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Overview

Saudi Arabia has immense potential in solar and wind energy production, ranking as the sixth and 13th country respectively. In addition to this natural endowment, the government's goal to achieve environmental sustainability has led to the emergence of renewable energy as a key objective in Vision 2030. The Kingdom, who currently has the largest desalination market in the world, also aims to increase its water reuse market, with the goal to continue leading the water market.

In addition, Saudi Arabia is a leading electricity producer and consumer globally. In fact, demand for electricity is expected to increase further due to the growing industrial base, which has prompted the government to launch initiatives to promote energy efficiency, paving the way for several investment opportunities.

The projected growth in both renewable energy and water, together with the ongoing privatization, localization, and energy efficiency efforts, leads to attractive investment opportunities for private sector investors in the Energy and Water sector.

Facts & Figures

6 th KSA ranks worldwide
In solar energy potential
13 th KSA ranks 13th worldwide
In wind energy potential
9.5 GW
Capacity of renewable energy by 2023
50 USD B
Investment in water sector by 2020
1.9 Mn m3/day in 2020
Water reuse market size by 2020
15 KSA Ranks 15 In top
Electricity generation rankings
330 B KWh per year
Electricity generation figures
90 B USD Over next 5 years
Investment needed to meet demand
131,000 Facilities across the country
Number of government/public buildings that need retrofitting
17 Of SWCC's desalination plants
Number of desalination plants to be privatized
20+ megaprojects Involving USD 50 B worth of investments
Number and value of megaprojects

Energy & Water Value Proposition

Saudi Arabia is committed to developing a globally competitive renewable energy programme. The Kingdom ranks 6th in the world for solar energy potential and 13th in the world for wind energy potential, placing Saudi Arabia among the best fields to deploy renewables. Ambitions are running high with over 20 megaprojects targeting a renewable energy capacity of 9.5GW by the year 2023.

KSA renewables projects are intended to have a far-reaching influence on the development of the sector throughout the GCC and MENA. By establishing itself as a renewable energy power-player, there is significant scope for KSA businesses to access the under-supplied regional market by exporting manufacturing supplies. Even the Kingdom’s research centres and universities are focused on fostering the sector by developing cutting-edge technologies that maximise quality and enhance economic viability. Additionally, the Ministry of Energy, Industry & Minerals has launched a set of reforms and actions to support the sector, establishing an independent regulator to guarantee credibility, transparency and assurance. As the renewables market enters an exciting new era, KSA is taking all the necessary steps to lead innovation, drive ambition and even break records along the way.

 

Unlimited Natural Endowment

With a land mass of 2,150,000 km2, Saudi Arabia has immense potential to diversify from its below-ground oil resources by harnessing its above-ground natural resources. The Kingdom is keen to start harvesting electricity from the other resources it has in abundance: sunshine and wind.

As the 6th ranked country with the highest potential for production of solar energy, KSA needs only 0.25% of its land to generate over 400TWh per year. Furthermore, Saudi Arabia is ranked as 13th in the world for its potential for production of onshore wind. The North-Western region of the Kingdom has been identified as a particularly good location to the develop wind-farm industry.

This fantastic mix of natural resources places Saudi among the best fields to deploy renewables.

 

Ambition to significantly grow the sector

To capitalize on its natural endowment, the Saudi Arabian government is committed to unlocking the renewable energy sector. In fact, one of the key objectives of KSA Vision 2030 is to "grow the contribution of renewables to the national energy mix". This will transform the oil-based economy into a sustainable economy, further freeing-up valuable oil from the heavily subsidised energy market whilst opening the door to green-tech renewables that power the country into the future.

Saudi Arabia has set ambitious targets in the years to come. The Kingdom aims is to increase renewable energy generation capacity from almost a negligible value to 9.5 GW by 2023. This will increase the share of renewables in the energy mix from 1% to more than 10% by 2023. To achieve that, over 20 megaprojects are scheduled over the next few years. Project tendering for solar farms are already underway, with 8 projects totalling 4.1GW forecast for 2018.

Furthermore, KSA Saudi Arabia has set ambitious targets for localization across the renewable value chain. In 2017, the localization requirement was set at 30% with goals to increase localization requirement to 40% - 60% in the future.

As Saudi Arabia embarks on the unprecedented journey to grow its renewables sector from scratch, exciting opportunities await investors.

Access to under-supplied regional market

Saudi Arabia aims to create a globally competitive local renewables industry that not only meets the needs of its own domestic projects, but also supplies its neighbours with the means to embrace this industry. Tendering rules regarding KSA solar and wind projects require developers to manufacture a sizeable percentage of renewables equipment locally, resulting in a domestic industry that can sustain itself beyond the Saudi project. The total renewables market size in GCC countries is forecast to reach ~17 GW and in the MENA (excl. GCC) region sights are set for it to reach over 100 GW by 2030. Given Saudi Arabia's logistical proximity to MENA and GCC countries and its strong trade partnerships, there is significant potential for KSA businesses to export manufacturing supplies, leaving the KSA renewables industry in a unique position to lead the regional market.

 

Advanced R&D Ecosystem fostering the sector

Saudi Arabia believes in educating its population to create a robust ecosystem that fosters research and development (R&D). Great strides are being made to push talent development through leading research centres and universities. These include the King Abdullah City for Atomic and Renewable Energy (KACARE), the King Abdullah University of Science & Technology (KAUST), the King Abdullah City of Science & Technology (KACST) and the King Abdullah Petroleum Studies & Research Centre (KAPSARC). KACST has established a center to develop technologies aimed at lowering the manufacturing cost of Photovoltaic Systems (PV Systems) and enhancing the quality testing of manufactured cells. Additionally, KACARE has established a data intelligence center to provide high precision information that enables private sector investors to de-risk investments.

 

Credibility, Transparency and Performance

In accordance with Saudi Vision 2030, the renewables sector is now overseen by the Ministry of Energy, Industry and Minerals through the Renewable Energy Project Development Office (REPDO). The government has launched a set of reforms and actions to enhance credibility, transparency and assurance to the private sector. These regulatory measures were necessary to safeguard best practice and inspire confidence in investors. In addition, the Electricity and Cogeneration Regulatory Authority (ECRA) has been established as an independent regulator to ensure adherence to international standards and to guarantee the provision of safe, reliable and efficient electric power.

Saudi Arabia is widely recognized as one of the leading and most advanced nations in the water sector globally.

The Kingdom is the global leader in desalination, the GCC’s largest market for water reuse and a pioneer in water technology innovation, scale and research. Numerous investment opportunities await in this sector, whether in existing waste-water treatment assets or new projects like the world’s first solar powered desalination plant. This sector also benefits from the support of a committed government and an independent regulator, making KSA one of the most attractive places in the world to invest in water.

 

Outstanding Growth Opportunities

Saudi Arabia's water sector has seen a remarkable annual growth of 8% per annum and is showing no signs abating. The current total daily capacity of 4.6 million m3 (including desalination and re-use) prompts a valuation of the sector at over SAR 48.75 billion (US $ 13 billion). The water sector owes its growth to strong industrial output, steady population increases and a huge consumption rate per capita.

Saudi has one of the highest rates of water consumption per capita globally. At 300 liters/ day, Saudi Arabia consumes twice as much water as the UK. Total investments are set to exceed SAR 187 billion (US $ 50 billion) by 2020, going towards water production, infrastructure and water related services.

Opportunities for growth here are therefore considered to be outstanding, offering peace of mind to even the most hawkish of investors.

 

Global Leader in Desalination

Saudi Arabia is the largest desalination market in the world producing around 4 million cubic meters of desalinated water per day. With 28 desalination plants to its name, KSA has the most of any nation yet is pushing to triple the capacity of desalination production by 2025 to reach 8.5 million cubic meters per day.

Tremendous opportunities await the private sector, with approximately SAR 300 billion (US $ 80 billion) expected to be invested in desalination projects over the next 10 years. Saudi Arabia is truly leading the way in this field and is well positioned to maintain this course for the foreseeable future.

Leading beyond desalination

Water reuse is playing an increasingly important role in the pursuit of sustainable water resources management. Saudi Arabia already has a thriving water reuse industry and aims to become the GCC’s largest market by tripling its current level of production to 1.9m m3/day by 2020. Ambitious targets of 90% water reuse have also been targeted by 2040, with aspirations to transform the existing and planned wastewater treatment assets into source water supplies for the industrial sector. In addition, the Kingdom officially launched a water reuse initiative to create an environmentally friendly, diversified source of water and to promote the financial sustainability of the long-term market. There are multiple projects and initiatives being implemented across this sector making the water reuse market very attractive to the outside investor.

 

Ongoing Privatization and proven commitment

KSA boasts the largest number of desalination plants in the world and has plans to privatise 17 of its SWCC plants to achieve 50% privatisation of the overall desalination market. Numerous investment opportunities will arise from these initiatives as the government continues its plan to diversify the desalination market. Additionally, more than 75 water and sewage projects worth more than SAR 2 billion (US $ 550 million) were signed by the government in the past 2 years, highlighting its proven commitment to the sector.

Investors can also be assured by the Electricity and Cogeneration Regulatory Authority (ECRA), which was established as an independent regulator for the water sector and by the Water and Electricity Company (WEC), which acts as a principle buyer in the water sector.

 

Pioneer in innovation, scale and research

KSA has long been established as a pioneer in the water sector. Through its well-rooted companies, advanced R&D centres and experienced talent pool, the Kingdom prides itself in its cutting-edge approach to sustainable water solutions. Boundaries are being pushed as Advanced Water Technology (AWT) is developing the world’s first solar powered desalination plant. The same can be said for Saline Water Conversion Corporation (SWCC) research institute, which is heavily engaged in a variety of projects to enhance membrane technology and desalination production cost efficiencies. Furthermore, Saudi Aramco is investing in leading water technology companies (e.g. OxyMem for water), placing Saudi Arabia at the heart of technological advancement when it comes to water.

 

Reducing and preserving energy is undoubtedly one of the most pressing initiatives preoccupying nations across the globe. Saudi Arabia shares this ambition particularly due to its huge rate of electricity consumption per capita. Years of subsidised utility costs and absence of public incentives to conserve energy have led to considerable waste, loss and overuse of electricity. KSA aims to break old habits by increasing energy tariffs, retrofitting aging public facilities, establishing awareness campaigns, developing energy efficiency solutions and introducing regulatory bodies that support and enforce the above. Sights have been set to achieve the lowest possible energy intensity by 2030 and the Kingdom is implementing multiple initiatives in pursuit of this goal. Energy saving investors should be buoyed by the prospect of contributing to this market as the new standards are set to impact all homes and businesses in KSA.

 

Saudi Arabia is one of the largest energy consumers with increasing electricity tariffs

Saudi Arabia is among the top 15 leading electricity producers in the world and is one of the fastest growing consumers of primary energy in the region. In 2016, Saudis consumed 9,333 Kwh of electricity per capita, which places the Kingdom 3rd among the top 20 largest producers worldwide. National electricity consumption has doubled in the last 15 years and is expected to double again by 2030. Economic expansion, rising per capita income and the rapid pace of urbanization have been the main drivers of this demand. An estimated SAR 75 billion (US $20 billion) of investment is needed by 2020 to meet KSA’s short-term energy needs and the government is committed to improving KSA’s power generation and distribution facilities for the long-term. Lowering energy demand and increasing energy efficiency are crucial going forward to render electricity consumption sustainable. Energy subsidies are in the process of being discontinued and tariffs have increased twice in the past 3 years with further increases expected in the future. Higher costs are aimed at deterring waste and encouraging demand for technologies, services, and products that support energy efficiency.

 

Government commitment to support the development of the Energy Savings sector

In accordance with Vision 2030, the KSA government has established dedicated entities to oversee the development and regulation of the energy savings sector. The Saudi Energy Efficiency Center (SEEC), Super Energy Service Company (Super ESCO) and Energy Service Company (ESCO) Committee have been tasked with introducing new regulations and energy standards in the form of licensing, measurement & verification systems, legal frameworks and incentive programs. Entities will be investing in human capital through certifications and training programs aimed at building capabilities in the energy sector. Increasing public awareness is high on the agenda with energy saving campaigns already being administered throughout the Kingdom. Households and businesses are being encouraged to heavily invest in energy efficiency applications and solutions in order to save costs and preserve the national wealth of energy resources.

Super ESCO established to facilitate the public buildings energy savings

The government is forming an energy service company (a “Super ESCO”) to administer energy projects in public facilities that support the merger of activities with new private-sector ESCOs. The Government is then to cooperate with private sector solution providers to help achieve energy saving targets and to share the risk with those providers. Approximately SAR 1,875 billion (US$500 million)_has been set aside to fund energy efficiency project development and to build the capabilities of traditional energy service companies. Saudi Arabia is developing a plan to fund and manage the retrofit of over 260,000 government and public facilities across the Kingdom. Increasing the energy efficiency of modestly insulated buildings can have a remarkable impact on energy costs, with up to 30% savings. By applying smart energy standards, improving the energy-efficiency of existing buildings and investing in renewables, KSA will establish an example in energy conservation that will impressive by any standard.

 

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