Nature and Biodiversity

4 factors driving renewable energy in Saudi Arabia

A Saudi man walks on a street past a field of solar panels at the King Abdulaziz city of Sciences and Technology, Al-Oyeynah Research Station May 21, 2012. Saudi Arabia, the world's top oil exporter, may finally be getting serious about overcoming the technical and financial hurdles for tapping its other main resource: sunshine. Saudi Arabia wants to generate much more solar power as it lacks coal or enough natural gas output to meet rapidly rising power demand. Doing so would allow it to slash the volume of oil it burns in power plants bankrolled by billions of dollars worth of saved oil earnings. Picture taken May 21, 2012. To match story SAUDI-SOLAR/  REUTERS/Fahad Shadeed   (SAUDI ARABIA - Tags: ENERGY BUSINESS)

The four key drivers that will accelerate solar energy in Saudi Arabia Image: REUTERS/Fahad Shadeed

Mounir Kabbara
Mounir Kabbara, Senior Manager – Government & Public Sector Consulting, PwC
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The potential of solar energy in Saudi Arabia is not debatable. The horizontal solar irradiation (for photovoltaic applications) ranges between 2,000 and 2,500 kWh/m2/year, one of the highest worldwide. This, coupled with a drop in world oil prices and a push for more energy to be produced locally from non-oil sources means that undoubtedly, renewable energy is the answer. Why haven't we seen wide-scale adoption of this technology yet? Truth is, there have been (and still are) key challenges related to opportunity cost and efficiency. Fortunately, there are 4 key drivers that will accelerate the adoption of this technology in 2018:

  • National Renewable Energy Plan

A key component of Vision 2030 is the National Renewable Energy Program (NREP), which is a a long term, multifaceted renewable energy strategy designed to balance the domestic power mix in order to deliver long term economic stability to KSA. This program aims to substantially increase the share of renewable energy in the total energy mix, targeting the generation of 3.45 gigawatts (GW) of renewable energy by 2020 and 9.5GW by 2023. To date, the program has tendered out three key renewable energy projects: a 300 MW solar PV plant in Sakaka and 2,400 MW wind energy plants in Midyan and Dumat Al-Jandal. In order to achieve the targets set-out in the program, additional projects will be tendered out over the next few years creating opportunities for public private partnerships, an effective approach that will help accelerate implementation of these projects and deployment of renewable energy solutions.

The 300 MW Sakaka PV project received a lowest bid of 1.79 cents/kWh, the cheapest price ever recorded.

  • Net-Metering Regulations

Net-metering is an enabling policy designed to foster private investment in renewable energy. In August, the Electricity and Cogeneration Authority issued a regulatory framework for electricity consumers to operate their own, small-scale solar power (<2 MW) generating systems and export unused power to the national grid, offsetting this amount against their own consumption. As such, this creates a significant financial incentive and accelerates private sector investment in small-scale renewable energy applications. This will come into force in July 2018 and pre-qualified, registered installers must carry out the work in order for the system to be eligible.

  • Increased Tariffs

As of January 1, 2018, the Electricity and Cogeneration Regulatory Authority (ECRA) announced a threefold increase in the electricity tariff. For most residential users, they will now be paying 18 ha/kWh compared to 5 or 10 ha/kWh. The direct impact of this on users is an increased monthly electricity bill. At the same time, the increased tariffs will solidify the business case for renewable energy projects: instead of a payback period of ~10-15 years, small-scale solar PV deployments are now expected to have payback period of ~5-7 years, which is attractive considering the 25 year lifecycle of the system. Moreover, another policy incentive that could be deployed is a Time-of-Use tarrif where higher tariffs are applied for peak times, during the day which coincides with peak solar PV output.

  • Technology Advancement

Technological advancements that have enhanced the output efficiency of solar panels have driven the cost of solar down significantly over the past 5 years. The price is expected to continually decrease due to further advancements in solar cell technology and energy storage and enhancements in solar cell manufacturing. On a more local level, two challenges that remain that limit the efficiency of the panels are dust and high temperatures. Research has been conducted into promising solutions to overcome these challenges such as electrodynamic screens, coatings and air blowers. These advancements will surely maximize the efficiency and output of solar solutions, while yielding significant financial gains and ultimately accelerating their wide-scale adoption.

The levelized energy cost of Solar PV is expected to drop by 59% from 2015-2025.

This article was originally published on LinkedIn

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Nature and BiodiversitySustainable DevelopmentEnergy Transition
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