Saudi solar industry development set to shine for nationals

Saudi Arabia is weighing plans to create more jobs for nationals in the kingdom's nascent solar power industry with a legal framework for the industry, expected to be complete by the end of Ramadan.

"Saudi Arabia is, first and foremost, interested in creating jobs for Saudis. Energy provision comes second in their thinking," said a Saudi government source who wished to remain anonymous. The King Abdullah City for Atomic and Renewable Energy (Kacare), the government body responsible for renewable energy, in May floated a plan to introduce solar power into the country's energy mix.

According to Kacare's vision, Saudi Arabian solar capacity will grow from next to nothing to 41,000 megawatts over the coming 20 years, four times Abu Dhabi's current electricity production.

To meet this demanding schedule, the government wants to tender the first solar projects this year.

The upcoming legislation will determine whether the solar plants need to contain components built in Saudi Arabia. The idea has previously been aired by the government and is meant to spur the development of a solar industry in the kingdom. Saudi Arabia is keen to build up an industrial base and has established giant industrial zones in the port cities of Jubail and Yanbu. Taking advantage of cheap natural gas, the clusters are now home to one of the biggest petrochemicals industries in the world.

Recent efforts have focused on breaking into the downstream sectors and developing industries for complex products closer to the end consumer.

The production of solar panels and the polysilicon that makes them work is regarded as the next step in the Saudi industrialisation drive. The government hopes this push, together with the installation of the solar parks, will help put a dent in the country's worrying unemployment figures.

"If this starts we can have the starting of an ecosystem," said Azzam Shalabi, the president of the National Industrial Clusters Development Programme, a government institution that recruits investors for such projects. "It is not only the jobs per se but the quality of jobs."

With no legislation in place, panel producers have so far been reluctant to commit.

After the entrance of China into solar manufacturing, the industry has suffered from a global overcapacity that threatens the existence of many established players. Convincing them to expand their production base will be no easy task.

Polysilicon producers, which rely on large amounts of energy, are more readily attracted to the kingdom on the promise of cheap electricity. Two ventures have already been allocated land in the industrial zones of Jubail and Yanbu, according to the source in the ministry. Doubts persist about whether the solar industry is well suited to create jobs.

More than one million Saudis receive unemployment benefits in a country with 18 million nationals. But many Saudis are reluctant to accept jobs they regard as lowly and a lot of factory jobs are taken by foreign workers. In any case, modern polysilicon factories are largely automated and require little manpower. "There are a few interesting jobs but most of them are in installation [of plants] and, thus, temporary," said the source. Apart from a decision on locally produced material, the legislative framework will also provide private power providers with operational guidelines.

These private producers make money on the tariff they receive from the electricity they sell, after fronting the costs of building the plant. The level of so-called feed-in tariff will be decided after the first projects have been put out to competitive bidding.

"The feed-in tariff will only be determined after the first tenders have been given out," said the ministry source.

"At the moment, they don't know what a reasonable rate is."