Sunny Outlook For Saudi Arabia’s Solar Power Sector
Saudi Arabia’s newly published energy white paper, which details a colossal plan to create 54.1 gigawatts (GW) of clean energy capacity by 2032, corroborates our optimistic outlook for the kingdom’s renewables segment, most notably for solar power. Although some country- and sector-specific risks will persist, we expect Saudi Arabia’s renewables industry to be among the regional outperformers.
Momentum is picking up in the industry, as political commitment to the renewables agenda strengthens and investment appetite increases.
- Although it is one of the most talked about renewables markets in the world, Saudi Arabia only has 10MW of solar capacity installed, a relatively insignificant amount.
- The government’s decision to develop a solar power market is sensible. It will free up more oil for exports; it suits the climate (Saudi Arabia has the second-highest insolation potential in the world); and it fits with the population’s power consumption patterns, such as high daytime use of electricity.
- Political commitment is strong and momentum is building behind the solar industry. The government’s white paper outlining the ‘renewables roadmap’ set a target of 24,000 MW by 2020 and 54,000 MW by 2032, principally made up from solar technology.
- We maintain our bullish outlook for the sector, and believe that the Saudi market presents some of the most exciting and rewarding investment opportunities for renewable energy developers in the world. This view is based primarily on Saudi Arabia’s promising track record for infrastructure and power projects and the government’s strengthening conviction towards solar power.
That said, we believe the government’s current targets are too ambitious, and it is unlikely these goals will be realised so quickly. Solar power expansion could also be hindered by the lack of experience developing this kind of large-scale renewable projects, as well as the government’s keenness to promote domestic, rather than international, production of related equipment.