Saudi Arabia gets cheapest bids for solar power in auction

04 October 2017 | Mitigation

Saudi Arabia received offers to supply solar electricity for the cheapest prices ever recorded, marking the start of a $50 billion program to diversify the oil producer’s domestic energy supplies away from fossil fuels.

Saudi Arabia and its neighbors are among Middle Eastern oil producers looking to renewables to feed growing domestic consumption that’s soaking up crude they’d rather export to generate income. While the offers submitted are remarkably low, the actual cost of power coming from the projects may be inflated by terms within the contracts that aren’t yet published, according to Bloomberg New Energy Finance in Zurich. 

Solar Laggards

The Middle East, rich in oil and natural gas, is trailing most other regions in developing renewables such as solar and wind. Governments from the United Arab Emirates to Iran and Saudi Arabia have spent the past two years sketching out incentive programs and regulatory changes needed to jump-start their clean-energy industries, which remain a fraction of the scale built up in places like Japan and Germany where energy is scarce.

Saudi Arabia’s price may reflect a “base rate” paid at periods of peak demand or a price that applies only for part of the project’s life, Chase said. It also could include a payment to the winning developer, land grants or other incentives to get the solar industry started in Saudi Arabia, she said.

“I don’t think this is possible as an all-in price of electricity from a 2019 PV project, particularly given the rising cost of debt in Saudi Arabia,” Chase said.

Even so, the announcement is a milestone in Saudi Arabia’s nascent solar program. The country that gets less than 1 percent of its power from renewables currently plans to develop 30 solar and wind projects over the next 10 years.

Officials at the ministry’s Renewable Energy Project Development Office will review all the bids presented before awarding a power-purchase contract, according to the webcast. It plans to make a final decision on who will build the solar plant at Sakaka in the country’s north in January, according to an emailed statement from the office. 

First Award

The plant will be the first awarded under the renewables program, which targets 9,500 MW of electricity generation capacity using solar and wind by 2030. The project is set to start producing power by June 2019, according to the bid.

Prices for solar projects in the Middle East have set successive records with first Dubai and then Abu Dhabi coming in with all-time low power pricing. A combination of improving and less costly technology, free land earmarked for the plants, connections to the national power grid and favorable financing have helped cut the costs.

The large size of the projects being offered has also played a key role, as developers have been able to bid lower prices for electricity because of anticipated economies of scale.

Saudi Arabia’s renewable energy program is part of a broader project to wean the economy from its reliance on oil exports. The government is seeking to build new industries such as petrochemicals, manufacturing and tourism. 



Source: Renewable Energy World