date to 2023.

This more aggressive target would represent a noticeable turnaround from the expected Saudi “wait and see” approach to renewables, contends Borgmann. It would make Saudi Arabia a sizable market for the global renewable-energy industry, likely the largest in the MENA region by annual new installations.

A feasible renewable energy target for Saudi Arabia?

This target appears extremely ambitious at first sight for a country which currently has a scant 25 MW of renewable energy generation capacity installed at the end of 2015. But with the rapid growth in Saudi electricity consumption, the target would only translate to a renewable-energy share of roughly 5% of the country’s total electricity consumption. In contrast, Germany reached a 32.6% renewable-energy share of electricity at the end of 2015, with 6.4% generated by solar photovoltaics (PV) alone. Saudi Arabia’s neighbor Dubai just increased its renewable-energy targets to 7% by 2020 and 25% by 2030.

Importantly, the Vision 2030 policy paper addresses the issue of localizing manufacturing and R&D in renewable energy. Apricum expects renewed interest in the manufacturing of components for renewable energy in Saudi Arabia, if and when sustained local demand becomes visible.

“This new Saudi announcement marks the first official statement from the Saudi government on renewable energy after the King Abdullah City for Atomic and Renewable Energy (K.A.CARE), founded by the late King Abdullah in 2010, famously announced ambitious renewable-energy plans in 2012. By 2032, the Kingdom planned to install 41 GW of solar capacity (with the mix heavily skewed toward CSP as opposed to PV), 9 GW of wind and 4 GW of other renewable sources. But K.A.CARE never followed up with an actual program. The 2015 death of King Abdullah predictably stopped further development.”

According to Apricum, the Saudi renewables program has “…long been marred by deep-running dissonances and contradictory claims to power over the program among numerous government entities, with the eventual result that nothing was done at all. The nail in the coffin of the renewables program was that it involved so many departments, including but not limited to the ministries of oil, finance, water and electricity, as well as entities such as Saudi Aramco, Saudi Electricity Company (SEC) and the Electricity & Cogeneration Regulatory Authority (ECRA).”

Ministry of Energy, Industry & Mineral Resources

Al-Falih was made the powerful head of a new “ministry of energy, industry and mineral resources”, the new manifestation of the oil ministry. The ministry of water and electricity was “canceled” and the responsibility for electricity now resides with the new energy ministry. Continuing his role as chairman of Aramco, Al-Falih holds one of the key positions in the implementation of Vision 2030. Furthermore, his ministry is expected to control KACST, KAUST, SIDF, NICDP and, very importantly, K.A.CARE.

As Apricum states, “The intent behind this reshuffle is clear – the paralysis brought about by a multitude of competing entities is to be replaced by a central, top-down governance structure, so that Vision 2030 can become a reality. It is certainly no coincidence that the new minister in charge of the energy portfolio is the country’s highest-profile corporate executive. This comprehensive shakeup has indeed the potential to finally mark the beginning of the implementation of Saudi Arabia’s renewable-energy plans.”

We shall continue reporting on renewable energy developments in Saudi Arabia. The Apricum paper can be downloaded here.

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