Though Saudi Electricity Company (SEC) just launched a tender for two small solar IPPs, the kingdom’s overall solar target has been cut fivefold as fuel costs for gas power plant are expected to stay low. “Our energy mix has shifted more toward gas”, energy minister Khalid Al Falih said, suggesting “the need for high targets from renewable sources isn’t there anymore.”
Ambitious targets, set when oil prices were about $100/bbl, aimed for renewables to cover 50% of Saudi Arabia’s electricity supply. Now, this target has been slashed to just 10% as plunging hydrocarbon prices make gas a more attractive energy source.
Cheap gas also brought about plans to reduce the kingdom’s generous subsidies for electricity and water by 200 billion riyals ($53.3bn) by 2020 – in parallel with boosting supply. Public private partnerships are ultimately meant to provide most of Saudi’s water and electricity supply, up from currently 27%.
Curbing Opex through hybrid solar-and-gas plants
Combining cheap gas and near zero-cost solar power reduces operational costs to a minimum. ‘Green Duba’, the first integrated solar combined cycle (ISCC) power plant in Saudi Arabia, will produce up to 600 MW of electricity, of which up to 50 MW will be from solar. Construction costs may well exceed the $667 million that SEC will pay on construction contracts to the Spanish solar firm Inteq Energia and the Saudi Services for Electro Mechanic Works (SSEM).
Shifting towards gas generation and stepping up localisation efforts, the deputy Crown Prince Mohammed bin Salman has set out the ‘Saudi Vision 2030’ – increasing the urgency to reduce the current overreliance on oil and gas exports.
Assembly of the first Saudi-built Siemens turbine was celebrated at the end of May, prompting energy minister Khalid A. Al-Falih to underline the kingdom’s “openness for companies to invest further in our economy.” Similar projects may soon follow: Gas turbine service provider Chromalloy Arabia, a JV between Chromalloy of the US and Arabian Qudra, plans to open a new gas turbine workshop in Jeddah by 2018.
Several mega plants are already being built, as SEC seeks to bring 4,750 MW of gas power capacity onstream around Riyadh before the end of next year. The 1,150-MW PP10 plant was already commissioned in May last year, and the PP13 and PP14 plants (each 1,800 MW) are set to follow suit. These projects are part of SEC's wider strategy to add a total of 40 GW of capacity to the Saudi power grid by 2023 at a cost of $166 billion.