Saudi Arabia’s Vision 2030 and Green Finance Framework set out targets for private and foreign investment in green energy generation, aiming for renewables to comprise 50% of output by 2030 (about 130GW), with about 60% of new capacity coming from solar and 40% from wind, it stated. 

 

Saudi Arabia also aims to replace inefficient oil-fired power stations with combined cycle gas turbines that can operate at over 60% efficiency. Abu Dhabi also plans to build 18GW of solar photovoltaic capacity by 2035.

 

Both Saudi Arabia and Abu Dhabi are currently using a model where 60% of power project ownership is through companies directly or indirectly held by the government – for example, via government-related entities like the Public Investment Fund and Abu Dhabi Developmental Holding Company – with the remaining 40% owned by international energy or construction companies, said Fitch in its report.

 

Contract risks in these projects in Saudi Arabia are limited to operational and construction risk under Saudi power agreements. However, untested legal frameworks and limited step-in rights could pose constraints for financing single-asset risks, potentially reducing access to power project financing. 

 

Financing for these new generation projects is mostly corporate-type lending provided by consortia of banks, local and regional, but with an increasing number of foreign banks involved to help diversify funding, it stated.

 

Reaching the targets to increase the contribution of renewables in electricity generation will require significant network infrastructure build-out. 

 

The GCC has established the Gulf Cooperation Council Interconnection Authority to regulate electricity transmission and distribution in the region, prevent power outages through a balancing mechanism, introduce power trading including renewables and help energy security. 

 

The company estimates that investments related to the expansion of the existing grid between 2023-2028 will reach $1.8 billion, said Fitch in its report.

 

Furthermore, Saudi Electricity and other national electricity companies are investing in their grids to connect new generation capacity, as well as focusing on digitalisation and battery energy storage systems.-TradeArabia News Service