Business | Economy

Makkah seeks to build renewable energy plant

Saudi Arabia plans to develop solar and nuclear power to preserve crude for export

  • Bloomberg
  • Published: 19:16 September 23, 2012
  • Gulf News

 Saudi Arabia
  • Image Credit: Waseem Obaidi/Bloomberg
  • Traffic passes the Kingdom Tower, left, on King Fahad Road in Riyadh, Saudi Arabia.

Riyadh: Makkah is working toward becoming the first city in Saudi Arabia to operate a utility-scale plant generating electricity from renewables.

The city on January 5 plans to select from a group of at least 20 bidders competing to build and operate facilities producing 385 gigawatt-hours per year of power, including 100 megawatts of solar capacity, Mayor Osama Al Bar said.

“No city in Saudi Arabia owns power-generation assets, and we want to be the first city that owns power plants and hopefully the first in the Muslim world,” Al Bar said in an interview on September 16 in Riyadh.

The plans are the latest indication that the kingdom is stepping up efforts to diversify its sources of energy as economic and population growth threaten to erode Saudi Arabia’s status as the world’s biggest oil exporter.

The central government is seeking $109 billion (Dh400.3 billion) of investment for building a solar industry, aiming to get a third of Saudi Arabia’s power from the sun by 2032 compared with almost none now. The target is almost as much as the $136 billion invested worldwide in solar energy last year, according to Bloomberg New Energy Finance.

Makkah’s programme complements that work and may provide a guide for other Middle Eastern cities on how to adopt the technology, Adnan Amin, director general of the International Renewable Energy Agency, said.

“The project is very visionary as Makkah has special significance around the world,” Amin, from the Abu Dhabi-based industry organisation, said in London on September 18. “The case is very simple. In 25 years, they [Saudi Arabia] could become net importers of energy. That makes renewables comparatively cheaper.”

Makkah is located 70 kilometres inland south of the Red-Sea port of Jeddah. The city has around 2 million residents and it hosts more than triple that number every year.

Saudi Arabia depends on oil for 86 per cent of its annual revenue and is accelerating exploration for natural gas and planning to develop solar and nuclear power to preserve more of its valuable crude for export. Less than 1 per cent of its energy came from renewables last year, according to data from BP Plc.

Sunnier than Greece

The nation gets more than twice the sunshine of anywhere in Europe and about as much as the brightest parts of the south-western US Research at the King Fahd University of Petroleum & Minerals in Dhahran estimated Saudi solar radiation between 4.5 to 7 kilowatts per square metre a day in the Kingdom. Greece by comparison measured 1.7 kilowatts, according to the European Photovoltaic Industry Association.

The Saudi programme is being managed by the King Abdullah City for Atomic and Renewable Energy, a government-backed institution independent of the energy ministry and Saudi Arabian Oil Co., the state oil company known as Aramco.

In Makkah, groups competing for the work include Saudi Binladin Group and ACWA Power International, the mayor said. Work on the project should start in June next year with completion within five years.

Some of the facilities will be fuelled by a mix of fossil fuel, wind, or biomass, Al Bar said. The electricity from the project will be used for lighting and in 35 tunnels, helping defray some of the 100 million riyals (Dh97.69 million) a year Makkah spends on electricity. The province is the biggest power consumer among Saudi Arabia’s 13 regions.

“We are open to all options, but solar must be there and then other renewable sources can go into the mix,” he said. Makkah produces 4,000 metric tonnes a day of garbage that also can be fed into power plants, Al Bar said.

Growing electricity demand

Saudi Arabia’s electricity demand is growing 8 per cent a year to keep up with a 3.2 per cent annual increase in the population, which numbered more than 25 million in 2011, according to government figures. Makkah hosted 5.8 million pilgrims in the first nine months of this year and expects another 1.8 million visitors by the end of 2012.

The Kingdom aims to generate as much energy from solar cells as it pumps out of the ground to export in the form of crude, Oil Minister Ali Al Naimi said in a speech in Poland in June 2011. He said the nation has the potential to produce enough solar power to meet four times current world electricity demand.

Contract terms

The developer on the Makkah solar contracts will be able to operate the plants until it can recoup its investment, the mayor said. The bidder offering the shortest contractual period will win the business, according to Makkah’s municipal authorities.

“During the build-own-transfer contract duration, generators will be selling electricity to Saudi Electricity Co., and after the contract ends, the city will own the power plants and it will sell electricity just like any other independent producer in the country,” he said.

The Kingdom currently has about 3 megawatts of solar installations, trailing Egypt, Morocco, Tunisia, Algeria and the UAE, according to Bloomberg New Energy Finance.

The Saudi government targets 41,000 megawatts of solar capacity within two decades. That would save as much as 523,000 barrels a day of oil equivalent, according to Ka-Care.

That target is “not just a short-term measure to meet energy demand,” Amin of the Irena industry group said.

“It’s a strategic approach through which Saudis are slowly beginning to compensate for internal consumption and to develop the possibility that they can become exporters of renewable energy, particularly solar,” he said. “It’s at the beginning point, but it’s happening.”

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