Saudi’s ACWA Power leading the global awakening towards a greener future

The portfolio of the Saudi-based ACWA Power, whose legacy stretches closes to nearly two decades, comprises 64 assets in operation, advanced development, or construction with a total investment cost of SAR 251.7 billion (USD 67.1 billion), with capacity to generate 42.7 GW of power and produce 6.4 million m3/day of desalinated water per day.

What began as Arabian Company for Water and Power Projects in 2004 transitioned into International Company for Water and Power Projects, or ACWA Power, in 2008, a powerhouse whose very ethos is around reliably and responsibly delivering power and desalinated water at low cost and that saw the value and importance of renewable energy early on – and has not looked back since.

ACWA Power’s renewable energy projects span the globe – including Saudi Arabia, UAE, Morocco, Egypt, Oman, South Africa, Uzbekistan, Azerbaijan – and its latest foray will see it, in conjunction with Air Products and Neom, take a noteworthy role in the world-scale green hydrogen-based ammonia production facility powered by renewable energy.

As such, the developer, investor and operator of power generation and desalinated water plants is leading the region’s green hydrogen and renewable energy transformation having accurately identified the opportunity to replace pollutant, and costly, energy sources with more efficient and eventually less costly renewable energy sources, including green hydrogen.

At the helm of all this transformation is the CEO and Vice Chairman of ACWA Power – Paddy Padmanathan who served as the President and CEO of ACWA Power since 2007, and is a key member of the company’s leadership team.

A seasoned engineering and energy expert with over 40 years of experience, he has spearheaded  ACWA Power’s expansion from a start-up in 2004 to where it is today; a leading developer, owner and operator of power generation, desalinated water and green hydrogen production plants.

Paddy has guided the company’s cost leadership and business strategy which is focused on reliably and responsibly delivering electricity and desalinated water, at low cost. He is also steering ACWA Power’s leadership in renewable energy, enabling it to be at the forefront in reducing the cost of clean energy on a global scale.

With such a dedicated career path, it is no surprise that Padmanathan is passionate about sustainability and the work ACWA Power does on renewable energy. His expertise and ardour shines through as he vigorously takes Arabian Business back to when the company first entered into the renewable energy market – back in 2010 as it ventured out of Saudi Arabia – and how it became an industry leader in that space, highlighting the key challenges and how ACWA Power resolved them.

In a wide-reaching interview with Arabian Business, Padmanathan also eagerly discusses the way forward for ACWA Power, talking about the company’s significant role in championing and supporting the energy goals outlined in Saudi’s Vision 2030 and its strategy as it continues to shine the light – and energy – through the next decade.

Read the interview to learn more about Padmanathan and the company’s strength behind using the best renewable energy sources in its projects in the region and the markets in which it operates, the company’s leadership role in cost reduction, utilisation of innovative technologies, the investments it attracts, and the public-private partnerships it leads, in addition to its extensive experience in developing and operating projects that deliver sustainable long-term value in energy and water desalination.

Over the past two years, we’ve seen an increased focus on sustainability, renewable energy and ESG targets among both global and regional corporates. Why do you believe this is the case?  

Even before the Covid-19 pandemic, the world was starting to get very concerned about climate change as environmental catastrophes were increasing, and there was more science showing that we were doing things that perhaps were harmful to the planet.

Back then, the emphasis was on the E side of ESG, the environmental side, but even bits of the other, the social and the governance parts, were starting to be recognised as issues that we needed to focus on to have enduring businesses.

Then came the coronavirus pandemic that knocked everybody sideways. For all its tragic consequences, one of the positive things the pandemic did was that it forced us to stay at home, working wherever and whenever we could but at the same time, spending more time with our immediate family, and inevitably worrying about the environment around us and thinking about life in general.

We saw the shift right away through 2020 to 2021 and, as we come into 2022, we are seeing more and more public concern and awareness across the world around the environment and people wanting to live a meaningful life.

ACWA Power has been among the first companies to pay close attention to renewable energy since 2010 and we have been playing a leading role in enabling the shift to cleaner solutions. Our colleagues in the private sector have also come to recognise that there needs to be this shift towards renewable energy sources.

How is ACWA Power driving energy transition?

We are in a very critical company which has transformed itself into the most impactful company in the context of the future of the planet with climate change, and leading the energy transition.

We started out as a business focused on reliably delivering water and power in Saudi Arabia, using oil to produce power for desalinating water before getting into gas.

But back in 2010, as we started to step outside the kingdom to grow a balanced business, we expanded into South Africa, Morocco, and a couple of neighbouring countries. The first projects that were being tendered there, in the power sector, were renewable energy projects so we got into that.

As we got into renewable energy, we realised its real compelling value proposition. Quite apart from the pollution aspect of fossil fuel, it is a market-priced commodity. In power generation using oil and gas, 60 percent of the cost is fuel, and it oscillates depending on the market, whereas renewable energy can be delivered at a very stable price.

We started from day one leading the market of renewable energy. That first project in Morocco concentrated solar power technology and we delivered tariffs that were 40 percent lower than the prevailing ones. We did exactly the same thing in 2015 in Dubai when we got into photovoltaic energy project.

In countries where sun and wind are available in abundance, especially in developing countries, renewable energy becomes competitive, even compared to fossil fuels.

We are privileged to have been in that position of driving cost down and, no surprise, continuing to grow in volume the amount of work that we do. And particularly as not only are people concerned about carbon emissions, but also now it’s the most cost-compelling way to do it anyway.

What are the challenges regarding the development of green hydrogen as a renewable energy source for the region and how is ACWA Power successfully addressing them?

The fact of the matter is we use energy for everything and not everything is electrified. Transportation is moving towards electric, but it’s a very slow, long process.

Industrial consumption that requires very high heat was reliant on carbon but it turns out hydrogen is an equally fantastic molecule, which doesn’t have the harmful effect of carbon. Hydrogen is a very powerful molecule that can help us decarbonise by 30 to 40 percent of all the energy that we consume.

For the moment, hydrogen has been produced for certain specific industrial purposes using fossil fuels but there is a renewable way of producing hydrogen by electrolysis. With renewable energy being available at a very low cost, electrolysis using it becomes potentially cost competitive.

Because it’s early days, the cost is still high but, over time, we can bring it down fairly fast to become at parity with fossil fuels, and possibly even lower.

It’s a transformational opportunity and there’s no going back on it. We’re very privileged to be in a place where the resources are available – not just the solar resources but also the land resources, credit worthiness and the vision of the leadership who are embracing it.

The Kingdom of Saudi Arabia has wholeheartedly absorbed the need for energy transition, is really championing the growth of renewable energy in the country and now positioning itself as a future provider of green hydrogen at scale to itself and to the world.

In time to come, for the volume to grow, you also need a bedrock of domestic consumption. So, in the Kingdom itself and in the region, a hydrogen economy should be developing, and it will for sure. These are all industrial countries so industrial processes will convert and long-distance transportation will start to use hydrogen etc.

We, the producers, need to keep focusing on bringing the cost down. Then the environment around us and the policymakers and industrialists and consumers need to start working on creating the market to utilise the hydrogen.

What is ACWA Power’s role in NEOM? 

Even though we come at it as a significant partner, we are a co-investor, with all three of us (ACWA Power, Air Products and NEOM) investing equally in the venture to produce and convert the power by using the electrolysis platform to produce hydrogen, convert it to liquid ammonia and take it through to the port of NEOM. Air Products will be the exclusive off-taker of the green ammonia and intends to transport it around the world to be dissociated to produce green hydrogen for the transportation market.

ACWA Power is involved as an investor, developer, owner and an operator, the same role we play in all projects we develop and invest in.

We are working together with Air Products on how best to integrate the energy solution with the hydrogen production facility in order to optimise and efficiently minimise cost and maximise production and performance. So, we are involved in concept engineering but we will be outsourcing the EPC contract.

The plant will be producing 240,000 tonnes of hydrogen a year, which is about the whole amount of green hydrogen produced in the world today.

Apart from NEOM, we are also extremely excited to be developing another Our global giga scale project in the Red Sea region. The Red Sea Development Company (TRSDC), awarded its highest-value contract to date to a consortium led by ACWA Power to design, build, operate and transfer The Red Sea Project’s utilities infrastructure.

The project, spanning an area the size of Belgium, is a remarkable one in terms of vision, ambition, size and a scope that pioneers responsible regenerative tourism, preserving the planet for future generations while providing a fantastic experience for tourists.

It will be the region’s first tourism destination powered solely by renewable energy. A project of this size has never been achieved on this scale anywhere in the world.

We’re proud to be the provider of all utility services to the very exacting zero carbon emission, zero waste and zero plastic standards and to support yet another path breaking project that is helping to meet the clean energy ambitions of Vision 2030.

All of the utilities will be delivered under a single agreement, unique for a contract of this kind and our role includes the provision of renewable power, potable water, wastewater treatment district cooling and solid waste treatment for 16 hotels, an international airport and infrastructure that make up Phase 1of The Red Sea Project in Saudi Arabia.

The scope also includes the construction of three seawater reverse osmosis (SWRO) plants totaling a capacity of 32,500 cubic meters per day at the project, designed to provide clean drinking water, a waste management centre and an innovative sewage treatment plant.

With sustainability and regeneration at the heart of the production, we are proud to be providing all of the utility services to the very exacting zero carbon emission, zero waste and plastic standards.

Undoubtedly, the Red Sea Project is remarkable in its vision and ambition regarding regenerative tourism, preserving the planet for future generations while creating a fantastic and unique experience for tourists.

Can you comment on Saudi’s Vision 2030 when it comes to energy transition and explain the vital role you play in that?

The Kingdom has fully embraced the need to decarbonise and therefore to transitioning its energy systems to increase renewable energy content in it.

There are some very specific targets that Saudi Arabia is working towards by 2030, one of which is having at least 50 percent of the power generation capacity be renewable energy. Within that, 30 percent of that will be developed through an agency in the Ministry of Energy, procured on a competitive tender basis. The balance 70 percent will be developed by a program led by the PIF, which will be a straightforward negotiated development activity.

As ACWA Power, we are the development partner of PIF to deliver that 70 percent, a very significant piece of the energy transitions the kingdom has embraced that we have been entrusted with the responsibility for. We are also actively participating in the 30 percent that is tendered and putting our best foot forward, therefore keeping the competition going, and ensuring that value gets delivered – whether it is by us winning or others winning against us.

The Kingdom of Saudi Arabia has recognised the opportunity of green hydrogen for itself and for export. Through that first project that we structured, we are showcasing what is possible and the Kingdom has developed a significant ambition of possibly developing nine other projects of that same scale by 2030, and we’re very supportive of that. We would like to participate and play our role in the green hydrogen economy as well.

The third part, all of which is intrinsic within this, is very much to do with industrialising Saudi Arabia, creating more employment opportunities and looking beyond just industrialisation in manufacturing to knowledge creation, invention and innovation.

Over the next 10 years, we will be generating a lot of economic activity between renewable energy and green hydrogen projects, so we should be able to focus that to deliver so many other value propositions, bring technology in and localise and add manufacturing capacity as fast as possible in all these segments. We would also like to support innovation, research and development because there’s a lot of work yet to be done in this aspect.

Since October 2021, the company has been listed on the Saudi Tadawul after a successful initial public offering, where 81.2 million shares were offered for public subscription, representing 11.1 percent of its capital, and the shares were covered by 248 times.

As part of its commitment to environmental, social and governance standards, the company is decarbonizing its fleet by not only focusing on developing new renewable projects but also capturing opportunities in relation to its existing fossil-fuel assets. Recent announcements of converting the Hassyan IPP in the UAE to work on gas instead of coal and sale of one of its oil-fired assets in Saudi Arabia bring the company a step closer to its commitment to achieving a zero-emissions by 2050.

ACWA Power has set world records for the lowest renewable energy tariffs.

Could you tell us more about your role as leaders in the water desalination sector?

ACWA Power is a global pioneer in applying reverse osmosis technology towards utility-scale desalination projects. We commenced our journey with the Shuaibah Expansion IWP which was launched in the fourth quarter of 2009, supplying 150,000 cubic metres of water per day. This facility was the first project of its kind at the time to deploy reverse osmosis technology with a production capacity at this scale. ACWA Power then commissioned Shuqaiq IWP in the second quarter of 2011 with a production capacity of 212,000 cubic meters per day, which was another testament to the effectiveness of reverse osmosis technology.

Since then, ACWA Power has continued to harness advanced reverse osmosis technology and developed its capabilities to maximise production capacities. Our Rabigh 3 Independent Water project in KSA which recently achieved a Guinness World Record for being the largest reverse osmosis plant in the world, with a producing capacity of 600,000 cubic metres per day, is delivering water to one million homes in the Kingdom.  With the lowest tariff and environmental footprint , Rabigh 3 has certainly set a global benchmark.

This remarkable achievement is a result of the ambitious strategic Vision 2030 which is inspiring and driving pioneering projects that globally stand out in terms of size, cost, operational and environmental efficiency.

As a business, we are firmly committed to localization across our projects in all geographies. Rabigh 3 IWP is led by a talented 100 percent Saudi workforce and currently has a 40 percent localisation rate, which includes Saudi companies that participated in the manufacturing of vital reverse osmosis technology components such as the membranes used to purify seawater from salt, adding a “Made in Saudi” stamp on technologies that comply with the highest international quality standards.