Riyadh to sustain power spending
12 March 2024
Latest news on Saudi Arabia’s power sector:
> Neom to start qualification for $2.7bn hydropower scheme
> Saudi power buyer holds Remah and Nairiyah meetings
> Enowa gives extra day for Gayal and Shiqri bidders
> Gayal and Shiqri bidders race to meet deadlines
> Neom extends Duba Energy Park bid deadline
> Data centre activity soars in Saudi Arabia
> US firm wins Al Kahfah solar tracker package
> Saudi-Omani team to set up transformers plant
The project pipeline in Saudi Arabia’s power generation sector continues to expand unabated.
The value of projects in execution or about to start construction has increased by 17% to $34bn compared to six months earlier, according to the latest available data from regional projects tracker MEED Projects.
The value of projects in the pre-execution phase similarly increased by 16% to reach $51bn during the same period. New schemes are expected to be announced in the coming 12-18 months, including power generation projects catering to the $500bn Neom development.
Two key factors underpin the ramp-up of both conventional and renewable energy generation capacity in the kingdom, notes a Dubai-based senior executive with an international developer.
“Saudi Arabia intends to become the renewable supplier of choice on the GCC grid,” the executive said, referring to the regional network linking the electricity grids of Bahrain, Kuwait, Oman, Qatar, the UAE and Saudi Arabia.
The second factor is the kingdom's push for industrialisation and urbanisation, including the adoption of electric vehicles and data centres.
“Saudi Arabia has very strong regulations to keep data within its domicile and the digitalisation needed to achieve the kingdom’s modernisation plans needs large data centres and corresponding electricity supply,” she notes.
Overall, Saudi Arabia awarded power generation contracts worth more than $16.1bn in 2023, which is higher than the total value of contracts awarded in the preceding eight years and nearly six times the value of contracts awarded in 2022.
The kingdom’s principal buyer, Saudi Power Procurement Company (SPPC) and its sovereign wealth vehicle, the Public Investment Fund (PIF), awarded the bulk of these contracts.
Shrinking renewables share
The share of renewable energy in the total value of awarded contracts shrunk to 28%, from about 82% in 2022, due to the award last year of the first gas-fired independent power producer (IPP) projects since 2016.
SPPC awarded a consortium comprising Saudi Electricity Company and Saudi utility developer Acwa Power the $3.9bn contract to develop and operate the Qassim 1 and Taiba 1 IPP projects in November 2023. Each combined-cycle gas turbine (CCGT) plant has a capacity of 1,800MW.
A team comprising the local Al Jomaih Energy & Water, France’s EDF and the local Buhur for Investment won the contract to develop the other pair of CCGT-based plants – the Taiba 2 IPP and Qassim 2 IPP schemes, each of which has a capacity of 1,800MW.
SPPC also awarded the contracts for the solar photovoltaic (PV) schemes under the fourth procurement round of the kingdom’s National Renewable Energy Programme (NREP).
A consortium that includes France's EDF Renewables, Abu Dhabi Future Energy Company (Masdar) and the local company Nesma won the contract to develop the 1,100MW Hinakiyah solar IPP project. A consortium led by China's Jinko Power won the contract to develop and maintain the 400MW Tubarjal solar IPP scheme.
The PIF, meanwhile, awarded contracts last year for the development of three solar PV schemes with a total combined capacity of 4.5GW to Acwa Power and its partner Water & Electricity Holding Company (Badeel). The 2GW Al Rass 2, 1.1GW Saad 2 and 1.4GW Al Kahfah solar PV IPPs require a total investment of about $3.4bn.
Unawarded projects
Following the award of these contracts, SPPC started the procurement process for four solar PV schemes with a total combined capacity of 3.7GW under the NREP fifth round, and four new CCGT schemes with a total combined capacity of 7.2GW.
Bids are due on 10 June for the 2GW Al Sadawi, 1GW Al Mas, 400MW Hinakiyah 2 and 300MW Rabigh 2 solar PV IPP schemes.
Bids are also due in late June for the Remah 1 and 2 and Al Nairiyah 1 and 2 gas-fired CCGTs.
As of early March, Neom’s utility subsidiary, Enowa, had received bids for two renewable energy engineering, procurement and construction (EPC) contracts, the 1.2GW Gayal wind farm and 800MW Shiqri solar farm.
Enowa is understood to be preparing a site for two CCGT plants to be built on a fast-track basis at Duba Energy Park. The first phase comprises a transportable gas turbine generator (GTG) with a capacity of 300MW, which is designed to deliver emergency power to Neom.
The second phase is a permanently installed 500MW facility comprising heavy-duty GTGs. Both are considered fast-track projects, with the first phase due for completion in early 2024 and the second phase in early 2025.
The first phase of a multi-gigawatt programme to build renewable energy capacity in Neom using a public-private partnership model is also expected to start soon.
Soaring costs
The raft of new projects coming to the pipeline is exerting pressure, particularly for the CCGT supply chain, experts tell MEED. “On average, the EPC prices have more than doubled since before the Covid-19 pandemic began,” says an executive working for an original equipment manufacturer (OEM).
The average EPC cost per kilowatt for CCGT plants with a capacity of over 1.5GW is understood to have reached approximately $750 a kilowatt in 2023, which is more than twice the average cost in 2019. EPC costs for smaller plants have similarly posted significant increases.
Industry sources say the turbine supply chain problem arises from the decision by some OEMs to reduce capacity over the past few years, driven by a combination of the Covid-19 pandemic and the threat of curtailed demand due to the push to decarbonise electricity systems.
The post-Covid-19 recovery, as well as the resurgence of demand for gas-fired power plants in the Middle East – and even in some countries in Europe – along with the expressed preference by most GCC clients for European-made gas turbines, has resulted in a seller’s market.
A Dubai-based OEM executive told MEED last year that its EU-made turbines are booked for several years, but order deliveries can still be shuffled between customers, so they do not expect major delays in delivering to clients. "It's definitely a seller's market right now for turbines. We have capacity in other regions like China, but customers prefer [turbines made in] EU factories”.
In comparison, the jury is still out on solar PV costs, although historical tariff data indicates a general upward trend between the record-low tariffs seen in 2021 and those submitted last year.
Transmission and distribution
Transmission and distribution (T&D) contracts exceeding a total of $12bn are under execution in Saudi Arabia, with an estimated $22.4bn in the pre-execution phase.
The value of contracts awarded in 2023, which sits at $4bn, exceeded the previous year’s total by 41%. The contract to build a high-voltage, direct current transmission system between Neom’s Oxagon industrial cluster and Yanbu is the largest T&D contract to have been awarded last year.
Volume-wise, 59 T&D contracts were awarded in Saudi Arabia last year compared to 64 in 2022.
Saudi Arabia has been gradually expanding the reach of its grid, both domestically – due to the development of new communities and industries and the growth of renewable energy capacity – as well as internationally.
Projects to link with Egypt and other countries in the GCC, as well as with Iraq and Jordan, are under way, while preliminary studies are ongoing to link the kingdom’s power grid further afield, including to the grids of India and Greece.
Energy storage and nuclear
A new project activity segment within Saudi Arabia’s power sector is emerging. SPPC intends to start the procurement process this year for the 2GW first phase of a project to procure 10GW of battery energy storage system (bess) capacity by 2030.
Bess comprises rechargeable batteries that can store and discharge energy from various sources when needed.
Saudi Arabia plans to locate its bess facilities near demand centres to boost the electricity grid's spinning reserves as more renewable energy is expected to enter its electricity production mix.
The 2GW first phase of the project entails building several plants at different locations, with individual capacities ranging from 50MW to 300MW each.
Finally, the procurement process is moving – albeit slowly – on the Duwaiheen nuclear power plant, Saudi Arabia’s first large-scale nuclear power project. Bids for the main contract are due in late April, following several deadline extensions since the kingdom invited selected companies to bid for the contract in 2022.
Exclusive from Meed
-
TotalEnergies signs $11bn Morocco green hydrogen deal
29 October 2024
-
Tadweer and Japanese firms to build recycling plant
29 October 2024
-
QatarEnergy to acquire 50% in Iraq 1GW solar project
29 October 2024
-
Kuwait tenders main Saad Al-Abdullah substation contract
28 October 2024
-
Emsteel and Masdar inaugurate pilot hydrogen plant
28 October 2024
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
Related Articles
-
TotalEnergies signs $11bn Morocco green hydrogen deal
29 October 2024
France's TotalEnergies has signed an agreement to develop an $11bn project to produce hydrogen and green ammonia in Morocco.
It was previously reported that the planned integrated facility will be located in Guelmim-Oued Noun in southern Morocco.
The deal is one of 22 that were signed during French President Emmanuel Macron's visit to the North African state on 28 October.
TotalEnergies chairman and CEO Patrick Pouyanne signed the agreement for the local production of green hydrogen and ammonia in the presence of Morocco's King Mohammed VI and Macron, according to local media reports
The counterparty includes Morocco's Minister of Energy, Leila Benali, Minister of Economy and Finance, Nadia Fattah, Minister of the Interior, Abdelouafi Laftit, and the Minister Delegate in charge of Investment, Karim Zidane.
It is understood that the project will require the development of 10GW of solar and wind energy and a land area of 187,000 hectares.
It was reported that Morocco's Unified Regional Investment Commission (CRUI) approved the project’s launch in November 2022.
The other agreements signed during Macron's visit to Morocco cover financial cooperation in the rail, forestry, aviation, logistics and energy sectors, with a particular focus on decarbonisaton and energy transition.
TotalEnergies has been exploring green hydrogen-related and other related projects across the Middle East and North Africa region.
In August, the Courbevoie- headquartered firm and Abu Dhabi Future Energy Company (Masdar), signed an agreement to assess the viability of developing a commercial green hydrogen to methanol to sustainable aviation fuel (saf) project.
It is also among the early investors in UK-based Xlinks First, which aims to deliver the $18bn Morocco-UK power interconnector project.
TotalEnergies acquired a minority stake in the company following an investment of $25.4m, which was announced in November last year.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12811486/main.gif -
Tadweer and Japanese firms to build recycling plant
29 October 2024
Abu Dhabi-headquartered Tadweer Group is partnering with Japanese chemicals companies to build a plastic chemical recycling facility in Abu Dhabi.
The investment is expected to reach up to ¥40bn ($261.5m), with the facility set to be operational by 2026 or 2027.
The new facility will be capable of recycling a wide variety of plastics, including materials used in polyethylene terephthalate (PET) bottles and packaging containers, said Tadweer.
It will also introduce advanced technology that can revert plastic waste to raw materials.
Ali Al-Dhaheri, Tadweer Group managing director and CEO, said: "We are considering two or three Japanese companies with the necessary technological capabilities and hope to select partner or partners for collaboration within the next three to six months."
Al-Dhaheri added that the final investment will depend on the facility's processing capacity, and will likely range between $100m and $300m.He also mentioned the possibility of a joint investment with Japanese companies, stating, “while we are reviewing technologies from other countries, it is Japan that best meets our requirements”.
Japan is recognised for its high PET bottle recycling rate and has made significant strides in the recycling of other plastics.
Tadweer added that it has existing partnerships with Marubeni Corporation and other Japanese companies, mainly in the power generation sector, and now plans to expand its collaboration with Japanese firms that possess advanced technology and expertise.
Related read: Dhafra waste-to-energy work to start
Photo credit: Pixabay
https://image.digitalinsightresearch.in/uploads/NewsArticle/12811435/main.jpg -
QatarEnergy to acquire 50% in Iraq 1GW solar project
29 October 2024
QatarEnergy has signed an agreement with France's Total Energies to acquire a 50% interest in the 1,000MW solar photovoltaic (PV) project as part of the $27bn gas growth integrated project (GGIP) in Iraq.
Total Energies will retain the remaining 50% of the project. The shared ownership is subject to regulatory approvals.
Located in Artawi – also known as Ratawi – in southern Iraq, the solar PV project is expected to start construction soon, MEED reported on 25 October.
In a statement, QatarEnergy said: "The project will consist of 2 million high-efficiency bifacial solar panels mounted on single-axis trackers and will, upon its completion, be capable of supplying up to 1.25 gigawatts (peak) of solar-generated power to the electricity grid in the Basra region of Iraq.
"The project will be developed in phases that will come online between 2025 and 2027 and will have the capacity to provide electricity to about 350,000 homes in the Basra region."
TotalEnergies Renewables awarded China Energy Engineering International Group the engineering, procurement and construction contract for the project in August.
China Energy Engineering Tianjin Electric Power Construction, International Group and Southwest Institute will deliver the project.
It was reported at the time that construction work is expected to start later this year, and completion is expected in early 2027.
The project includes the design, procurement, construction and commissioning of the PV power station site and 132-kilovolt booster station, with a capacity of 1,000MW.
In addition to the solar PV independent power project (IPP), the three main projects that make up the $27bn GGIP project include:
- A treatment facility for associated natural gas from five southern oil fields – West Qurna 2, Majnoon, Artawi, Tuba and Luhais
- The $4bn common seawater supply project
- Development of the Artawi gas field
QatarEnergy announced in June 2023 that it had entered into a consortium to implement the GGIP project in Iraq, with a 25% participating interest, together with TotalEnergies (45%) and Iraq’s Basra Oil Company (30%).
https://image.digitalinsightresearch.in/uploads/NewsArticle/12811027/main.jpg -
Kuwait tenders main Saad Al-Abdullah substation contract
28 October 2024
Kuwait's Public Authority for Housing Welfare (PAHW) has tendered a contract to construct a main substation project at South Saad Al-Abdullah Residential City.
The selected bidder will supply, install, implement and maintain the planned 11/132/400-kilovolt (kV) substation
The PAHW expects to receive bids for the contract, for which it set a bid bond of KD500,000 ($1.6m), on 28 October.
Located in Kuwait's Al-Jahra Governorate, the South Saad Al-Abdullah housing project covers an area of 64 square kilometres and consists of five residential areas with 24,508 housing units.
The PAHW recently awarded two substation contracts for another city, which is being developed in Al-Jahra.
The Kuwait branch of Saudi Arabia's National Contracting Company (NCC) won a contract to build 10 132/11-kV substations in Sabah Al-Ahmad City, MEED reported earlier this month.
The substations will cater to neighbourhoods N5, N6, N8 and N10 in South Sabah Al-Ahmed City. The 24-month contract is valued at SR534m ($142m).
Al-Ahleia Switchboard Company won the other tender for the supply, installation, implementation and maintenance of 10 11/132kV main transformer stations in Sabah Al-Ahmed's N5, N7 and N9 neighbourhoods.
Located 80 kilometres south of Kuwait City, the South Sabah Al-Ahmad residential development will be home to an estimated 280,000 people when complete.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12804333/main2244.gif -
Emsteel and Masdar inaugurate pilot hydrogen plant
28 October 2024
Register for MEED's 14-day trial access
Emsteel and Abu Dhabi Future Energy Company (Masdar) have inaugurated a pilot green hydrogen plant at Emsteel's manufacturing complex in Mussafah, Abu Dhabi.
The pilot project's electrolyser capacity and equipment supplier have not yet been disclosed.
MEED understands the plant utilises solar power from the grid to produce hydrogen on site.
The project sets the stage for Emsteel to use green or renewable hydrogen, instead of natural gas, to extract iron from iron ore.
Emsteel Group CEO, Saeed Ghumran Al-Remeithi, said the partnership with Masdar is part of a commitment to "accelerate decarbonising green steel production in the UAE and the wider Middle East and North Africa (Mena) region".
During the launch event for the plant, Al-Remeithi said the project marks a significant step towards making the UAE "a world green hydrogen leader" and Emsteel "a hub for green steel".
In a press briefing on 28 October, Saeed Al-Ghafri, CEO of Emirates Steel, said the plan is to scale up the pilot green hydrogen facility to enable it to meet demand for green steel both locally and from abroad.
"We are decarbonising across verticals through carbon capture and green hydrogen … to serve the UAE market and eventually to go global," he said.
Al-Ghafri declined to confirm whether the plan entails developing a major integrated facility with Masdar in one of two planned green hydrogen oases in Abu Dhabi, or offtaking the hydrogen produced at one of the future facilities planned in the emirate.
Previously known as Emirates Steel Arkan, the steel and cement producer rebranded as Emsteel in September as part of a broader strategy to accelerate operational transformation and expand its global footprint.
Headquartered in Abu Dhabi, Emsteel operates 16 plants with an annual production capacity of 3.5 million tonnes a year (t/y) of steel and 4.6 million t/y of cement. The company exports its products to over 70 markets, which account for 30% of its sales.
The rebranding followed the merger of Emirates Steel and Arkan Building Materials in late 2021, establishing the UAE’s largest steel and construction materials company, valued at $3.53bn.
Emsteel, which contributes 11% of Abu Dhabi’s manufacturing output, operates through two main divisions: Emirates Steel and Emirates Cement.
The cement division includes Al-Ain Cement Factory, Emirates Blocks Factories, Anabeeb and Arkan Bags.
Emsteel has a focus on low-carbon products, with the group committing to reduce carbon emissions as part of the UAE’s Net Zero by 2050 strategic initiative, with 80% of its operations powered by clean energy.
The company is also a key player in the UAE’s industrial strategy, Operation 300bn, holding a 60% share of the UAE’s steel market.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12803934/main.jpg