Riyadh’s 130GW renewable target needs justification

25 June 2024

Commentary
Jennifer Aguinaldo
Energy & technology editor

Saudi Arabia's Energy Minister, Prince Abdulaziz Bin Salman Bin Abdulaziz Al-Saud, recently confirmed plans to tender 20GW of renewable energy projects annually starting this year, in line with reaching 100GW-130GW of installed capacity by 2030, "depending on electricity demand growth".

It is the highest-level confirmation yet that the kingdom has revised its target of having 58.7GW of renewable energy installed capacity by the end of the decade.

Notably, the upward revision of the renewable energy installed capacity target does not change the original objective for renewable sources to account for 50% of the kingdom's overall electricity production installed capacity by 2030.

This implies a parallel growth in gas-fired capacity due to the need to implement the kingdom's liquid fuel displacement programme and build baseload capacity to deal with the intermittency of renewable sources such as solar and wind, notwithstanding plans to build multi-gigawatts of battery energy storage system capacity.

However, not everyone is convinced that Saudi Arabia needs this much capacity so soon, despite the all-important qualifier "depending on electricity demand growth".

"Where will the power be used, can the grid take it, and where is the population and industry data to justify the demand growth?" asks an executive with an infrastructure investor.

According to the International Renewable Energy Agency (Irena), Saudi Arabia's electricity generation capacity stood at about 84GW in 2022, with renewable energy capacity accounting for 1% of the total.

The same report specifies that oil sources accounted for 49% of the kingdom's total energy supply in 2020.  

According to BP's annual statistical review, Saudi Arabia's electricity generation in 2021 amounted to roughly 357 terawatt-hours, which is estimated to require about 44GW of installed capacity. This is approximately one-half of the kingdom's installed capacity if the Irena report is anything to go by.

Crucially, UK-headquartered data services provider GlobalData, which reports a higher cumulative installed capacity of 94GW for Saudi Arabia, expects the kingdom's overall capacity to increase by a compound annual growth rate (CAGR) of more than 2% between 2023 and 2035.

An assumed 2.4% CAGR would take Saudi Arabia's installed capacity to about 96GW by 2030, using the Irena installed capacity of 84GW as a baseline. Based on this, plus a further assumption that all oil-fired and aging gas-fired capacity will be retired by 2030, the kingdom could need to procure at least 50GW-60GW by the end of the decade.

However, this figure does not factor in the amount of baseload required to balance its electricity system as more intermittent renewable energy enters the kingdom's grid.

Massive survey

It is significant that Prince Abdulaziz issued the above statement on 24 June, when the ministry announced the start of a project to survey 850,000 square kilometres of land in Saudi Arabia – equivalent to the land areas of the UK and France combined – to determine the most suitable locations for solar and wind projects.

Such a statement leaves open to speculation whether the aspirational target of 100GW-130GW of renewable energy capacity by 2030 includes the capacity planned by gigaproject developer Neom, which aims to be fully powered by renewable energy by 2030, and which has already carried out pre-development work for over 35GW of solar capacity

The question now seems to be whether the kingdom's ongoing gigaprojects, its industrial expansion plans and green hydrogen projects, and its clean energy export ambitions will justify building twice as much capacity as forecast based on historical data and its current needs.

"Justifications are important, otherwise such lofty plans only expose investors to increased risk," the source told MEED. 

 

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Jennifer Aguinaldo
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