Economic and Environmental Benefits of Energy Transition in Saudi Arabia:A Case Study of Sakaka Solar Power Plant

Abstract

In the context of global efforts to transition to renewable energy, the Sakaka Solar Power Plant represents a pivotal development in Saudi Arabia’s energy landscape, aligning with Vision 2030 goals of economic diversification and environmental sustainability. This study aims to evaluate the economic and environmental impacts of the Sakaka Solar Power Plant, Saudi Arabia's first utility-scale renewable energy project. Using a comprehensive case study approach, data were collected and analyzed utilizing key financial metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, Profitability Index (PI), and Benefit-Cost Ratio (BCR), alongside environmental impact assessments. The results indicate a positive NPV of $566 million, an IRR of 20.19%, and a payback period of 4.90 years, confirming the project's financial viability and attractiveness to investors. Environmentally, the project contributes to a significant annual reduction of 430,000 tons of carbon emissions, totaling 10.75 million tons over its lifespan. These findings underscore the potential of renewable energy projects in Saudi Arabia to deliver substantial economic returns and environmental benefits. Policy recommendations include enhancing support for renewable energy projects through financial incentives, fostering public-private partnerships, and promoting localization to stimulate economic growth and technological innovation, thereby advancing the objectives of Vision 2030. Additionally, aligning with global trends highlighted by the World Economic Forum (2023), the successful implementation of the Sakaka project demonstrates Saudi Arabia's commitment to fostering effective energy transition.