Saudi Arabia To Build 6.2 Gigawatts Of Wind Capacity By 2028
Saudi Arabia is set to become a regional heavyweight in wind power by the early 2020s, according to new research published this week by Wood Mackenzie Power & Renewables, installing 6.2 gigawatts (GW) of new wind capacity between 2019 and 2028, 46% of the region’s total wind capacity installed during that time.
Wood Mackenzie highlighted Saudi Arabia’s growing wind energy industry in its recently published Middle East Wind Power Market Outlook, 2019-2028, which provides a 10-year wind power market outlook for 13 markets in the Middle East region. Though the report is locked behind a traditional paywall, Wood Mackenzie highlighted some of the major findings from the report in a post published on Monday.
Regional Heavyweight
“The integration of renewables in Vision 2030’s objectives underlines strong political commitment within Saudi Arabia,” said Sohaib Malik, Wood Mackenzie Power & Renewables Senior Analyst, referring to Saudi Arabia’s Vision 2030 policy, described by His Royal Highness Prince Mohammed bin Salman bin Abdulaziz as “an ambitious yet achievable blueprint, which expresses our long-term goals and expectations and reflects our country’s strengths and capabilities.”
“The level of Saudi ambition for wind and solar PV varies significantly, despite the cost parity between both technologies during the first round of tenders in 2018,” continued Wood Mackenzie’s Malik.
“The 300 MW Sakaka PV project was awarded to ACWA Power at US$23.4/MWh and the 400 MW Dumat Al Jandal wind project at US$21.3/MWh to EDF/Masdar. Despite offering comparable prices and more rigorous industrial development opportunities, the wind power capacity target is set at 16 GW by 2030 and solar PV at 40 GW, indicating the government’s preference for the latter.
“Moving forward, the Renewable Energy Project Development Office (REPDO) will award 850 MW of wind capacity in 2019, which is expected to be commissioned in 2021-2022, and increase the local content requirement in future tendering rounds.”
Saudi Arabia is normally thought of — if it is ever thought of as a source of new renewables — as a country with tremendous solar resources. Just last month, the country announced plans to develop the 2.6 GW Al Faisaliah Solar Project in the Makkah Region, home to the two holiest mosques in Islam, the Al-Haram Mosque in Mecca and the Prophet’s Mosque in Medina. The specific plans were in line with news reported in January that REPDO was set to tender 2,225 MW of solar projects this year — which included 600 MW of the Al Faisaliah Solar Project, leaving 2 GW which will be constructed without support from REPDO.
The country is also focused on developing wind energy as well, though, and in January Saudi Arabia awarded the contract to build the country’s first wind project, the 400 MW Dumat Al Jandal wind farm.
Saudi Arabia also upgraded its renewable energy targets in January, increasing its solar target from 5.9 GW by 2023 up to 20 GW and its larger renewable energy target from 9.5 GW to 27.3 GW by the same year. The country’s REPDO also introduced a 2030 target which will see 40 GW of solar installed by 2030 and 58.7 GW of renewables.
However, there are concerns that despite predictions of strong growth through the next decade and similarly strong regional leadership, Saudi Arabia will nevertheless fall short of its newly-implemented 2030 renewable energy targets.
“In January 2019, the Saudi government revised its renewable energy targets upward resulting in enhanced visibility through 2030,” said Sohaib Malik. “It earmarked 70% of target renewables capacity for the Public Investment Fund (PIF), the Saudi sovereign wealth fund, while the remaining capacity is to be awarded through REPDO. The new mechanism highlights concerns that will define the future of Saudi Arabia’s wind market.”
“A central concern is the PIF’s lack of track record in the renewables sector and its limited in-house sectoral expertise. REPDO, on the other hand, completed two renewables request for proposals after pre-developing the sites. PIF is estimated to have $230bn of assets – targeted to reach $2trillion under Vision 2030 – driven by investments in a variety of sectors ranging from electric vehicles to public infrastructure.
“There is little doubt about the Fund’s financial muscle, however its past investment strategy focused on established firms in traditional industries,” Malik. “Aspirations to develop a value chain for wind and PV technologies locally is a different ball game and requires the PIF to acquire new capabilities for effective oversight of these ventures.”
Regional Volatility
An uncertain renewable energy future is not just on the horizon for Saudi Arabia, either, as Wood Mackenzie expects regional volatility to remain a factor across the region. Despite strong positive growth in 2018, Jordan and Iran are expected to see their fortunes reverse in 2019, but Wood Mackenzie nevertheless sees steady growth across the Middle East post-2020.
“In 2018, developers added 185 MW and 63 MW of wind capacity in Jordan and Iran, respectively, compared to 53 MW of capacity across the entire region in 2017,” Sohaib Malik continued to explain.
“The completion of the 89 MW Al Fujeij and the 86 MW Al Rajef projects in 2018 indicates that Jordan has 375 MW of the region’s operational 675 MW wind capacity. Iran followed with 278 MW of installed capacity at the end of 2018. A slowdown in 2019 is expected, as project development activity softens in Iran. Additionally, delays in awarding the 400 MW Dumat Al Jandal project in Saudi Arabia will limit annual capacity additions to 184 MW.
“A maturing project pipeline within the region supports the 2020-2021 outlook. Saudi Arabian demand serves as the foundation for regional demand. Regional demand diversification is also occurring, with Lebanon set to add 200-400MW to its existing permitted capacity pipeline of 202MW in 2019. These developments pave the way for the addition of 2GW of wind capacity between 2019 and 2021.”
Solar Remains Strongest
Despite the focus on wind power, Wood Mackenzie reiterated the dominant role that solar will play in the Middle East — a renewable energy technology which will benefit from strong regional ambition and leadership as well as obviously abundant resources.
“Compared to only 6 GW of wind power capacity, developers will add 53 GW of PV capacity through 2024,” said Malik. “Solar PV has become a natural choice for many countries in the region, which is endowed with world class solar energy resources. The increased focus on solar energy is demonstrated by ambitious PV targets across the region.
“As the countries with stable macroeconomic outlooks began auctioning larger projects (Kuwait, Saudi Arabia and UAE), developers offered some of the world’s lowest solar PV tariffs. As such, it will become increasingly difficult for wind to compete with PV in low wind countries including Bahrain, Qatar and the United Arab Emirates.”
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