Saudi Arabia backs local content in 7GW drive

The Holy City of Mecca in Saudi Arabia

The Holy City of Mecca in Saudi Arabia

Saudi Arabia has confirmed its intention to heavily incentivise the use of domestically-manufactured equipment in the early procurement rounds of its renewables programme, as it looks to have 7GW of capacity – mostly solar – under development by 2015.

Most of the details released by the King Abdullah City for Atomic and Renewable Energy (K.A. CARE), which is in charge of the programme, confirm previously released statements, such as its goal to have 23.9GW of renewables capacity by 2020 and 54GW by 2032 – the largest portion of which will come from concentrated solar power (CSP).

However, the industry has been waiting with bated breath for more detail on the Kingdom’s local content requirements, which it has now provided. K.A. CARE says projects will initially be evaluated “on their financial strength, experience, project development status, and degree of local content”.

As expected, in the first phase – spread across an introductory round (500MW-800MW), a “first” round (2GW-3GW) and a “second” round (3GW-4GW) – developers will be judged in part based on how much local content they use.

In future rounds, an as-yet-undetermined percentage of local content will be compulsory.

In the first phase to 2015, K.A. CARE will award proposed projects a certain amount of points based on the types of local content they employ, with some aspects incentivised far more heavily than others.

For example, across all technologies only 50% of the money a developer spends on Saudi-based legal, engineering and construction services will count towards their total points. Only 25% of locally purchased balance-of-plant components will count towards the total.

But other purchases – including receivers and molten salts for CSP; wafers and inverters for PV; and gearboxes and generators for wind – will count 100% towards a project’s total points.

At least 20% of the total content going into a project must be purchased locally for any points to be counted at all.

Future rounds are expected to have far more stringent local-content requirements, with K.A. CARE saying it will “aggressively” develop the domestic value chain.

A number of emerging renewables markets, such as India and South Africa, have imposed local-content requirements, with varying degrees of success.

The Canadian province of Ontario successfully lured a number of manufacturers to its soil, but elements of its local-content programme were ruled against by the World Trade Organisation.

India has made the development of its domestic manufacturers a key plank of its National Solar Mission. However, the government recently acknowledged it may back away from the rules due to the poor pace of technological and commercial progress among local PV module suppliers. 

Saudi Arabia's introductory round – to be launched in the next months – will focus only on CSP, PV and wind, although later rounds will expand to include geothermal and waste-to-energy.

Between five and seven projects of varying technologies – likely including parabolic trough and power-tower CSP, and thin-film and crystalline silicon PV – will be offered in pre-arranged spots easily connected to the grid.

Successful bidders will be offered 20-year power purchase agreements, adjusted annually for changes in the exchange rate between the Saudi riyal and the US dollar.

CSP plants will be required to provide a minimum four hours’ storage, which may go up for future rounds, K.A. CARE says.

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