Saudi Arabia To The Rescue For Chinese Renewable Majors

For China's green energy makers, the arrival of demand, and the opportunities for profitable manufacturing in Saudi Arabia are vital

24 Jul 2024 13:35 IST

Saudi Arabia's renewable demand perks up Chinese green energy firms — Saudisation of Saudi Arabian Industry

Hit by domestic overcapacity and sanctions in the US and other key markets, China's leading green energy firms are looking to the Middle East to fill the holes. As the world's largest solar and wind market, with the manufacturing capacity to boot, Chinese firms have been well established as global suppliers across every major market, exporting over 200 GW of solar modules worldwide in 2023.

However, recent moves by the US, now the EU, and of course, India, the top three markets for Chinese exports, have drawn a quick reorientation. The Middle east and South East Asia are in the sights for Chinese makers as key markets that will pick up some of the slack from loss of share in their top three markets till now. Even EPC firms like L&T from India have benefited, as seen in their own announcements of large wins in the region, especially Saudi Arabia.

Trade in the energy sector between China and the Middle East is likely to increase significantly and reshape the sector globally in the wake of the Saudi-Iran peace deal brokered by China last year, according to Swiss bank UBS. The bank projected that by 2030 energy-related trade between the two sides will have risen by US$423 billion annually, with renewables and petrochemicals accounting for US$77 billion and US$325 billion, respectively, the investment bank estimated.

Saudi Arabia The Clear Focus

For China, its been all about aligning itself with Saudi Arabia's Vision 2030, which envisages massive renewable capacity additions as well as manufacturing prowess in the Kingdom. Green energy, including solar and wind, is meant to account for half of the country’s energy mix by 2030 at 58.7 GWh, according to the Vision 2030 plan put forward by Saudi Crown Prince Muhammad bin Salman bin Abdel Aziz Al Saud in 2016.

In the past week, three major Chinese clean-energy manufacturers have announced they will build production plants in Saudi Arabia to expand their global footprints. These JVs are said to collectively be worth $30 billion eventually.

These firms will partner with Saudi Arabia’s Public Investment Fund (PIF) to form joint ventures. The firms include Jinko Solar and TCL Zhonghuan, two of the world’s largest producers of solar modules and solar silicon wafers, as well as wind turbine maker Envision Energy, also the market leader in India.

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While the projects will enable Saudi Arabia to become an exporter of renewable energy and equipment, for the Chinese, a significant share is much better than being shut out of the lucrative market.

Jinko Solar announced on July 23 that it will build a US$985 million facility with an annual capacity of 10 gigawatts (GW) for both high-efficiency solar cells and solar modules. Saudi Arabia’s Vision Industries, a privately owned green energy developer, will be a shareholder in the joint venture.

Similarly, TCL Zhonghuan will also partner with PIF and Vision Industries, to invest US$2.08 billion in a plant capable of producing 20GW of photovoltaic silicon ingots and wafers a year, according to an exchange filing in Shenzhen by the firm.

Wind energy maker Envision Energy’s joint venture with PIF and Vision Industries will involve the manufacture and assembly of wind-turbine components, with an estimated annual generation capacity of 4GW.

Saudi's Love For Large Projects Opens Up China Opportunity

Saudi Arabia's love for thinking big has already meant that Chinese firms have bagged some massive module and energy storage deals. Sungrow, the no. 1 solar inverter maker and major player in utility scale energy storage will agree.

Sungrow has announced it will build a 7.8 gigawatt-hour energy storage project to improve the stability and reliability of Saudi Arabia's electricity grid, in a deal inked by the two parties. The project, which will comprise nearly 7.8 million battery cells, will be spread across three sites, namely Najran, Madaya and Khamis Mushait, Sungrow said.

With delivery of the units set to start this year, the 15 year project is expected to be completed by next year.

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Conclusion

For once, Chinese players will say, this time it is different, when reminded about previous false starts in the Middle East. Countries in the region, after making tall targets, have repeatedly failed to catch up, leading many to wonder about the prospects for renewable energy in the oil rich region. But now, with a string of projects moving ahead, things finally seem to be coming in place for the region to clean up its energy mix. Besides Saudi Arabia, UAE, Iraq, Oman, and at some stage, Iran and Pakistan are all expected to emerge as key markets, capable of absorbing 1 GW(Pakistan) to 5 GW plus 9Saudi, UAE) of solar capacity annually for instance.

Sungrow Envision Jinko PIF vision 2030 TCL Zhonghuan Green energy JVs in Saudi Mohammed Bon salman

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