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SAUDI ARABIA INVITES EXPRESSIONS OF INTEREST FOR DEVELOPMENT OF TWO 50MW PV FARMS

The state owned Saudi Arabian electricity company has announced two tenders for the development of PV farms, each one to be 50Mw.

Although the contracts are sizeable, the announcement marks a significant scaling back of the Kingdom’s original plan to develop 41,000 megawatts. Whereas early targets reached 50%, Renewable sources are now only expected to account for about 10% of the Kingdom’s total power capacity. However, even this represents a large development programme still thought to be 9,500Mw. The Kingdom is now expecting that an increased output of natural gas will help cut its reliance on crude oil.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

We have been involved in the development of both nuclear and renewable power in the Kingdom for many years and would be happy to discuss this tender with any party that is interested in bidding for it. For further information please contact Edward de la Billiere on edlb@prospectlaw.co.uk

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SOLAR POWER IN THE MIDDLE EAST AND NORTH AFRICA: WHAT FUTURE DOES IT HAVE? PART II

A recent article by Stratfor, A Bright Future for Solar Power in the Middle East, assessed the future of solar power in the Middle East and North Africa, and offered guidance to those seeking to invest in the market. We have been following the development of the PV sector in the region and agree with much of Stratfor’s comment. With permission, we have published some of their main points below, adding our own views.

To read Part I, which assessed the future of Solar Power in Jordan, Egypt and Morocco, click here.

Saudi Arabia

Saudi Arabia relies on oil for electricity production, and it faces rising domestic demand for electricity at a time when low oil prices have put significant financial strain on the government. Its domestic fuel consumption is following an unsustainable trend and the need to wean itself off oil is ever growing.

Under current goals, renewables would account for 8 percent of electricity production by 2020 and 15 percent by 2030, with solar power accounting for the majority of that increase. In the past, however, Saudi Arabia has lengthened the timelines for such targets. The Kingdom also has ambitious nuclear energy plans, which we have been involved in, and aims to remain an ‘energy exporter’ post oil by developing and then exporting its own solar and nuclear technologies.

Saudi company ACWA Power is involved in multiple projects in the region (Morocco and Jordan) and farther away (South Africa and Turkey). ACWA Power has gained a regional reputation as having sufficient economies of scale to underbid other major solar power firms, mostly Western or East Asian companies. This helped ACWA Power win large bids such as the first phase of Morocco’s Noor plant and the Mohammed bin Rashid solar park in the United Arab Emirates. Saudi Arabian Oil Co., the national oil company, has even expressed interest in developing solar export capability. There are also plans to add solar technology production facilities.

The United Arab Emirates

The UAE, meanwhile, has positioned itself as a renewable energy financier and development hub. It is the home of the International Renewable Energy Agency, and hosts important conferences focused on both renewable and non-renewable energy. Furthermore, it has used its ample hydrocarbon largesse to develop unique large and small-scale renewable projects in ways that less resource-rich countries such as Morocco, Jordan and Egypt cannot match. The United Arab Emirates has established itself as a regional leader in solar power in part because of its greater ability to adopt the technology (both domestically and through partnerships with other countries) and to fund projects throughout the world. Masdar, the country’s renewable energy arm, is connected with the Mubadala Development Co., one of the country’s smaller sovereign wealth funds. Masdar is involved in projects throughout the Middle East, Africa, South America and Europe and on islands in the Pacific.

The UAE has shown a similar aptitude for new technologies and flexibility in working with international partners to have the foremost nuclear energy programme in the region, with the first nuclear power station due to commence generation this year, although a delay is looking likely.

Algeria

Algeria is a leading natural gas producer, and has ambitious plans to follow a similar path with solar energy. Renewable power installations totalling 22 gigawatts of capacity — 13 gigawatts of that solar — are proposed to go online by 2030. That is enough power to meet nearly a quarter of domestic needs while still reserving a significant portion for exports. However, the issue of insufficient energy storage, which is a barrier to incorporating large amounts of variable renewable power worldwide, will require substantial research and investment first. Energy storage is a major issue that we have advised on but which is yet to be cracked.

Algeria will require foreign investment and cooperation to meet its grand plans. While Algeria is more stable than some of its neighbours, such as Libya, its government is in a slow leadership transition and the risk of instability caused by protests relating to development and distribution of energy resources is high. Nonetheless, the country has made strides toward attracting the necessary investment to build out its solar capacity. With over 250 megawatts of capacity installed in 2015 and work occurring at additional sites in 2016, Algeria is moving toward its target of 15 percent of electricity being generated by solar by 2020.

Summary

Overall the region will undoubtedly install more renewable energy installations in the coming years. However, there are and will continue to be concerns for those wanting to build, own and operate systems in the region. There are lesser risks for those supplying renewable technologies and those seeking to operate purely as EPC contractors, particularly with the involvement of the World Bank in countries such as Jordan.

Introduction to Prospect Energy and Prospect Law

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.          

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally. 

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Edward de la Billiere on 01332 818 785 or by email on: edlb@prospectlaw.co.uk.

For a PDF of this blog click here

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SAUDI ARABIA: INCREASINGLY OPEN FOR BUSINESS?

UK Trade & Investment (UKTI) considers Saudi Arabia to be a “High Growth Market” with important growth potential, and this article examines some of the commercial driving forces currently at work in the Kingdom.

King Salman has faced a series of political and economic challenges since coming to the Saudi throne last year, including the Yemeni Civil War and Iran’s possible re-entry into the global economy, not to mention the threat posed on various fronts by ISIL.

Falling oil prices have exposed the Kingdom to a budget deficit of nearly $90million, and it would appear that this has made the ruling regime question the sustainability of its current economic model, in which over 70% of citizens work for the state in what has traditionally appeared to be a fairly impenetrable and closed off economy with high barriers to potential inward investors.

A fresh attempt at change has been spearheaded by Mohammed bin Salman, King Salman’s ‘favourite’ son. Just thirty years old, the new Deputy Crown Prince’s increasing status and influence reflects the Kingdom’s youthful population and a desire for greater openness and change, and he now heads a new Committee that is shaping up to have a major influence upon the Kingdom’s economic decision making.

The nature of Saudi Arabia’s population has led many to call for a shift away from reliance on Oil production. Many have noted the Kingdom’s potential for growth in areas such as consumer goods and housing, but oil still made up nearly three quarters of national revenue last year. Bearing in mind that Brent Crude is being traded for a third of its 2014 price, it is not hard to see why Saudi Arabia has been experiencing difficulties.

Following the advice of international consultants and regulators however, the new Deputy Crown Prince recently launched a “National Transformation Programme” in an effort to create jobs and increase foreign investment in Saudi transport and healthcare. He has told one newspaper of his willingness to publicly list Saudi Aramco, the company that owns and operates all of Saudi Arabia’s energy, and the recent Saudi Investment Conference caught the attention of PepsiCo and Lockheed Martin.

These are of course, very early days and the tentative moves we are seeing in Saudi hardly mirrors to apparent rush to attract investor interest which appears to be gathering pace in Iran. And as in Iran, cultural differences will inevitably pose various barriers for Western investors to overcome in Saudi; but whereas companies may have previously considered Qatar or Bahrain as more likely routes into the Middle East, the Saudi economy seems to be opening up.

The Arab spring has no doubt reminded Saudi Arabia’s rulers of what can happen when a youthful population feels somewhat disenfranchised  and undervalued, and Iran’s desire for foreign investment will likely make the Kingdom keen to move forwards towards a rather more open economy in future as well.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice. Prospect Law and Prospect Energy accept no responsibility for loss or damage incurred as a result of reliance on its content and specific legal advice should be taken in relation to any issues or concerns of readers which are raised by the article.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy

For a PDF of this blog click here