Even in Saudi Arabia, renewable energy is cheaper than that from fossil fuels

Luc Williams

This week, a state-owned company Saudi Power Procurement Co. (SPPC) announced that it agreed to purchase of energy at record low prices from wind projectsto be implemented in Saudi Arabia by a Japanese company Marubeni Corp. The combination of state support and strong wind conditions in the country will help make green power plants cheaper than fossil fuel alternatives, the head of a Saudi company said.

“What is unique about these projects is what they have achieved extremely low cost of electricity, considered the lowest we have seen in the world,” Mazin Albahkali, CEO of SPPC, said in an interview.

Saudi Arabia wants rapid expansion of renewable energy sources

Saudi Arabia, the world's largest oil exporter, compared to other countries in the world, lags far behind in terms of renewable energy production. The Saudis obtain most of their electricity from power plants burning oil and gas. Crown Prince Mohammed bin Salmanwhich is trying to free the economy increasingly from oil dependence, intends to change this.

According to BloombergNEF data, Saudi Arabia is the target half of its energy generated from clean sources by the end of this decade. In 2022, the share of renewable energy in Saudi Arabia was less than 1%. all energy produced.

While it is unclear whether Riyadh will achieve its goal, the country is rapidly expanding its fleet of solar farms and wind parks.

Saudi Arabia is rapidly increasing its renewable energy capacity / Bloomberg

Renewable energy expansion plans

According to BNEF data, more than 45 gigawatts of capacity will likely be installed by 2030 in photovoltaic and wind installations, which is over 13 times more than at the end of last year. A switch to renewable energy also has other benefits for the Saudi economy, as it would free up more of its vast oil production for export.

The attractiveness of renewable energy sources is at least partly cost-based, and achieving extremely low renewable energy tariffs will help reduce the cost of power generation in Saudi Arabia.

Low costs of renewable energy

SPPC said the deal with Marubeni, which is developing wind farms with a local partner, would deliver levelized energy cost of just 1.57 cents per kilowatt hour from the 600-megawatt AlGhat project. When completed in 2026, the factory will be the largest in the country. Marubeni is also building the project Wa'ad Alshamal with a capacity of 500 MW, which will produce wind energy at a price of 1.70 cents per kilowatt hour. Low prices are supported by favorable conditions provided by the Saudi state.

While it's not possible to accurately compare variable renewable generation with grid-connected gas plants, the cost is cheaper than fossil fuels, Albahkali said.


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