Will the WTO Nip Saudi Arabia's Budding CSP Industry
Will the WTO Nip Saudi Arabia's Budding CSP Industry?
By Ed Cahill, Lux Research
King Abdullah City for Atomic and Renewable Energy (K.A. CARE) recently proposed a competitive procurement process for concentrated solar power (CSP) systems in Saudi Arabia. The kingdom aims to install 25 GW of CSP before 2032, and plans to start an introductory tender round of 900 MW, with winners to be announced in the next nine months to 12 months. Subsequent rounds are expected every year until the 25 GW target is met.
Saudi Arabia is lining up to be a very attractive market for CSP suppliers. However, the news comes with strict requirements that will require some planning. Projects are required to have a minimum of four hours of storage capacity and will give preference to projects with the most storage capacity. Projects need to source 50% of the total system costs from local content in the first round, with later rounds potentially increasing to 60% and 70%. This is split by component and includes some of the more technical parts such as 100% local content for storage tanks, steam turbines and generators, molten salts, receivers, and absorbers. This will be near-impossible for current CSP providers, as manufacturers of these components are not in Saudi Arabia and could cripple the Kingdom's ability to meet its 25 GW target. This proposal is far from final – K.A. CARE would be smart to lower requirements and provide a second option for companies unable to meet domestic content requirements, such as making an investment in the country equal to the cost of the non-domestic content.
Saudi Arabia is trying to build a domestic CSP industry, both upstream and downstream, while replacing oil-burning power plants. The country plans for CSP to cover more than half of its 41 GW solar target by 2032, even though PV systems are significantly cheaper, in order to foster this domestic industry. However, the World Trade Organization (WTO) has been bearing down on domestic content requirements, as it found Ontario's domestic content requirement violates international law, and is currently investigating India. If this proposal from K.A. CARE goes through, expect the WTO to target Saudi Arabia, as well. Of course, the effectiveness of the WTO remains in question. Ontario still managed to attract significant business in the years before the WTO made a final ruling and there is no definite resolution to Ontario and India's domestic content requirements despite the WTO's stance. The WTO's lack of teeth may result in K.A. CARE moving forward with the domestic content, and regardless of the WTO, clients interested in CSP systems and components should take a close look at locating production in Saudi Arabia simply due to the expected volume of installations.
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SEMI, The Grid - April 2013