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Large Saudi Arabian companies are accepting solar power generation in an effort to save energy costs after the government eliminates electricity subsidies in the world’s largest oil exporter.
Encouraged by the cost of solar panels and the decline in state sustainability targets, several large companies in the logistics to retail sector have installed rooftop solar panels in recent months.
The Saudi Arabian government hopes that half of the kingdom’s power generation will come from renewable sources by 2030 and reach net zero by 2060.
However, experts say the key drivers of recent solar power generation could be a gradual phase from energy subsidies that began in 2018 as part of a broader economic reform, including the rollout of large-scale renewable projects.
“We invested in solar, but we’re actually paying it back,” said Mazen Fakeeh, president of Fakeeh Care Group. “We were able to reduce our carbon footprint. Still, solar is not cheap and we were able to reduce costs, albeit small, because we are not very cheap.”
PV panels installed on the roof of the company’s multistory parking lot near a pack of hospital buildings on Palestine Street in Jeddah helped save groups over SR170,000 ($45,000) with electricity bills in 2024.
“It’s a long-term investment, so it actually takes 2-30 years to look at the overall return on investment. But we’re encouraged by the initial results,” he said.
Faris Al Suleiman, co-founder of Hara Energy, a local startup that helps businesses build solar power systems, said there is a clear difference in demand between commercial and industrial clients.
“Commercial clients, malls, warehouses and more, who pay the highest electricity bill at SR0.30 per kilowatt-hour, are significantly more acceptable for rooftop solar business cases,” he said. “Industrial clients paying lower tariffs of SR0.18 are less responsive.”
Saudi Arabian companies, part of multinational groups such as IKEA and GSK, deploy solar power to encourage their parent companies with sustainability goals. Meeting these expectations is also a factor for other Saudi Arabian groups, including logistics and transportation businesses, which have connections to the Western market.
“The main purpose is to contribute in a positive way to supply chain sustainability, as at the end of the day this is also recognized by vendors, suppliers and partners.”
“We partner with over 200 suppliers from various industries around the world, and we have unique goals when we’re green.”
Still, the company saved more than SR440,000 last year by reducing energy efficiency and utility costs after installing rooftop solar panels in logistics hubs in Jeddah and Riyadh. The aim is to expand this to all major distribution centres within two years, Elmansoury said.
This shift is supported by the supply of inexpensive Chinese-made PV modules. Greenfield foreign direct investment from China into the kingdom from 2021 to October last year totaled $21.6 billion. About a third of the investments tracked by the FDI market were directed towards clean technologies such as batteries, solar and wind.
However, experts said the most important driver could be Crown Prince Mohammed bin Salman’s reforms to cut subsidies and diversify the economy, raising diesel prices by 44% last year.
“While the reduction in renewable energy costs also plays a role, the direction of Saudi government’s fiscal reform, including changes to energy subsidies, has been a very important factor in encouraging businesses to actively consider power generation options beyond fossil fuels.”
