Taking stock of the National Renewable Energy Program

Saudi Arabia’s National RenewableEnergy Program (NREP) aims to generate 50% of its electricity from renewables by decade’s end, under the kingdom’s Vision 2030 to diversify the energy mix. The program’s initial target of 9.5 GW of renewables by 2023 was later raised dramatically — by 2019, the target for 2030 expanded to 58.7 GW (40 GW of solar PV, 16 GW of wind, and 2.7 GW of concentrated solar power).

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Structure: The NREP, managed by the Energy Ministry’s Renewable Energy ProjectDevelopment Office, uses a tender system to attract independent power producers. Developers bid to finance, build, and operate renewable plants, selling electricity via long-term power purchase agreements (PPAs) to the Saudi Power Procurement Company (SPPC) — the Principal Buyer. SPPC, a state-owned offtaker spun out of the Saudi Electricity Company, is responsible for conducting feasibility studies, tendering projects, and inking PPAs with winners.

How far did we go? The total installed renewable capacity in operation reached 6.5 GW by end-2024, according to figures from Gastat (pdf). This represents a huge jump from just a few years prior — for perspective, between 2012 and 2022 Saudi had only about 700 MW of renewables on the grid. In 2024 alone, five large solar projects came online, adding 3.75 GW of capacity in one year.

Total capacity and investments: Of the 6.5 GW commissioned, 6.1 GW is from solar PV across nine projects, and 400 MW is from wind (Domat Al-Jandal farm). The total investment in these projects is estimated at SAR 19.8 bn (c. USD 5.28 bn) as of end-2024. Solar projects account for the lion’s share at SAR 18.3 bn, with about SAR 1.6 bn invested in wind.

Competitive auctions have driven costs extremely low: Capital expenditures and financing have been optimized to yield one of the world’s lowest levelized cost of electricity (LCOE) for the Kingdom’s projects. By late 2024, the lowest PV bid was SAR 0.039/kWh (recorded by the 600 MW Shuaibah-1).. The wind farm’s LCOE, standing at SAR 0.08/kWh, is similarly very low by global standards.

SOUND SMART- The LCOE is the real cost for a developer to produce one kilowatt-hour of electricity over the life of a project. It covers the developer’s total cost to produce electricity — including capex, opex, and financing — over the plant’s lifetime energy output. On the other hand, the tariff is the price the developer agrees to sell the electricity at — usually to the SPPC under a long-term (20-25 years) PPA. The difference between the tariff and their LCOE is their net income margin.

Low tariffs aren’t necessarily bad news for developers — as long as they’re backed by rockbottom LCOEs. For developers, it is certainty, scale, low-risk, and secured cashflows for over 20 years. For the government, it means locking in cheap, unsubsidized electricity. For the energy system, it keeps inflationary pressure off power prices and frees up crude oil for export. (Check our deep dive into the kingdom’s LFDP).

ICYMI- We have seen the largest single renewable procurement in Saudi recently: The SPPC inked development and power purchase agreements for seven solar and wind projects — five solar PV (12 GW) and two wind farms (3 GW) — valued at a combined SAR 31 bn (USD 8.3 bn), with a total capacity of 15 GW. All seven projects were won by a consortium led by Acwa Power, alongside PIF’s Badeel and Aramco Power, highlighting the role of local developers in the NREP.

Tariff figures were surprisingly low: All solar projects’ bids were at nearly SAR 0.05/kWh (c. USD 0.0126), among the cheapest solar electricity ever contracted. Wind energy bids stood at SAR 0.07-0.08/kWh.

BUT- Can the grid handle all the renewables? The grid was historically built to handle large centralized power plants (oil & gas) feeding load centers via high-voltage transmission and extensive distribution networks. With 6.5 GW of renewables on the grid as of, renewable penetration remains relatively low in percentage terms — providing only 5-10% of total generation on an annual basis. This modest share means few grid issues — for now, but Saudi also aims to include 50% share of natgas in its energy mix, further applying an asynchronous source for grid stability.

Alongside government-led procurements, we’ve seen moves to localize the renewable value chain: The PIF is ramping up the push to localize renewable manufacturing with three JVs under its wholly owned Renewable Energy Localization company, announced back in July. The first JV, with Envision Energy, will localize the assembly of wind turbines and blades with a planned 4 GW annual output. The second JV, with Chinese JinkoSolar, will produce PV cells and modules with a capacity of 10 GW of solar annually. The third JV, with TCL Zhonghuan’s subsidiary Lumetech, will localize ingots and wafers production, with 20 GW of annual production.

AND- We are also looking into trading some capacity later: The cabinet approved the general agreement to establish the Pan-Arab Electricity Market (PAEM), which will offer Riyadh a regional outlet for surplus capacity once operational. Check out our deep dive on the PAEM.