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Renewables supply chain takes shape

24 October 2023

Commentary
Jennifer Aguinaldo
Energy & technology editor

It is an open secret that the financial close and construction of most independent power producer projects in the Middle East and North Africa region – and elsewhere – were significantly delayed between 2020 and 2022 due to the Covid-19 pandemic and the Russia-Ukraine war.

The China-centric nature of the supply chain, particularly for renewable energy components, triggered increases in solar panel and wind turbine component costs and engineering, procurement and construction expenses. The Russia-Ukraine war and the widespread economic uncertainty it caused subsequently triggered inflation. 

Utility clients also paused some projects to allow time to assess the impact of the Covid-19 pandemic on their future and long-term demand.

Related read: Region turns into battery storage hotspot

Recent developments in the UAE and Saudi Arabia demonstrate their desire to minimise project delivery disruptions should similar events take place in the future, while also supporting their industrialisation strategies.

China's Trina Solar, Abu Dhabi Ports and Jiangsu Provincial Overseas Cooperation & Investment (Jocic) recently signed an agreement for Trina Solar to set up a solar production and supply chain hub in the UAE.

The plan entails setting up a production base for up to 50,000 tonnes of high-purity silicon, 30,000MW of silicon wafers and 5,000MW of battery modules across the solar industry chain. These are understood to be annual capacities for the plants.

In Saudi Arabia, the local Vision Industries and China's TCL Central New Energy Technology Company recently signed a joint development agreement for Saudi Arabia's first solar photovoltaic (PV) crystalline chip factory.

The project's first phase will have a design capacity equivalent to 20,000MW of solar PV production a year and will require an investment of more than $1bn.

Another Saudi-Chinese joint venture plans to build a wind turbine manufacturing facility at Oxagon in Saudi Arabia's Neom gigaproject development. The planned facility will have the capacity to manufacture wind turbines that can produce an equivalent of 3GW of electricity.

Vision Industries and China's Envision are investing in the wind turbine manufacturing plant project, which aims to cater to the growing demand for wind turbines in the broader Middle East and Africa region in light of widespread decarbonisation initiatives.

The first wind turbines are expected to roll out of production by the first quarter of 2025. MEED reported that it will require an investment of approximately $1.5bn.

The more than $120bn-worth of solar and wind power farms planned across the region – exclusive of the small and medium-sized commercial and industrial projects as well as those catering to the planned off-grid green hydrogen plants – can underwrite these investments, assuming all projects go ahead at some point in the future.

In June this year, the UAE tapped Belgium’s John Cockerill Hydrogen and the local firm Strata for the project to establish the country’s first electrolyser production plant.

With over $180bn-worth of integrated green hydrogen projects in the planning and design stages, primarily in Egypt, Oman, Saudi Arabia, Morocco and the UAE, locating an electrolyser plant in the region is imperative, given the need to scale up global production.

There have also been developments on the lithium and battery storage solutions front.

Australia-headquartered battery company EV Metals Group is developing an integrated battery chemicals complex on a 127-hectare plot in Yanbu Industrial City in Saudi Arabia, which is expected to house a lithium chemicals plant with scope to include a nickel chemicals plant and a cathode active materials plant. The estimated cost for phase one of the lithium chemicals plant is $1.3bn.

Another Chinese company, China’s Guangzhou Tinci Materials Technology, plans to build a lithium-ion battery materials plant in Morocco. The planned facility will produce the materials locally, which it will then export to Europe. Morocco’s ample phosphorite ore resources underpin Tinci’s plans.

Saudi Arabian Mining Company (Maaden) has also signed an agreement with US-based Ivanhoe Electric to undertake exploration of the Arabian Shield zone in Saudi Arabia for high-demand minerals. The Arabian Shield region – approximately the size of Switzerland – is understood to be rich in reserves of critical minerals such as copper, nickel, gold, silver and possibly lithium.

While these investments are a drop in the bucket compared to the national oil companies' multibillion-dollar investments to increase oil and gas production, they still represent a major change in strategy to support decarbonisation. 

Such investments in clean energy will only grow in the future if the countries in the region wish to maintain their status as global energy hubs.

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Jennifer Aguinaldo

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    Read the September 2024 issue of MEED Business Review

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    INDUSTRY REPORT:
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    > SAUDI GIGAPROJECTS: Communication gaps hinder Saudi gigaprojects

    > INTERVIEW: Legacy building at Diriyah

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    > LEADERSHIP: Navigating the impact of digital currencies on forex markets

    > KUWAIT MARKET REPORT: 

    > COMMENT: Kuwait’s prospects take positive turn
    > GOVERNMENT: Kuwait navigates unchartered political territory
    > ECONOMY: Fiscal deficit pushes Kuwait towards reforms
    > BANKING: Kuwaiti banks hunt for growth 
    > OIL & GAS:     Kuwait oil project activity doubles
    > POWER & WATER: Kuwait utilities battle uncertainty
    > CONSTRUCTION: Kuwait construction sector turns corner

    > MEED COMMENTS: 
    > Saudi World Cup bid bucks global trend for sporting events
    > Finance deals reflect China’s role in delivering Vision 2030
    > Harris-Walz portents shift in US policy on Gaza
    > Aramco increases spending despite drop in profits

    > GULF PROJECTS INDEX: UAE leads slight dip in market

    > JULY 2024 CONTRACTS: Saudi Arabia boosts regional total again

    > ECONOMIC DATA: Data drives regional projects

    > OPINION: The beginning of the end

    > BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts

    To see previous issues of MEED Business Review, please click here
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    Yasir Iqbal