Time: October 27, 2018
Basil M.K. Al-Ghalayini
The third day of the Future Investment Initiative (FII) conference on Thursday provided an excellent opportunity to listen to Nadhmi Al-Nasr, the new CEO of Neom. It is planned that this giga city, unveiled by Crown Prince Mohammed bin Salman at the FII conference last year, will run entirely on renewable energy — making it the largest city in the world to do so — to reduce its dependency on crude oil. Though Iceland and Norway claim to be close to achieving entirely renewable electrical grids in some of their cities, they do not compare in scale to Neom.
Saudi Arabia, the world’s largest oil producer, is looking to generate more energy from renewable sources partly to reduce its greenhouse gas emissions as part of the Paris Accord on climate change, but also to allow it to sell oil abroad at full price rather than use it domestically where it is heavily subsidized. Developing a renewable energy industry is also part of its Vision 2030 efforts to diversify its economy away from dependence on oil and gas.
A key component of Vision 2030 is the National Renewable Energy Program, a long-term, multifaceted strategy designed to balance the domestic power mix to deliver long-term economic stability to the country. This program aims to substantially increase the share of renewable energy in the total energy mix, targeting the generation of 3.45 gigawatts (GW) of renewable energy by 2020, equivalent to 4 percent of the Kingdom’s total energy production and 9.5GW by 2023, equivalent to 10 percent of the Kingdom’s total energy production.
The investment in the projects is expected to reach SR60 billion ($16 billion). To date, the program has tendered out three key renewable energy projects: a 300MW solar PV plant in Sakaka and 2,400MW wind energy plants in Midyan and Dumat Al-Jandal. In order to achieve the targets set out in the program, additional projects will be tendered out over the next few years, creating opportunities for public-private partnerships, an effective approach that will help accelerate implementation of these projects and deployment of renewable energy solutions.
I believe the potential of Saudi renewable energy projects in general, and the solar ones in particular, are undebatable. Furthermore, Neom’s unique geographical location provides one of the highest levels of horizontal solar radiation, a key technical indicator for solar energy viability. This, coupled with a push for more local energy from non-oil sources, means that investments should be made in large-scale master developments to meet the ambitious Vision 2030 mandate. With ACWA Power Company leading the private-sector league, others are also following suit, including ALJ Group, Khaled Juffali Group, and Olayan Group.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.