Last month, at the China-Arab Cooperation Forum, 30 investment agreements of USD10 billion were signed between China and the Arab states, covering multiple fields including renewable energy, agriculture, real estate, mining, tourism, healthcare, etc.
"We don’t have to compete with China, we have to collaborate with China,” said Saudi Energy Minister Prince Abdulaziz bin Salman. He added that there is value in working with China because they have taken the lead in getting the “right manufacturers” especially in the renewables space. “We will never go again to this zero-sum game.”
In fact, in October 2021, before the 26th United Nations Climate Change Conference, Mohammed bin Salman, the Crown Prince and Prime Minister of Saudi Arabia, has pledged to achieve net-zero emissions by 2060.
As the largest oil exporter in the world, countries in the Middle East are now vigorously promoting energy transition, and they found that China's advanced photovoltaic technology and products are good choices for them.
-- Energy Transition in Middle East
Since 2017, Saudi Arabia has launched the National Renewable Energy Program (NREP), to achieve 58.7GW of new energy power generation capacity by 2030, contributing to 50% of the total power generation capacity. Among them, the installed capacity of photovoltaic power generation will be in the first place, expected to reach about 40GW.
On January 30 this year, Saudi state television quoted the Saudi Energy Minister as saying that the country plans to invest 1 trillion Saudi riyals to produce clean energy.
Besides, under the triple pressure of falling oil prices, declining market share, and depletion of resources, the traditional single economic structure that relies heavily on oil has become unsustainable. Saudi Arabia therefore began its energy transition.
Similar to Saudi Arabia, many oil-dependent countries in the Middle East like the United Arab Emirates, Oman, Jordan, and Kuwait are accelerating their transition to new energy, among which the photovoltaic power has been one of the most developed.
According to statistics from the Middle East Solar Industry Association (MESIA), the current value of the photovoltaic market in the Middle East and North Africa is about USD 20 billion.
The low-carbon energy industry in the Middle East and North Africa region will reach USD 257 billion by 2030, and photovoltaics will account for 50% of the total value.
-- Chinese Photovoltaic Companies are Speeding Up in the Middle East
According to InfoLink, in 2022, the Middle East imported 11.4GW of photovoltaic modules from China, up 78% compared to 2021.
Among them, Saudi Arabia imported 1.2GW of photovoltaic modules from China in 2022, a 10-fold increase compared to the demand of less than 100MW in 2021. The UAE imported about 3.6GW of photovoltaic modules from China in 2022, up 340% YoY, and become China's largest module customer in the Middle East.
At the same time, Chinese photovoltaic companies are speeding up their efforts to snatch all possible opportunities in the Middle East market.
On May 24 this year, TCL Central announced to establish a joint venture with Vision Industries Company and to build a photovoltaic crystal wafer factory project in Saudi Arabia.
Before this announcement, Jinko Solar and LONGi have developed businesses in the same area.
In December 2022, Jinko Solar signed a memorandum of understanding with ACWA Power, to provide 4GW of N-type Tiger Neo modules for photovoltaic projects.
LONGI and Sungrow have also reached cooperation with ACWA Power. In 2022, LONGi completed the delivery of 406MW photovoltaic modules to the Red Sea New City project. Soon Sungrow provided a 536 MW/600 MWh energy storage system for the same project in 2023.
Except for private photovoltaic giants, state-owned enterprises such as China Southern Power Grid, State Power Investment Corporation, China Energy Engineering Corporation, and China General Nuclear Power Corporation have also signed relevant new energy cooperation agreements with Saudi Arabia.
As more and more Chinese companies enter Saudi Arabia, the competition in this trillion-scale market has become increasingly fierce.
-- Making Money Is Not Easy
Chinese photovoltaic companies are optimistic about the Middle East market, but making money in this area is not easy.
Firstly, environmental challenges determine that this market has high-quality requirements for photovoltaic projects.
Photovoltaic power plants here are often built in remote deserts, and the accumulation of wind and sand in the desert environment will seriously affect the power generation efficiency of photovoltaic modules.
According to the Qatar Environment and Energy Research Institute (QEERI), in Qatar, the daily power generation will drop by about 50% due to the dirt.
In terms of climate, the high temperature, high humidity, and high salinity conditions in Middle East ask higher requiements to build a power station here. Photovoltaic modules must resist wind, sand, and high temperatures and must have strong resistance to salt, alkali, and corrosion.
However, the technical requirements are high though, the bidding prices here have repeatedly hit new lows in the industry. It is related to the bidding mechanism in the Middle East.
It should be noted that at present, few Chinese contractors have directly become investors, and most of them participate in the projects in the EPC mode, under which the contract price will not be adjusted. Therefore, the EPC contractor will take the risk when the prices of equipment and raw materials increase.
Risks often coexist with opportunities. How to ensure revenue while grabbing the market is what Chinese photovoltaic companies need to think about.