The requirement for local content in Saudi Arabia’s early solar power tenders could mean it misses out on global cost cuts, according to IHS.
The country is preparing for its first large procurement phase, anticipated for early 2014, with 500MW to 800MW of capacity on offer.
“The outcome of this first tender in Saudi Arabia will serve as a benchmark for future tender rounds,” said Henning Wicht, senior director of solar research, IHS.
“Expected technology costs are poised to play a key role in determining the success of this tender. While PV module production costs are expected to drop by half during the next decade, for Saudi Arabia to benefit from global price reductions its supply chain for modules must be transparent and not overruled by mandates for local content,” he warned.
IHS estimates that Saudi Arabia will install 1,481MW of solar between 2013 and the end of 2017 giving it an 18% share of Middle East and African installations. Only Israel and South Africa are expected to make a larger contribution to the Middle East and Africa's capacity additions.
Saudi Arabia has set a 16GW target for 2032 but until recently, there have been few signs of progress from outside the country.
“Saudi Arabia is definitely a market to watch,” said Josefin Berg, senior analyst for solar, IHS. “However, this market is still in flux as the time frame and requirements for the planned tenders remain under consultation.”
November will see a major PV trade event bring together legal and technical experts with potential project developers and manufacturers interested in operating in the Saudi Arabian market.
A detailed analysis of Saudi Arabia's solar procurement process can be found in Solar Business Focus.