Saudi Arabia’s Acwa Power to stay the course with China as trade war concerns grow

Recent trade disputes and tariffs will not disrupt Acwa Power's business, chief executive says

A solar project in the Ningxia region of China. Cfoto/Sipa USA

Saudi Arabia’s Acwa Power will move ahead with its China plans despite growing concerns of a trade war and will not invest in the US in the short term, its chief executive said.

Acwa Power, one of the largest renewable energy developers in the Middle East, recently entered China’s renewable energy market with agreements for one gigawatt of projects. By 2030, the company aims to invest up to $30 billion in China – the world’s largest renewable energy market – in line with its plans to triple its overall assets under management to about $250 billion.

“We take a long-term view, and we see China as a very strong economy,” Marco Arcelli told The National in an interview. "China has a programme of installing 250-300 gigawatts of renewables per year, and the commitment there is very strong. The scale is such that even if, in theory, it slows down by 10 per cent, it is still a gigantic market.”

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Since taking office in January, US President Donald Trump has levied 20 per cent tariffs on Chinese imports to the US, raising concerns of a further slowdown in the world’s second-largest economy. Beijing has responded with retaliatory tariffs on American goods, while introducing stimulus measures aimed at bolstering consumer spending.

The trade disputes and tariffs will not disrupt Acwa Power's business, which is centred on clean energy projects in the Gulf, Central Asia, Africa, South-East Asia and China. The company does not have assets in North America and Europe. “In terms of tariffs on the supply chain for renewables, I don't see that there is really an issue … there are no tariffs between Africa, Central Asia, the Gulf and China,” Mr Arcelli said.

China produces about 90 per cent of the world’s solar photovoltaic (PV) components and has by far the world’s largest wind turbine production capacity. The renewable energy executive is “more concerned” about the potential impact of a trade war on economic growth, which may lower the demand for energy in some countries.

“We're working in countries that grow at “4 per cent to 8 per cent” per year, so I still think it's a very healthy environment,” Mr Arcelli said, adding that Acwa Power will not invest in the US in the short term as it focuses on projects in territories it is already in.

Meanwhile, Saudi Arabia has pledged to expand its investments and trade with the US by $600 billion – and potentially beyond that – over the next four years.

Middle East impact

Mr Trump has pulled the US out of the Paris Agreement, the global accord to lower greenhouse gas emissions, and has sought to cement the country’s position as a major supplier of crude oil and liquefied natural gas (LNG). The new US administration is also looking to remove or weaken the Inflation Reduction Act (IRA), the landmark green bill passed by the Biden administration, which allocated billions of dollars in tax credits and subsidies to developers of clean energy projects.

This policy shift away from renewable energy in the US has raised concerns that global energy transition efforts will face more hurdles. However, Mr Arcelli does not expect a slowdown in Saudi Arabia – Acwa Power’s home market – and the wider Gulf region.

“I think that the Gulf and Saudi Arabia are becoming the centre of the world in terms of commitment and driving the energy transition, which I think is predicated on the fact that you have a lot of natural resources here,” he said. “Oman and the Emirates are going ahead with tenders … we are also working in Bahrain and Kuwait for some additional capacity there.”

Renewable energy generation in the Middle East is forecast to grow by about 14 per cent per year from now until 2027, with its share of the overall energy mix rising from 5 per cent to 7 per cent, according to the International Energy Agency.

Green hydrogen bridge

The Middle East and North Africa (Mena) region is emerging as a green hydrogen hub and Europe and Asia could be its most important markets. There is potential for an “energy bridge” between Europe and Saudi Arabia for green hydrogen and direct power exports, driven by Saudi Arabia's competitive energy costs and Europe's need to decarbonise and ensure energy security, Mr Arcelli said.

In February, Acwa Power signed an initial agreement with Germany’s Sefe (Securing Energy for Europe) for the supply of 200,000 tonnes of green hydrogen annually by 2030. The Saudi company will lead development, investment, and operation of green hydrogen and ammonia assets, while Sefe will co-invest and serve as the primary off-taker, using its position as a major European energy trader to market the hydrogen, Acwa Power said at the time.

Acwa Power is also a partner in the $5 billion Neom Green Hydrogen project, the world’s largest, which is expected to be completed next year. The other venture partners are Neom and the US-based Air Products, which has secured an off-take agreement for all the green ammonia produced at the facility. However, the hype around green hydrogen – a fuel produced using renewable energy – seems to be fading due to concerns over its high costs and potential buyers.

“There is still interest in off-takes, and we are in contact in Europe with multiple parties,” Mr Arcelli said. “Despite the fact that the hype may not be the same that you had a couple of years ago, there is still a realisation that this [green hydrogen] will need to happen in by 2030, or in the next decade,” he added.