Saudi Arabia has held its first, 300 MW solar tender. While bidders are being shortlisted, it seems that a new global solar power tariff record may be the outcome, with bids of under 2 US cents per kWh.

Saudi Arabia has held its first PV tender for a 300 MW solar project located at Sakaka in the North of the country. The project is backed by a 25-year power purchase agreement (PPA). This week’s bid opening ceremony was broadcast live and online as a webinar. After 27 companies had been shortlisted as potential candidates in April, Saudi Arabia’s new Renewable Energy Project Development Office (REPDO) used the ceremony as a platform to reveal which 8 companies made it through to the next stage – the bidding.

Further hurdles to be taken by bidders

All bids received by the 8 currently shortlisted companies will be evaluated for compliance with the requirements of the Request for Proposal (RfP). Once this has been completed, REPDO will announce a final shortlist of bidders on 28 November 2017. On 27 January 2018, the project will be awarded to the winning bidder. It will then take another month until the financial closing date on 28 February 2018, and until 2019 for the project to be commissioned.
Through the entire process so far, REPDO have been applauded for a very transparent procedure.

Low bids had been expected

The opening bids that REPDO have now received are unusually low. This, however, had been expected by experts: In April, GTM Research, an analysis firm, forecast that this tender was a very likely occasion for solar to break the barrier of 2 US cents per kWh. In the end, it turns out GTM Research were right – the highest bid received was from Cobra Energy, for 3.3 US cents per kWh. But the world’s lowest-ever bid, received from a consortium formed by UAE-based solar developer Masdar and French power utility EDF, was just 1.7 US cents per kWh, and could thus – if awarded – break a new global solar power tariff record.

According to GTM Research, there are various reasons for the low bids, such as a long project timeline, an escalating or split tariff, near-zero land cost, permitting costs, taxes, and – above all – highly attractive financing terms.

Tender shall be first step towards improving energy mix and creating jobs

Meanhwhile, Saudi Arabia maintains high hopes that the tender will open the door to a greener energy future, with all of its benefits. Khalid Al Falih, the country’s Minister of Energy, Industry and Mineral Resources, said: “Today’s bid opening represents a significant milestone for the NREP, and an important step on the way to diversifying Saudi Arabia’s domestic energy mix and building a cutting-edge domestic renewable energy sector, which will create new jobs and opportunities. The commercial viability of utility-scal solar energy projects is a corner stone of the program and the bids opened today will set the benchmark for this burgeoning new industry in the Kingdom and beyond.“