Responsible growth: Using green solutions to tackle multi-dimensional energy needs

Like many other nations looking to diversify their economies, Saudi Arabia has chosen to take advantage of its natural resources to fuel development. Yet this economic growth is not without consequences. These heavy industries, including petrochemical factories, oil refineries and mineral smelters, all have associated environmental costs in the long run.

While environmental issues affect all nations regardless of economic or geopolitical standing, Saudi Arabia’s unique climate also poses a number of localised challenges as well. Chief among these are concerns over the country’s limited water supply, which is subjected to increasing demands from industrial, agricultural and domestic use, leaving the fragile ecosystem vulnerable. But with the rapid progression of green technologies applicable across a wide variety of industries from petrochemicals to tourism, the Kingdom is now moving to develop long-term strategies to ensure not only more environmentally sustainable growth, but also more efficient and cost-effective business practices.

Renewables

Reducing potential contamination to the air, land and water, the substitution of renewable energy sources in the Kingdom is one of the most effective and expedient tools available to move the country towards a more environmentally friendly economy. With its vast open spaces and ample sunshine generating solar radiation between 4.5 and 7 KW per sq metre a day according to research conducted by the King Fahd University of Petroleum & Minerals in Dhahran, solar power plants are a natural fit for the country. This potential, coupled with a solid track record of large-scale infrastructure projects by the government, have placed Saudi Arabia on the Renewable Energy Country Attractiveness Indices (RECAI) compiled by Ernst & Young for the first time in November 2012.

The Kingdom debuted 37th among the 40 nations included in the all renewables index, which takes into account a weighted compendium of the potential of all renewable technologies, including wind, solar, biomass and geothermal. The country faired even better in its strong suit, the solar power index, in which Saudi was tied with Greece as the 14th-most-attractive destination for solar investments, just one spot behind the UAE. The Kingdom came 33rd on the wind index, with wind power generation potential of 4.9 hours of full load per day, with the windiest regions located along the Gulf and the Red Sea coastal areas.

Strong Regional Standing

Perceptions of Saudi Arabia’s potential were particularly strong when compared to other countries within the Middle East and North Africa (MENA) region, according to the RECAI, specifically regarding clean technology, in which 190 regional experts were polled across various disciplines including investors, bankers, technology experts and government representatives. Saudi Arabia, along with the UAE, Qatar, Jordan and Egypt polled as the most attractive MENA markets based on a five-year horizon, with Saudi Arabia’s showing a particular strength in terms of availability of financial resources through major initiatives such as King Abdullah City for Atomic and Renewable Energy (KACARE). Some 94% of respondents indicated they felt the country had high potential in terms of attractiveness for developing renewable energy, the highest percentage for any MENA country.

While the Kingdom has little to show for its efforts in this arena so far, recent government initiatives have revealed strong national ambitions for alternative energy, which could equal that of its current hydrocarbons prowess. These plans entail a massive roll-out of solar power projects over the next 20 years, which in theory could replace one-third of hydrocarbons-powered electricity with clean energy. According to KACARE, the government’s alternative energy arm, the state is planning to spend $109bn to develop 41 GWh of solar power (16 GWh in photovoltaic projects and 25 GWh in solar thermal projects) and 9 GWh of wind capacity by 2032. At the end of 2011, the country’s combined installed electricity generating capacity totalled 57,432 MW according to Saudi Electric Company (SEC) figures. If realised, the project could free up as much as 523,000 barrels per day (bpd) of oil equivalent on the domestic market according to the SEC. This would mark a significant departure from the country’s current power generation mix, which is heavily dependent on hydrocarbons, with crude oil and natural gas each accounting for a 37% share of generated electricity in 2011, followed by 21% derived from diesel and 4% from heavy fuel oil as per SEC figures.

The introductory round of competitive procurement programmes for renewable energy projects is set to be held by KACARE in the second quarter of 2013, with the first full round planned for 2014. After offering up contracts totalling between 500 MW and 800 MW in the introductory round, the capacities will be increased for the first full-scale round. This is projected to encompass approximately 2000 MW in solar projects split between 11 and 55 photovoltaic projects, with a combined capacity of approximately 1100 MW, and between five and 25 solar thermal projects, with a total capacity of around 900 MW. These will be supplemented by 650 MW of wind power procurements and 50 to 350 MW of other renewable energy technology.

For all its apparent advantages, solar power plants still have their drawbacks. Apart from their relatively high upfront generation costs (especially when compared to subsidised hydrocarbons fuel currently used), solar plants also face performance degradation over time. This decline can be especially pronounced in dry, arid desert environments that produce considerable quantities of dust, sand and other potentially damaging particulate matter, which negatively affects solar photovoltaic performance.

Water

As is the case for most MENA nations, potable water availability remains a major challenge. As per data from the World Bank, Saudi Arabia is the driest country on earth at 99 cu metres of renewable water resources per head – far below the UN Food and Agriculture Organisation’s threshold of 1000 cu metre per capita, which classifies a country as “water scarce”. With a growing population putting pressure on the already thin resource and exasperated by the growth of domestic industry, this dilemma is only expected to worsen, with UN data predicting water supplies to dip further to 59 cu metres per person by 2025.

Similar to electricity generation, Saudi Arabia is tackling the issue of water scarcity through a two-pronged approach, targeting both supply- and demand-side issues. While demand management is addressed primarily through education programmes and utilisation of more efficient technologies, raising water supplies without dangerously depleting sensitive aquifers and water tables generally requires more costly and complicated solutions. Historically, this problem has been addressed for the most part by tapping into the Kingdom’s vast petroleum reserves to fuel the country’s massive desalination plants. Managed by the Ministry of Water and Electricity, the National Water Company and the Saline Water Conversion Company (SWCC), efforts to keep the taps flowing often come with an environmental downside both through the release of greenhouses gases and the discharge of high salinity brine.

“Subsidised water rates are the fastest and surest way to turn Saudi Arabia into a net importer of energy. Water needs power to drive desalinisation, which is created by burning oil at the subsidised price of $4 per barrel,” said Nizzar Kammourie, CEO of Suido Kiko and general manager of SAWACO. “This stands as a massive economic loss when global oil prices are around $115 per barrel. Continuing with current consumption rate is not sustainable and depresses potential for economic growth”, he told OBG.

Given mounting financial and environmental costs, the Kingdom is looking into new more sustainable sources of water, including renewable energy-powered desalinisation plants and better usage of grey water reclamation. One of the most promising developments in terms of mitigating environmental impact is a new facility to harness one the country’s most abundant power sources – the sun – to produce one its most scarce and precious commodities – water.

Blue Skies

Saudi Arabia’s flagship major solar-powered desalinisation plant will be powered by ultra-high concentrator photovoltaic technology and provide up to 30,000 cu metres of drinking water a day. As a joint venture between IBM and King Abdulaziz City for Science and Technology (KACST), the plant is being constructed in the city of Al Khafji near the border with Kuwait, and is expected to begin operations in 2013. Three more solar-powered plants are slated to be built by SWCC in Haqel, Dhuba and Farasan, and all new desalination plants built after 2020 will use renewable technology. These new plants forgo the use of polluting oil-burning generators, as well as produce water less expensively at a cost of under SR1.5 ($0.40) per cu metre compared to the current cost of desalination of seawater by thermal technology of SR2.5-5.5 ($0. 67-1.47) per cu metre according to KACST.

Burning Clean

While the economy is inextricably linked to global consumption of petroleum, Saudi Arabia has nonetheless moved forward with plans to develop the country’s first biofuel plant. Counterintuitive at first glance for a country which holds the world’s largest oil reserves, the diversification strategy is a glimpse into the future as the Kingdom joins a larger global drive towards a cleaner-burning renewable energy future.

Announced in December 2012, a new 50:50 joint venture between Indian biofuel producer Biomax Fuels and the Jeddah-based Middle East Environment Protection Company will build Saudi’s first commercial biofuel plant at cost of $40m. Due to be commissioned in late 2013, the facility will use cooking oil as feedstock to produce up to 2.5m tonnes of biodiesel per year.

As the biofuel project provides an alternative to petroleum consumption, Saudi Arabia is also making strides to reduce harmful emissions in its refined products as well. Under Saudi Aramco Mobil Refinery Company’s Clean Fuels and Aromatics Project, the company is targeting a reduction in petrol sulphur content levels in excess of 98% by 2013 and diesel by 2016, respectively. These efforts will focus on upgrading Saudi Aramco’s largest refinery, Ras Tanura, to produce cleaner-burning transportation fuels.

In addition, the oil and gas company is currently constructing three new 400,000-bpd refineries which will produce fuels clean enough to meet the stringent import requirements mandated by the US and Europe.

Waste Not, Want Not

While Saudi Aramco and the government forge ahead with plans to supply the country with greener electricity and fuel, other strategies are targeting the demand side of the problem. Perhaps the most urgent issue to be tackled is improving the country’s energy efficiency after decades of strong population growth and economic expansion have caused its electricity consumption to balloon. The number of consumers increased 57.3 % from around 4.03m in 2002 to roughly 6.34m in 2011, according to Electricity and Co-Generation Regulatory Authority (ECRA) data. This spurred corresponding spikes in electricity sales, which increased 70.8% from 128,629 GWh to 219,662 GWh, and peak demand, which more than doubled from 23.9 GWh in 2002 to 48.4 GWh in 2011. While an increase in energy consumption is inevitable with the country’s population and economic growth patterns, the government is working to curtail the overall impact through several measures targeting both the supply and demand side of the problem.

According to Khalid M Abuleif, sustainability advisor to the minister and chief negotiator for climate agreements at the Ministry of Petroleum and Mineral Resources, “I have a lot of hope for energy efficiency; we can be very ambitious in this regard and we have the technology to do it,” he told OBG.

By employing a series of demand-side management and energy-efficiency policies, ECRA is targeting a reduction in total energy consumption and peak electricity demand of 8% and 14%, respectively, by 2021 according to an ECRA presentation from the Fourth Saudi Solar Energy Forum, which took place in Riyadh in May 2012. These actions alone amount to a consumption savings averaging 17.5m barrels of oil per year. Without demand-side management measures, domestic consumption of oil for power generation use is set to climb from current levels of 270m barrels per year to 430m barrels by 2020 and 850m barrels by 2030.

Another demand-side management study commissioned by ECRA indicated that setting up an electrical load shifting programme consisting of direct control of air-conditioning units (load curtailment), an incentive tariff to reduce loads, an interruptible loads tariff, an energy-efficiency programme consisting of increasing efficiency of air-conditioning equipment and implementing building efficiency standards using thermal insulation, high-efficiency air-conditioning and other electrical equipment, would also have substantial long-term effects on consumption. These benefits included savings equal to more than 2200 MW of installed generation capacity over the next 10 years, recouping an estimated SR76bn ($20.25bn) offset by the SR27bn ($7.2bn) costs of implementing these programmes. These savings include SR14.3bn ($3.81bn) that would have been spent to build new generation plants, plus another SR46.3bn ($12.34bn) for the additional cost of fuels the plants would have consumed, SR10.8bn ($2.88bn) for the operational and maintenance costs and another SR5bn ($1.33bn) in transmission and distribution networks investments.

Actions recommended for the government by business research and consulting firm Frost & Sullivan, include establishing standards and guidelines for electrical appliances (in particular air-conditioners), along with replacing inefficient models, standardised regulations on maintenance and adopting new technologies, and also rolling out education and awareness campaigns for energy efficiency and management.

Green Building

By taking into account the potential impact a new building has on the environment, such as electricity and water consumption, soil erosion, emissions and other issues, green building practices can utilise planning, design and construction to initiate resource-efficient and environmentally responsible buildings. One of the most widely used green building standards applied worldwide is the Leadership in Energy and Environmental Design (LEED) Green Building Rating System programme, which has been developed by the US Green Building Council and is used by its local counterpart, the Saudi Arabia Green Building Council.

Although these buildings require higher upfront outlays, the long-term benefits are not only environmentally friendly, but also involve lower power and water costs, as well as greater occupational health and productivity of employees. Applying these more stringent standards to new structures in Saudi generally yields particularly large dividends, given the scarcity of water, the extreme temperatures and high amount of oil-generated electricity dedicated to air conditioning.

A key pioneer project in the Kingdom is to incorporate these standards into the development of King Abdullah Financial District (KAFD), currently under construction in Riyadh. The largest such LEED-certified project of its kind, KAFD will incorporate 34 towers into its 3m sq metres of space. According to the Saudi Binladin Group, the principal designer and contractor, green measures are already being incorporated in the construction phase of the project, including an erosion sedimentation control plan to reduce pollution and soil erosion from dust, as well as a waste management incineration programme diverting half of all construction waste from landfills. At least 50% of building materials are targeted to be made from recycled resources, and 10% to 20% to be extracted and manufactured within 805 km of the site. Upon completion, the project will boast environmentally friendly attributes including: a six-station monorail; bicycle parking and changing rooms; 20% reduction in water consumption achieved in part through the installation of dual-flush toilet systems and low-water-flow fittings and the usage of gray water; a 10% reduction in electricity usage through the implementation of low ultra-violet materials, shading device systems, heat recovery systems, efficient light fixtures and other technologies.

Several universities with dozens of separate buildings have also been LEED certified. These include the Princess Noura University, King Saud bin Abdulaziz University of Health Sciences (Riyadh, Al Hasa and Jeddah campuses) and the King Abdullah University of Science and Technology (KAUST). At the time of its certification in 2011, the 511,000-sq-metre, 27-building KAUST was the world’s largest platinum-certified project (the highest attainable level within the LEED system), and its credentials included: 100% wastewater reuse, 42% reduction in water use, 27.1% annual energy cost savings and on-site renewable energy generating 7.8% of its electricity needs.

Outlook

The Kingdom’s ambitions to diversify its economy with an initial emphasis on heavy industry poses a challenge to the country’s sensitive environment.

Given the interaction of global ecosystems, which do not respect national boundaries, no single solution is available as a quick fix. As such, the Kingdom is enacting an array of actions to maintain economic growth in a more environmentally sustainable manner. The country’s track record of commitment to social and economic infrastructure projects, as well as the financial benefits of freeing up oil resources from domestic use bode well for environmental investments such as green building developments, renewable energy and desalinisation facilities. Regarding demand, government efforts to create stronger regulatory and incentive schemes should lead to increased private investment in green building technology and energy-efficient appliances, potentially translating into improved energy savings.