Speed of essence, Saudi Arabia on track to 2060 net-zero goals: ACWA Power CEO Investing in renewable energy sources is no longer just a matter of ideology but “pure business sense,”

RIYADH  (  Web  News  )

“If you look at renewables [sector], it’s not just that you do them for the environment, but you do them because they are the fastest, the most effective, the cheapest source of electricity that you can achieve,” Arcelli said, speaking on the sidelines of the Future Investment Initiative (FII) in Riyadh.

The energy and desalination company is a leading MENA regional player in the state-backed transition to developing renewable energy sources. It operates 75 assets with an investment value of $79.4 billion (SAR 297.75 billion) across 12 countries, of which 46.6 percent are renewables.

Most of the new projects that ACWA Power undertakes are contributing to the Kingdom’s net-zero goals by 2060.

Arcelli said speed was a crucial component in this shift.

“We talk about the energy trilemma, but I find it to be a quadrilemma,” he added.

The energy trilemma is a framework of three markers for policymakers in the sector: Security, sustainability and affordability. Arcelli’s “quadrilemma” adds speed to the equation.

In Saudi Arabia, the energy sector is meeting those markers currently. “However, we also need to be fast to achieve those goals,” said Arcelli, who has more than 20 years of experience in the energy sector. He had previously held senior positions in Italy’s Enel and the European EPH Group.

“The scale of the transformation that is going on in Saudi Arabia is one of the most ambitious decarbonization projects in the world,” he added.

Arcelli also highlighted the factors helping speed up the equation, including the availability of real estate, the ease of obtaining permits, abundant natural resources, and a rapid opening up of the country.

“In Europe, it’s challenging to get permits because there’s very little land; it’s very dense. In some of the other countries where we operate, like Indonesia and Bangladesh, it’s difficult to find big portions of land. The solar projects in those countries tend to be smaller and in terms of growth, they are not that fast.”

He compared those countries to Saudi Arabia, the UAE and Morocco “where we’ve been very successful.”

“If you think about it, we have here in Saudi Arabia three times the sun hours that you have in Europe. So that makes the electricity so cheap,” he explained.

Electricity in the region costs roughly $20 per megawatt-hour (MWh), while in Europe, it costs anywhere between $80 and $100 per MWh.

Looking ahead

ACWA Power has yet to make plans to convert the entirety of its portfolio to purely renewables-based sources for at least the next 20 years, Arcelli said. This estimate, he said, was based on account of maintaining a reliable and constant source of energy, which only fossil fuel sources can achieve now.

Since current energy storage solutions are neither cost-effective nor energy-efficient – as would be required in instantaneous, high-demand situations – there has been global apprehension to shut down conventional energy sources entirely.

As for an alternative, battery storage, concentrated solar power and pumped storage are all viable. “But you also have to look at the overall system. I firmly believe that nuclear will play a role,” the ACWA Power chief said.

“I think that gas-fired generation for the next few decades will be very important, particularly in countries with a big growth of electricity demand, and particularly if we don’t want to resort to coal,” he said, referring to Europe’s increase in coal usage, following the launch of Russia’s war on Ukraine last year.

Currently, Arcelli said ACWA Power plans to continue investing in the Gulf and Central Asia, which accounts for 90 percent of their investment. The firm is also investing in China and looking at opportunities in Africa and the Far East.

“For the time being, Europe is a customer for the green molecules that we can produce,” he said.

The Saudi stock exchange-listed firm signed $746 million worth of agreements on the sidelines of the FII event. A non-binding heads of terms agreement was signed with infrastructure investment firm EIG for projects in the Gulf and Uzbekistan. A $246 million funding agreement was signed with the European Bank for Reconstruction and Development (EBRD) and the OPEC Fund for International Development to develop a 240-megawatt wind power project in Azerbaijan.

Arcelli said they do not have plans to invest in the US directly, but will continue to monitor the situation.

After years of partnerships with global entities, Arcelli said it is “time to bring the new Saudi Arabia to the world to do things better in the countries where we operate.”