Overview

On 20 February 2013 the King Abdullah City for Atomic and Renewable Energy (KA-CARE) released a white paper entitled “Proposed Competitive Procurement Process for the Renewable Energy Program” (the White Paper). KA-CARE has set a deadline of 5 April 2013 for interested parties to provide their comments on the proposals contained within the White Paper.

The White Paper sets out the roadmap for delivering the first phase of Saudi Arabia’s ambitious renewables programme, which aims to produce 23,900MW of renewable energy by 2020 and 54,000MW by 2032. Contained in the White Paper are details of the proposed competitive procurement process (CPP) covering the tender and award of contracts for various renewables projects.

Developers will be invited to bid on 20-year power purchase contracts. The CPP will be split into several rounds, commencing in 2013, which will procure a total capacity of 7,000MW. A government-owned entity, the Sustainable Energy Procurement Company, will be established and assigned the role of administering the CPP and managing the contracts once they are awarded.

Procurement Rounds

The CPP will consist of an introductory round involving the procurement of 500-800MW of renewable energy from between five to seven pre-packaged sites selected by KA-CARE. Initially, the eligible renewable technologies will be thermal solar, photovoltaic solar, wind, geothermal and waste to energy. However, it is envisaged that hybird and other renewables technologies will be considered in future rounds.

After the completion of the introductory round, the first full-scale round will put 2,000-3,000MW of capacity out to tender. The next round will create an additional 3,000-4,000MW of capacity. The White Paper expects that each procurement round should take no longer than 10 months.

Assessment criteria

Each proposal will be assessed on a number of price and other factors, including financial strength, experience and project development status. Local content will also carry a significant weighting in line with KA-CARE’s wider objective of developing an indigenous renewables industry, with a focus on domestic training, job localisation, and research and development. The importance placed on local content is evident in the White Paper which states that "While KA-CARE is aggressively pursuing the development of the local value chain, projects will be expected to escalate their local content inclusion accordingly."

Conclusion

The White Paper should be viewed in the context of a predicted sharp rise in domestic energy demand in Saudi Arabia over the next 20 years. Domestic forecasts estimate that peak demand will grow at a rate of 4.5-5 per cent a year until 2032. Such growth in demand necessitates prompt action in order to diversify the kingdom’s energy mix and to move away from an over-reliance on oil, freeing up its oil resources for export.

Fortunately, Saudi Arabia has many advantages which facilitate its move towards renewable technology. The kingdom has an abundance of sun, plentiful land on which to host the technology and more than adequate financial resources for investment. With even the oil majors like Shell (in its New Lens Scenarios report published on 28 February 2013) forecasting that by 2100 renewables could provide over half the world’s energy, Saudi Arabia clearly has an eye on the future. Such foresight and resources are enough to make many other less fortunate countries green with envy.