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Energising the Kingdom: The Role of Renewable Energy in the Saudi Economy

Updated: Jan 2



As the world grapples with the urgent need to mitigate climate change and transition towards a sustainable future, renewable energy has emerged as a robust solution in the fight against climate change. Renewable energy options generate significantly lower carbon emissions than traditional fossil fuels. This reduction in greenhouse gas emissions plays a crucial role in mitigating the impacts of climate change and aligning with the global climate goals outlined in the Paris Agreement. Transitioning to renewable energy is necessary for countries to contribute to the collective effort in combating climate change. In this article, we explore the importance of renewable energy and the case for global change while highlighting the critical efforts undertaken by Saudi Arabia to overcome energy challenges and embrace a greener future.


The case for global change:


By reducing reliance on finite fossil fuel resources, which are susceptible to price volatility and geopolitical tensions, nations can achieve greater energy security. Local renewable resources enable countries to promote self-sufficiency in meeting their energy needs. This decreased dependence on energy imports reduces vulnerability and enhances stability in the face of geopolitical uncertainties.


The renewable energy sector offers immense economic growth potential. Investments in renewable energy infrastructure, research and development, and manufacturing can stimulate job creation and contribute to economic diversification. This sector can attract substantial investments and foster innovation, providing long-term economic benefits. By prioritising the development of renewable energy technologies, countries can seize the opportunity to generate employment opportunities, bolster local economies, and lay the foundation for sustainable economic growth.


Renewable energy projects require extensive planning, construction, and ongoing maintenance, creating a demand for a skilled workforce. Job opportunities span various sectors, including engineering, manufacturing, installation, and maintenance. Moreover, the renewable energy industry often generates employment in rural areas, where natural resources like wind, solar, or hydropower are abundant. This helps to alleviate unemployment disparities between urban and rural areas, fostering inclusive economic development.


In addition to job creation, investments in renewable energy can contribute to economic diversification. Traditionally, many economies heavily relied on fossil fuel extraction or manufacturing industries. However, transitioning to renewable energy opens avenues for new industries and sectors. For instance, research and development in renewable energy technologies drive innovation and can lead to the emergence of cutting-edge companies, supporting a knowledge-based economy.


Furthermore, the renewable energy sector attracts significant investments. As the world increasingly recognises the urgency of addressing climate change, capital flows into renewable energy projects have steadily increased. Investors, both domestic and international, are keen to support sustainable initiatives. This influx of capital stimulates economic growth and encourages further advancements in renewable energy technologies. As the sector expands, economies can benefit from the multiplier effect, as the growth of renewable energy industries spurs development in related sectors such as manufacturing, construction, and transportation.


As a major oil-producing country, Saudi Arabia has recognised the importance of diversifying its energy mix and reducing its dependence on fossil fuels. The Kingdom has taken significant steps towards embracing renewable energy:


Vision 2030: Saudi Arabia’s Vision 2030 is a comprehensive plan to transform its economy and reduce its reliance on oil revenue. The plan strongly focuses on renewable energy to achieve 50% of the country’s energy from renewables by 2030. This ambitious target has accelerated the development of various renewable energy projects in the Kingdom.


Renewable Energy Projects: Saudi Arabia has launched several large-scale renewable energy projects, including the King Salman Renewable Energy Initiative and the National Renewable Energy Program. These initiatives encompass the development of solar, wind, and geothermal power projects across the country, promoting investments, technological advancements, and job creation in the renewable energy sector. The Sakaka Solar Power Plant in the Al Jouf region is Saudi Arabia’s first utility-scale solar project. With a capacity of 300 MW, it highlights the country’s commitment to renewable energy. The project, developed by ACWA Power, has contributed to local job creation and has set the stage for subsequent solar ventures. The Dumat Al Jandal Wind Farm, situated in the Al Jouf region, is the largest onshore wind farm in the Middle East. With a capacity of 400 MW, it is set to power over 70,000 households while reducing carbon emissions. The project, developed by EDF Renewables and Masdar, showcases the immense wind potential in Saudi Arabia and solidifies its position as a regional leader in renewable energy.


The Saudi Green Initiative and Green Hydrogen: In April 2021, Saudi Arabia announced the Saudi Green Initiative, a comprehensive plan to tackle climate change and protect the environment. The Kingdom aims to produce 50% of its electricity from renewable energy sources by 2030. Additionally, Saudi Arabia has shown interest in developing a green hydrogen sector, leveraging its abundant solar resources to produce clean hydrogen for various applications.


Legal Framework for Renewable Energy


National Renewable Energy Program: In 2017, Saudi Arabia launched the National Renewable Energy Program (NREP) as part of its Vision 2030 initiative. The NREP aims to diversify the energy sector, increase the share of renewable energy in the total energy mix, and develop a sustainable and competitive renewable energy market. The program provides a comprehensive legal framework for renewable energy deployment, including regulations, incentives, and investor support mechanisms.


Power Purchase Agreements (PPAs): PPAs play a crucial role in facilitating the development of renewable energy projects. The Saudi Arabian government, through REPDO, offers long-term PPAs to project developers, ensuring a guaranteed market and a stable revenue stream. These agreements provide certainty for investors and incentivise the private sector to participate in the renewable energy market.


Regulatory Reforms and Investment Protection: Saudi Arabia has implemented regulatory reforms and investment protection measures to attract foreign investors. The Kingdom has enacted laws and regulations that promote ease of doing business, protect intellectual property, and ensure fair competition. Additionally, establishing the Saudi Arabian General Investment Authority (SAGIA) has streamlined the investment process and provides a single point of contact for investors.


Renewable energy has emerged as a vital tool in addressing the challenges of fossil fuels, mitigating climate change, promoting energy security, and fostering economic growth. Globally, countries actively invest in renewable energy technologies and implement policies to accelerate the transition. As a key player in the energy sector, Saudi Arabia has recognised the significance of renewable energy and is undertaking substantial efforts to diversify its energy mix. By embracing renewable energy sources, nations can pave the way towards a sustainable and greener future for future generations.

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