The renewable energy market in Saudi Arabia is set to grow, backed by abundant solar power, land availability, as well as the kingdom’s A-rated sovereign credit and its strategic plans, Moody's Investors Service said in a report on Wednesday.
The kingdom’s renewable power plans are driven by pent-up demand for electricity due to economic and demographic growth, and highly energy-intensive industrialization programs.
They also come as part of Saudi Arabia’s strategy to cut oil subsidies and encourage clean generation technologies, after slumping oil prices put pressures on public finances.
"The government of Saudi Arabia's plans are motivated by a desire to diversify the energy mix and take advantage of the compelling economics of renewables, especially solar, in the country", said Christopher Bredholt, a Moody's Vice President -- Senior Analyst and the report's author.
The renewable energy program would also cut the public sector contribution to the economy and increase banks’ opportunity for project finance, the credit agency added.
A relatively untested regulatory framework for renewable energy, the lack of total cost recovery for the state-owned utility Saudi Electricity Co. (SEC), operating in the desert environment, and a relatively undeveloped local supply chain are among credit challenges.
In February, the Saudi government issued a request for qualifications (RFQ) for the first round of the national renewable energy program (NREP) to build 700 megawatts of wind and solar power plants, Argaam earlier reported. Shortlisted companies are expected to be announced by April 10.
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