Other BriefingsChina and Saudi Arabia Collaborate on Energy Transition
China and Saudi Arabia are collaborating to accelerate the energy transition towards renewable sources, marking a strategic move towards sustainability and economic diversification.
By Giulia Interesse
In today’s world, where environmental issues demand urgent attention, countries are realizing the importance of shifting towards renewable energy sources. Recently, China and Saudi Arabia announced their collaboration to drive this crucial transition.
At the Boao Forum for Asia conference, Saudi Energy Minister Abdulaziz bin Salman Al-Saud expressed Saudi Arabia’s willingness to work with China and other key economies on this endeavor. This partnership highlights a shared commitment to addressing climate change and promoting sustainable development globally.
In this article, we explore the implications and potential outcomes of this collaboration between two influential players in the energy sector, examining how their joint efforts could shape the future of renewable energy and environmental protection.
Saudi Arabia’s commitment to energy transition
Saudi Arabia’s economy heavily relies on petroleum and its related sectors, boasting nearly one-fifth of the world’s known oil reserves. The discovery of oil in 1938 transformed the country’s economic landscape, with significant expansion occurring post-World War II, notably with the establishment of the Ras Tanura refinery in 1945. By the 1970s, electricity production saw rapid growth, transitioning from decentralized to centralized systems under state supervision. In 2000, a centralized state entity gained control over all electricity production, primarily utilizing diesel and natural gas for power generation.
In recent years, Saudi Arabia as well as the other Gulf producers have shown interest in diversifying into nuclear and renewable energy sectors, driven by the need to find alternatives to oil. Demographic and economic growth in these countries from the Gulf Cooperation Council (GCC) has led to increased energy demands, and transitioning to renewable and nuclear energy sources could free up oil for export and address local sustainability concerns.
In particular, the Saudi Arabian energy landscape has undergone significant transformation driven by the ambitious goals outlined in the National Vision 2030. This strategic plan aims to diversify the country’s economy, reduce its dependence on oil, and enhance public services across various sectors, such as healthcare, education, infrastructure, recreation, and tourism.
Notable reforms, including substantial energy subsidy adjustments, have been implemented alongside rapid growth in the renewable energy sector. With global oil prices and demand on the decline and domestic energy needs on the rise, a swift transition away from oil has become imperative.
China-Saudi Arabia growing collaboration in energy transition
The collaboration between China and Saudi Arabia offers significant benefits for Saudi Arabia’s renewable energy ambitions. Partnering with Chinese firms known for their expertise in green hydrogen, ammonia production, and renewable energy technologies provides Saudi Arabia with access to valuable resources and knowledge to fast-track its shift towards sustainable energy.
In 2023, for example, Saudi Arabia’s Acwa Power, a leading private utility developer, inked preliminary agreements with two Chinese firms to bolster collaboration in green hydrogen, ammonia production, and renewable energy sectors. The agreements, signed with state-owned China Southern Power Grid International Company and clean energy company MingYang Smart Energy Group, signify a strategic move towards fostering sustainable energy partnerships between Saudi Arabia and China. Mohammad Abunayyan, Chairman of Acwa Power, expressed enthusiasm about strengthening cooperation with Chinese partners to advance green hydrogen and ammonia initiatives, as well as to explore opportunities in global renewable energies and integrated smart energies.
Saudi Arabia’s decision to join the Shanghai Cooperation Organisation (SCO), a China-led political, security, and trade alliance, highlights its commitment to aligning its interests with China’s. Although Saudi Arabia will not be a full member, its partial membership underscores its willingness to deepen cooperation with China in various strategic areas.
During the 10th Arab-China Business Conference, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, emphasized the importance of collaboration with China in trade and energy sectors. Bin Salman acknowledged China’s leadership in renewable energy and highlighted the value of partnership with China in leveraging its expertise and market potential. This sentiment reflects Saudi Arabia’s recognition of the shifting global dynamics and its proactive approach towards building mutually beneficial relationships with key stakeholders.
Furthermore, Saudi Arabia’s substantial agreements with China, such as the US$5.6-billion deal with Human Horizons to manufacture electric vehicles (EVs), demonstrate its commitment to deepening ties with China beyond traditional sectors like oil and gas. These agreements, totaling US$10 billion across various industries, underscore the Kingdom’s strategic shift towards economic diversification and its alignment with Vision 2030 goals.
China’s broader role in the GCC’s energy transition
China is actively contributing to the energy transition efforts of GCC countries as a whole through various initiatives and collaborations. As China solidifies its position as a dominant player in the renewable energy supply chain, it is leveraging its expertise and resources to support the GCC’s commitment to clean energy. This partnership is not only strengthening economic ties but also facilitating the exchange of technological advancements and sustainable practices between the two regions.
One significant aspect of China’s contribution is its involvement in renewable energy projects within the GCC, particularly in solar energy. Chinese companies like Trina Solar are investing in large-scale photovoltaic plants in GCC countries like the United Arab Emirates (UAE), aligning with the region’s vision for clean energy development. Additionally, China’s expertise in battery technology and wind energy production is helping to advance the renewable energy sector in the GCC, providing valuable resources and knowledge to support the region’s energy transition goals.
Furthermore, China’s financial institutions are playing a crucial role in financing energy transition projects in Gulf countries. As reported by the World Economic Forum, sovereign wealth funds in the GCC are partnering with Chinese financial institutions to establish financing platforms aimed at supporting clean energy initiatives. This collaboration not only enhances the funding available for renewable energy projects but also promotes the integration of capital markets between China and the GCC, fostering greater financial cooperation and investment opportunities for sustainable development.
