Powering Vision 2030 with solar energy
Saudi Arabia Focus
Aurangzeb MaqsoodSenior Associate,Banking and Finance
Saudi Arabia's ambitious Vision 2030 aims to revolutionise the country’s energy mix. Understanding the regulatory framework for solar power generation is crucial for investors in this dynamic landscape.
The government of the Kingdom of Saudi Arabia (“KSA”), in pursuit of achieving its goals for Vision 2030, aims to install about 10GW (or 10,000MW) of renewable energy into the energy mix by 2027 itself. By 2030, the Renewable Energy Project Development Office (“REPDO”) aims to install 27.5GW (or 27,500MW) of solar capacity in accordance with KSA’s Solar Energy Plan. It is envisaged that by 2030, solar power will account for a substantial share in the country’s total power generation capacity.
In the recent couple of years, we have seen REPDO complete the financial close for both the REPDO Round 3 projects, which constituted of four (4) solar projects with a combined capacity of 1,200MW; and the REPDO Round 4 projects, which constituted of three (3) greenfield wind projects and two (2) greenfield solar projects with a combined capacity of 3,300MW. More recently, KSA is actively inviting bid submissions for REPDO Round 5 projects consisting of four (4) solar power projects with a combined capacity of 3,700MW.
In light of the rapid development of solar power plants in KSA, we have set out below an overview of the regulatory framework for solar power generation in KSA, comprising of both large-scale and small-scale solar power generation mechanisms in KSA.
Saudi Arabia aims to install 27,5GW of solar capacity by 2030.
The key policy for renewable energy in KSA is the National Renewable Energy Program (“NREP”) which sets out an organized and specific road map to diversify local energy sources, stimulate economic development and provide sustainable economic stability to KSA in light of the goals set for Vision 2030, which include establishing the renewable energy industry and supporting the advancement of this promising sector while working to fulfil KSA's commitments to reducing carbon dioxide emissions.
The key players for the solar power generation systems and the overall renewable energy sector in KSA include: (i) the Ministry of Energy (“MOE”); (ii) the Supreme Committee for Energy Mix Affairs for Electricity Production and Enabling Renewable Energy Sector (the “Supreme Committee”); (iii) the Water and Electricity Regulatory Authority (“WERA”); (iv) the Saudi Electricity Company (“SEC”); (v) the Saudi Power Procurement Company (“SPPC”); (vi) the Public Investment Fund (“PIF”); (vii) King Abdullah City for Atomic and Renewable Energy (“KACARE”); and (viii) REPDO.
In relation to large-scale solar power generation in KSA, the key legislations include the: (i) Electricity Law and its Implementing Regulations issued under Saudi Arabia Royal Decree No.M56/1426 (Saudi Arabia Cabinet Decision No. M254/1426) (the “Electricity Law”); and (ii) Grid Code approved by the board of directors of WERA by Resolution No. (03/16/28) dated 01/06/1428H. The Electricity Law provides the framework under which the Ministry of Energy, through the Water and Electricity Regulatory Authority (WERA) regulates the electricity industry, which includes the services provided for the production, cogeneration, transfer, distribution, and trading of electricity, while its implementing regulations distinguish between the various licensed activities. The Grid Code is a technical regulatory document that defines the technical requirements necessary for the use of the transmission system, including the metering code and the scheduling and dispatch code. Together, these make up the key legislations for power generation in KSA.
Solar power will account for the lion’s share of Saudi Arabia’s total power generation capacity by 2030.
In relation to small-scale power generation systems in KSA, the: (i) Regulatory Framework for Renewable Energy Generation (dated 20/08/1443H corresponding to 23 March 2022 and effective as of 17/04/1444H corresponding to 11 November 2022) (the “Regulations”); and (ii) the Small-Scale Solar PV Regulation (for solar photovoltaic systems up to 2MW) (dated 21/01/1442H) (together, the “Small Scale Solar Regulations”) provide the regulatory framework for small-scale solar power generation.
These Small Scale Solar Regulations define the regulatory requirements for grid-connected or off-grid autonomous renewable energy generation systems. Furthermore, they lay the framework for billing arrangements and provides guidelines in relation to the development, instalment, maintenance and operations of energy generation systems connected to the grid.
The Regulations, in specific, are applicable to renewable energy generation systems exceeding 1 kilowatt that are used for self-consumption in KSA. As a result of such Regulations, a person who operates renewable energy generation system for self-consumption of their grid connected facility and has a meeting point that satisfies the regulatory requirement under the Regulations, the Metering Code, the Distribution Code and the Transmission Code, or such a person whose facility is not connected to the grid but generates renewable energy for self-consumption may install and operate the same for self-consumption or for the distribution of surplus; whereby excess energy can be exported to the grid and recorded in the billing system, which shall be carried forward to the next billing cycle.
Other notable features under the small-scale framework include: (i) the mechanics of ‘net billing’ i.e., the energy exchange and corresponding financial arrangements between an eligible consumer and a service provider; (ii) compliance requirements with other regulations and industry codes; (iii) procedures for installation of a renewable energy system; (iv) the reporting requirements; (v) the draft of the system connection agreement between the eligible consumer and the service provider for grid-connected renewable energy generation systems; (vi) framework guidelines for self-consumption; and (vii) the overview of the allowed use cases. As counsels for several developers envisaging setting up solar power projects in KSA, we have extensive experience in working with sponsors in providing the legal advice necessary for the development of solar power projects in KSA. We are well-placed to advise on a number of issues that range from the initial procurement of relevant consents up until the achieve of financial close.
You can reach out to us should you require any professional legal support in partaking in KSA’s expansive solar power project plans.
For further information,please contact Aurangzeb Maqsood.
Published in April 2024
