In: Economics
Source Arab News April 05, 2018: Richard Wachman Green energy drive will boost KSA employment: Saudi Arabia’s renewable energy chief Tuki Mohammed Al-Shehri is head of Saudi Arabia’s Renewable Energy Project Development Office. London: In an exclusive interview with Arab News, Turki Mohammed Al-Shehri explains how an expanding renewables industry will boost employment as well as pave the way for a greener future. *** Crown Prince Mohammed bin Salman unveiled plans to develop the world’s biggest solar power project for $200 billion. A massive investment drive in green energy projects across Saudi Arabia is about creating jobs as well as diversifying the energy mix away from oil, according to the Kingdom’s renewables chief. Last week Saudi Arabia revealed ambitious plans to produce 200 gigawatts of solar power by 2030, helping the country become a leading exporter of sustainable energy. In an exclusive interview with Arab News, Turki Mohammed Al-Shehri, head of Saudi Arabia’s Renewable Energy Project Development Office (Repdo), said jobs and “local content” are guiding principles of the Kingdom’s renewables program. “A fundamental cornerstone of these projects will be local content. Local content is key — it is being stipulated in tenders,” said Al-Shehri in an interview in London. He said: “The idea is that the products and components that are used in these farms (turbines, panels, hoists and other parts) are brought in from local factories, and the idea is to grow the industry organically; we want local factories to also export outside the Kingdom, ensuring the creation of jobs, and this will make sure that everything that is built in the Kingdom will be on a competitive global basis.” Al-Shehri told Bloomberg in January that eight renewables tenders would be issued this year for 4.125 gigawatts of capacity at a cost of between $5 billion and $7 billion. Asked by Arab News if the Kingdom would also need foreign investment to develop the sector, Al-Shehri replied: “Due to the size of the projects, we do need foreign investment experience and know-how, yes.” In terms of the nuts and bolts of how renewable tenders would work, he pointed to the example of Riyadh-based Acwa Power, which recently won the contract to build the Kingdom’s first utility-scale solar photovoltaic plant. “As long as they meet our local content requirement of 30 percent as well as other stipulations, where and how they source the technology is up to them,” he said. “The objective is to have an economic energy mix, driven by low-cost energy, and to ensure that local competitive industry is created in the Kingdom.” By building up solar and wind-power generation, KSA will free up oil reserves for export, strengthening the country’s balance sheet. Last week Crown Prince Mohammed bin Salman unveiled plans to develop the world’s biggest solar power project for $200 billion in partnership with Japan’s SoftBank. The memorandum of understanding aims to produce up to 200 gigawatts of power by 2030 — about 100 times the capacity of the current biggest projects. If built on one site, the solar farm would cover an area twice the size of Hong Kong, according to a Bloomberg News calculation. Acwa Power CEO Paddy Padmanathan, who along with Al-Shehri attended London’s recent Saudi-UK CEO Forum, said: “Personally, I think they (renewables) could make up 40 percent of the (KSA) energy mix in 2030.” Turning to his company’s success in February, 2018, of being awarded the 300-megawatt PV solar project in Sakaka, Padmanathan said: “The tender was a rigorous, transparent process at a new world-record tariff and will set the foundation for a robust and competitive market for renewable energy in the Kingdom.” The 25-year Sakaka power purchase contract was awarded to Acwa at a new world-record tariff of 8.781 halala/kWh (per kilowatt hour) (2.3417 cents/kWh). Middle Eastern oil producers are looking to renewables to meet growing domestic consumption and would rather export as much oil as possible to generate income to meet internationally recognized green energy standards, such as those in the Paris climate accord, while also reducing reliance on fossil fuels. Saudi Arabia wants to deploy more natural gas, as well as solar and wind, to reduce its dependence on oil-based power generation. Developing a renewable energy industry is a key plank of Saudi Vision 2030. The Sakaka plant, which Acwa has already started constructing in Al-Jawf province, is backed by a 25-year power purchase agreement with the Saudi Power Procurement Company. Last year the Kingdom also tendered a 400 megawatt wind project — its first — at Dumat Al-Jandal, for which Repdo prequalified a number of companies in 2017. In a recent interview with Arab News, Adnan Amin, director-general of the International Renewable Agency, said renewables were incredibly cheap now. “The latest bids for Saudi solar projects are around 2.5 US cents per kWh, which is about a quarter of the cost of oil,” he said. Victoria Cuming, head of policy covering Europe, Middle East and Africa for Bloomberg New Energy Finance (BNEF), told Arab News: “Looking at the MENA region as a whole, renewables should both replace fossil fuel and add to the mix, as electricity demand will double by 2040, according to BNEF forecasts.” She expected the region to see a significant shift in the capacity mix, from being 93 percent fossil fuels today to just under half renewables in 2040, according to BNEF’s New Energy Outlook 2017. Cuming said: “In the near term, this will be mainly driven by incentives such as auctions, but in less than a decade the shift will be driven by the economics. Utility-scale PV plants are already cheaper than combined-cycle gas plants in net importing countries such as Egypt.” Provided governments continue to phase out fossil-fuel subsidies, “this will be the case across MENA by 2025. Ten years later, onshore wind farms will be cheaper than gas,” said Cuming. ASSIGNMENT
1. Discuss how renewable energy sector can grow organically. What are the benefits to Saudi Arabia.
2. Conduct SWOT analysis for ACWA.
Answer to Question 1:
Renewable energy & farming are a winning combination. Wind, solar & biomass energy can be harvested forever. Renewable energy can be used on the farm to replace other fuels or sold as a cash crop. Wind energy could alone provide 80000 new jobs and $1.2 billion in new income for farmers & rural landowners. Renewable energy can also help to reduce pollution, global warming etc. The utilization of renewable energy resources which includes solar, wind, hydro, waste material and geothermal energy seems to be one of the most efficient & effective way for acheiving the goals.Farms have long used wind power to pump water & generate electricity. Biomass energy is produced from plants & organic wastes, everything from crops, trees and crop residues to manure. The amount of energy from the sun that reaches earth each day is enormous. Solar energy can be used in agriculture in a number of ways, saving money, increasing self-reliance & reducing pollution. Solar power is often less expensive than extending power lines.
The benefits available to Saudi Arabia with respect to renewable energy sector are as follows:
i) The geographic loacation of Saudi Arabia on the solal belt has endorsed it as one of the most suitable producer of solar energy strategically.
ii) Studies in Saudi Arabia revealed that country has viable wind energy potential, which is estimated to five hours of full load wind per day on an average.
iii) Saudi Arabia has a geographical loacation which has significant tectonic activity. At the Red sea shore many volcanic ridges are existing in the country.
Answer to Question 2:
The SWOT analysis for ACWA Company is as follows:
Strength(S) - Strength of ACWA company is that they are the leading developer, investor of power generation & desalinated water plants with 58 assets in operation, construction or advanced development across 12 countries.
Weakness(W) - Weakness of ACWA company is that they have employees of 863 which generates revenue of $863 Million revenue compared to other power company i.e Cogentrix energy of USA which has 500 employees & $362 Million revenue.
Opportunities(O) - Opportunities of ACWA company is that they can either reduce their empolyees to increase their earnings or they can increase their revenue by hiring appropriate employees which can generate more revenue.
Threats(T) - Threats of ACWA company is that there can be fall in the earnings of the company due to high number of employees compared to other power companies in the world.