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15 April 2021

Saudi Arabia sets the new world record low solar tender

According to Saudi Arabia’s Crown Prince, a new global world record for solar tariffs at auction has been set – $10.4 per MWh, from the 600 MW Al Shuaiba PV IP Project. While such a statement from Mohammad bin Salman bin Abdulaziz or the Saudi Arabian government is suspect, especially on future megaprojects, this still fits the trend. Saudi Arabia has set the record before, as have its neighbors in the UAE and Qatar.

Record Low Solar Tariffs at Auction
YearCountry$ per MWh
2017Qatar24.2
2018Saudi Arabia23.4
2018Chile21.5
2019Brazil17.5
2019Portugal16.5
2020Qatar15.6
2020UAE13.5
2020Portugal13.0
2021Saudi Arabia10.4

This week has also seen the announcement of the 1.5 GW Sudair project, which was under direct negotiation by the government, and will be developed by a consortium led by Riyadh-based ACWA power, with a tariff of just $12.39 per MWh, which would have been a record itself not long ago.

The Crown Prince has stated that Al Shuaiba is one of seven large-scale solar plants whose power purchase agreements have been signed with the Saudi government, and whose output capacity, “including the new Sakaka photovoltaic project and the Dumat al-Jandal wind power project”, will exceed 3.6 GW. This 3.6 GW figure includes the 1.5 GW Sudair project, so the other six projects will not be as large as Al-Shuaiba.

The other six solar projects come from Round 2 of Saudi Arabia’s National Renewable Energy Program (NREP). The Prince didn’t give further detail on the results of Round 2 in his statements, merely observing that “More renewable energy projects will follow across the Kingdom, which we will announce when the time comes”.

However, further details on Round 2 were reported last week, with the 600 MW Al-Faisaliah project coming down to the wire between two consortia, which will be chosen between later this month via a Best and Final Offer process. The other five projects, totaling 870 MW, saw bids ranging from $16 per MWh and $20 per MWh. Round 3 of NREP, which will allocate another 1.2 GW, was launched in January.

In our recent Country Profile for Saudi Arabia, we observed that the country had only 400 MW of renewable energy installed – all solar, and 300 MW coming from the Sakaka power plant. That plant was officially inaugurated this week, having been grid-connected in 2019, and is the nation’s first utility-scale solar project. The winning bid to develop it, in 2018, came from ACWA Power – and was also another record low tariff at the time, at $23.4 per MWh, with an even lower bid from Masdar and EDF of $17.9 per MWh being rejected.

In part, the weak performance of Saudi solar development up to now is precisely because of very low tariffs; Saudi Arabia has even taken the step, previously, of trying to renegotiate with developers to keep track with the global fall in prices. But perhaps we’ve now reached the point where costs are low enough to satisfy both parties – bear in mind how cheap oil-fired electricity generation is in Saudi Arabia.

The project was developed by ACWA Power, the state-owned water and electricity company which has been branching out into solar power development since the mid-2010s. Since 2016 it has doubled the scale of its operations, with its international power generating capacity increasing from 23 GW to 42.9 GW, and its desalination going from 2.5 million cubic meters per day to 5.8 million.

Almost all of its capacity is still thermal – it was to build some of Vietnam’s cancelled coal plants, and it is involved in a 1500 MW gas plant in Uzbekistan – but its pipeline is now heavily wind and solar, both inside and outside its home country. Saudi Arabia’s local content requirements on renewable energy projects are not stringent, and its domestic industry remains nascent, but the country must make sure it develops a real economy before the clock runs out on oil and gas – and renewable energy development will be a major part of that.