Saudi Arabia aims to produce 10 percent of its power from renewable sources in the next six years as it pushes ahead with a multi-billion-dollar plan to diversify its energy mix and free up more crude oil for export.
The drive by the world's top oil exporter will see the kingdom developing 30 solar and wind projects by 2023 to boost its electricity generation and reduce crude oil burning.
Saudi Arabia is targeting 9.5 gigawatt (GW) of renewable energy by 2023. The renewables initiative involves investment estimated between $30 billion and $50 billion.
Saudi Energy Minister Khalid al-Falih kicked off the massive renewable programme in Riyadh on Monday by announcing the beginning of the bidding process for a 300 megawatt (MW) solar power project, which is expected to come online by 2018-2019.
"The energy mix to produce electricity will change, today the kingdom uses large quantities of oil liquids, including crude, fuel oil and diesel," Falih said.
"So the percentage of renewable energy by 2023 (will be) 10 percent of total installed capacity in the kingdom."
Under an economic reform programme launched last year, known as Vision 2030, Saudi Arabia is seeking to use non-oil means to generate much of its additional future energy needs to avoid running down oil resources and diversify its economy.
ENERGY REFORM PUSH
The kingdom is restructuring its energy sector as part of Vision 2030 and a focus on renewable projects is a pillar of this transformation as it would help develop the private sector and create thousands of jobs.
"Since the restructuring of the energy sector ... one of our key priorities is to engage with the private sector," Falih said, adding he was confident the programme would be delivered.
Saudi Arabia has short-listed 27 companies for its solar power project and 24 firms for its wind project, the energy ministry said last week.
France's EDF Energies Nouvelles, Japanese companies Marubeni Corp and Mitsui & Co and Saudi Acwa Power are among the firms which have qualified to bid for the 300 MW solar PV project in Sakaka, the al-Jouf Province in the north of the kingdom.
Abu Dhabi Future Energy Company (Masdar), GE, Marubeni Corporation, Mitsui & Co., JGC Corp, SNC Lavalin Arabia and Iberdrola Renovables Energia are among those qualified to bid for the 400 MW wind farm project in Midyan in the northwest.
The kingdom also plans to launch a second bidding round for 400 MW of wind power at a project in Domat al-Jandal in al-Jouf Province by the fourth quarter of this year, which will be followed by 620 MW of solar power, Turki Shehri, head of the renewable energy project development office at the energy ministry told reporters on Monday.
"This will come in stages. It (wind power project) will come in the fourth quarter of this year with Domat al-Jandal, and then the 620 MW (solar) will come immediately after that in phases," he said.
The projects will be tendered on a build, operate and own basis, meaning the companies which win the projects will retain ownership for 20 years for the solar plants and 25 years for the wind, Shehri said.
State oil giant Saudi Aramco would be interested in investing in the second bidding round for renewable projects as it aims to play a major role in the sector, Abdulaziz al-Judaimi, senior vice president for downstream at Aramco said.
Aramco, which is preparing to list up to 5 percent of its shares by next year, has created a department for renewables within the company to develop wind and solar projects.
The kingdom has a long-term goal of increasing the use of gas for domestic power generation, thus reducing oil burning at home and freeing up more crude for export.
This could help increase Aramco's valuation as it generates more revenue from exports than selling oil at lower domestic prices - Saudi Arabia is the world's fifth-biggest oil consumer despite being only the 20th biggest economy.
The OPEC heavyweight burned an average of 700,000 bpd of oil for electricity to keep the population cool in the hottest months from May to August.
The expansion into renewables will help the kingdom to save 18 million barrels of oil equivalent being consumed for electricity generation by 2020, Shehri said.