12 JAN 2017
MENA is leading the march to sustainable energy
Paddy Padmanathan, President and Chief Executive Officer, ACWA Power
It’s no secret that clean energy has made significant inroads into the global energy market over the past few years. Last year, driven by the sector’s increasing cost-competitiveness and the need to meet new climate change policies, global investments in renewable energy were more than double the amount spent on new coal and gas-fired plants. The result is that the International Energy Agency (IEA) now expects solar energy to account for over five per cent of global power production capacity by 2020.
The MENA region has led this growth by driving cost competitiveness with a number of price-setting projects in recent years, such as the Mohammed bin Rashid Al Maktoum Solar Power Park in Dubai, and the NOORo solar power complex in Morocco. Both will contribute significantly to their respective countries’ renewables ambitions – and the latter, once complete, will become the world’s largest solar complex, supplying electricity to over one million homes and, through a permanent reduction in fossil fuel imports, adding 0.5% GDP to the Moroccan economy.
Another country primed to ride the crest of the renewables wave is the Kingdom of Saudi Arabia. The Kingdom, like most countries in the region, is richly endowed with renewables resources, benefitting from strong sunshine and wind, as well as long daylight hours. It also benefits from vast expanses of open desert seemingly tailor-made for solar-panel arrays and wind farms.
The bold blueprint for the social and economic transformation articulated in Saudi Arabia’s Vision 2030 places renewable energy firmly in the energy mix of the future. The plan identifies renewable energy as not only a component of the fuel mix, but also as one of the country’s key pillars of economic diversification. It plants the goalpost of renewable energy production at an ‘initial target’ of 9.5 gigawatts (GW) and aims to realise a renewable energy industry that spans from technology origination to production of goods and services. The National Transformation Programme 2020, which was announced in early June after the announcement of Vision 2030, was even more ambitious. The program set an initial immediate target of 3.45GW for deployment - four percent of total power consumption - by 2020.
During Abu Dhabi Sustainability Week, the energy industry will gather at the World Future Energy Summit (WFES) to reaffirm the Kingdom’s commitments to these targets. How can they be financed and deployed, and what other unseen opportunities exist in a country so committed to diminishing its carbon emissions and reducing the total cost of electricity through dramatic reductions in solar and wind tariffs?
Given the Kingdom’s plans to procure capacity using an Independent Power Producer (IPP) model of contract, four US cents/KWh would not be an unreasonable expectation for renewable energies. It would be the outcome of a government taking advantage of competitive financing and benefits, from high levels of liquidity and rapid improvements in technology. These are the factors that have allowed for the continuous reductions in key component costs and increasingly more efficient construction methods.
We at ACWA Power—with our well established track record in developing large-scale renewable energy projects via well-executed procurement programmes in South Africa, Morocco and the UAE—consistently set new tariff benchmarks, and we remain ready to bring our first-hand expertise to the development of local content and human resource capacity at the local level. This level of expertise is what’s required to deliver on the ambitious renewable energy deployment programme in the Kingdom.
Saudi Arabia’s overall electricity generating capacity is only 70GW today, but demand is forecasted to continue growing at 7% for the next decade. In light of that, is 9.5GW of renewable energy too small an ambition? No, it is clearly just an initial target, and I for one am convinced that the level of deployment will multiply many times over. Contracted tariffs will become even more competitive, and the sector will begin to deliver on the industrialisation and employment creation agenda, thus adding significantly more value beyond the reduction of carbon emissions and lowering the true cost of energy without subsidy. ACWA Power will proudly participate in this exciting journey.