Investments in renewable energy systems – encompassing solar power, green hydrogen, and micro-grids – are driving the transition towards a sustainable world
For thousands of years, people made the journey across the Arabian Peninsula to the oasis of Al-Ahsa. With its innumerable palm trees and shallow water table, the huge oasis provided irrigation that allowed settlements to grow into thriving economies on its banks. As more settlers arrived, farmers dug trenches to direct the flow of water outwards, enabling the cultivation of crops and fuelling the agrarian economy.
As societies evolved, so did their demands for energy. New methods of agriculture, transport, information technology and industrial production created a global economy which today connects 8.1bn people. But maintaining this growth is no longer sustainable unless humanity can curb its use of fossil fuels.
For Saudi Arabia this represents an opportunity. The country has fuelled its economic growth through oil, but is now aiming to derive 50 per cent of its energy needs from renewables by 2030, with its Public Investment Fund (PIF) mandated to provide 70 per cent of this capacity.
Harnessing
the sun
Much of this transition will be driven by solar energy. In August, PIF’s wholly owned energy investment company Badeel, ACWA Power and Aramco subsidiary SAPCO reached financial close to fund construction of the world’s largest solar plant; by 2025 the Al Shuaibah 1 and 2 projects are expected to produce over 2,600 megawatts (MW) of electricity, powering electric vehicles and infrastructure in the city of Jeddah and beyond.
Elsewhere, the first phase of the Sudair solar plant outside Riyadh, the Saudi capital, recently completed construction and started operations; when fully complete the plant will have 1,500MW of capacity. In addition, solar-power capacity of more than 4,500MW is being developed by ACWA Power and Badeel at the Ar Rass 2, Saad 2 and Al Kahfah sites.
The speed and scale of Saudi Arabia’s transition to renewable energy is testament to the country’s existing delivery and ambition, but also a reflection of the environmental challenges it faces. Take water, for example: because of its dry climate, Saudi Arabia is heavily reliant on seawater desalination.
“Beyond utilising solar PV and wind energy for utility-scale generation, energy intensive industries, such as desalination, could be next on the radar,” explains Badeel’s CEO, Husam Al-Ghailani. “Much of the procurement of seawater desalination projects in recent years has emphasised making this process cleaner and more energy efficient.”
Lowering
energy costs
A number of projects under development across Saudi Arabia are using solar power to shape their own off-grid energy systems. On the country’s west coast, The Red Sea – the world’s largest regenerative tourism project – has installed more than 760,000 solar panels to provide energy to the hotels, residences, airport and other facilities being built along a 200km stretch of coastline and across an archipelago of offshore islands.
“The Red Sea is now the largest tourism destination to be powered by sunshine 24 hours a day,” says John Pagano, Group CEO of Red Sea Global, the PIF-owned company developing the luxury project. “To achieve this we created the largest microgrid system in the world powered by renewable energy, proving that while it’s a little bit more expensive, the technology is there.”
We created the largest microgrid system in the world powered by renewable energy”
John Pagano, CEO of Red Sea Global
Saudi Arabia already has one of the world’s lowest solar-power tariffs, which, along with improved interconnection between grids, is key to Saudi Arabia’s vision for an international energy market.
“In Saudi Arabia, we produce renewable energy at less than $20 per megawatt hour,” says Marco Arcelli, CEO of ACWA Power, the PIF-backed energy and desalination company. “This is a lot lower than other countries because not only are we blessed with three times the sun of Central Europe and similar amounts of wind, but we also have a lot more land to develop on.”
Efficient use of these natural resources is essential to turning Saudi Arabia into an exporter of clean energy and chemicals, such as green ammonia, which can be used as an emissions-free fertiliser or as fuel for ships and power plants. The country is already developing the world’s largest green hydrogen plant in PIF giga-project NEOM, a region being developed in the north west of Saudi Arabia, which plans to integrate up to 4GW of solar and wind energy to produce 600 tonnes of hydrogen per day in the form of green ammonia.
Producing green ammonia requires water for electrolysis, however, and Saudi Arabia is also investing heavily in reducing the costs and environmental impact of desalination. “ACWA Power has achieved the lowest cost of desalination in the world, and, at that cost, water will be less than 2 per cent of the final cost of green hydrogen,” says Arcelli. “So combine that with our availability of land and natural resources and we think there’s a significant cost advantage for countries to partner with Saudi Arabia in the energies of the future.”
Squaring sustainability
With the Saudi Vision 2030 well under way, the country’s energy transition will need to cater for a dramatic increase in economic activity. Numerous multinational companies have already applied to set up regional headquarters in the country before 2030; each of these companies has its own energy demands, and many will need to power factories and charge delivery vehicles.
The changing energy mix of a region can have a significant impact on the cost of fuel.”
Husam Al-Ghailani, CEO, Badeel
“The changing energy mix of a region can have a significant impact on the cost of fuel,” explains Al-Ghailani. “To make sure this doesn’t impact society’s most vulnerable, affordability is key, including the structure of energy prices charged to consumers.”
Saudi Arabia’s vision for sustainable energy is also designed to withstand the environmental challenges the future will bring. Engineers in the King Abdulaziz City for Science and Technology are working with new materials and technology to make solar panels more resistant to high temperatures and dust storms, and partnerships with foreign companies and institutions are accelerating innovation in other areas of the energy transition.
To square a rapidly growing industrial economy with the need to mitigate humanity’s impact on the environment, the energy transition must be anchored in a clear vision for a sustainable future. For PIF this is not only a priority, but a precondition for Saudi Arabia’s long-term economic growth.