Saudi Arabia can help solve net-zero innovation gap
At COP28, the world’s attention is firmly placed on a collective target that we have set ourselves for the year 2050 — to limit global average temperatures from rising more than 1.5 degrees Celsius above pre-industrial levels.
Since that target was agreed at COP21, significant progress has been made by governments and the world’s largest companies, setting out their strategies to decarbonize the global economy and reach net-zero emissions by 2050.
But strategies that span 30 years have gaps, which are important to identify, define and work toward solving.
One such gap is the amount of investment needed to create a net-zero economy, which most estimates set at some $100 trillion between 2020 and 2050. As things currently stand, that would translate to rapidly increasing annual investment into decarbonization by $3 trillion to roughly $5 trillion — or 2.5 percent of global gross domestic product. This is a sizeable gap, but global investors are quickly waking up to the financial opportunity in front of them.
Another gap matter is a fair energy transition that ensures we are decarbonizing the global economy while maintaining affordable and reliable energy and supporting developing nations to continue their growth, unhindered by a more expensive energy system. The disruption we have seen over the last few years, following the COVID-19 pandemic and Ukraine crisis, has put this issue sharply into focus and now plays a central role in all discussions between political, business and energy leaders at events like COP, WEF and G20.
However, a factor which is not discussed enough is the innovation gap. Many net-zero strategies rely on assumptions about our ability to develop and implement technologies that have not yet been proven at scale.
Green hydrogen, carbon capture utilization and storage, direct air capture, bioenergy with carbon capture, enhanced rock weathering are all decarbonization pathways that stand to make a seismic impact on our ability to reach net zero without limiting economic growth.
But all require significant innovations to take place in research and development if they are to become tangible solutions that can deliver real impact on our pathway to net zero.
So, how can we address this gap?
History provides us with many examples of how game-changing innovation takes place — the technology boom of the 1960s in Silicon Valley; the birth of the automotive industry in Detroit at the turn of the 20th century; the Financial Revolution that happened in the 1600s between Amsterdam and London.
All these periods of rapid, disruptive change happened in highly localized areas benefiting from an ecosystem that fostered innovation by bringing together entrepreneurs, investors and businesses as well as governments and institutions. The right people meeting at the right time.
For the net-zero innovation gap to be addressed, we need to identify and cultivate ecosystems where the same can be true today.
Saudi Arabia is in a unique position that could place it at the center of net-zero innovation.
A clear national vision
Saudi Vision 2030 has set a bold new direction for the Kingdom, its society, economy and people. Decarbonization plays a key part in that strategy.
Saudi Arabia has set itself the ambitious target of scaling its renewable energy capacity to support 50 percent of the country’s energy consumption needs by 2030. Since 2019, three solar and wind farms have come online, with six more under construction, for total a capacity of 10 gigawatts.
Longer-term endeavors such as the 40 GW solar project in Al Jouf province and the 16 GW wind farm in Tabuk province would put Saudi Arabia among the top 15 renewable energy producers globally, all within just a few years of having built its first solar power facility.
Moreover, Saudi Arabia’s giga-projects such as NEOM are investing significant resources into innovating renewable energy technologies and using them at unprecedented scale. ENOWA, NEOM’s energy and water company, will supply the budding community on Saudi Arabia’s northwestern coast with 100 percent renewable energy to power its regions and residents, while also supplying desalinated water, and creating exportable green hydrogen.
By setting a clear target in Saudi Vision 2030, the country’s largest companies and projects are being challenged to implement decarbonization pathways at a scale that provides much needed proof of viability for the rest of the world to follow.
Equally as important, government initiatives are also ensuring that local communities and small businesses are benefiting from the increased focus on renewable energy investment. In the city of Taif, the government is investing in a number of wind projects which are expected to create hundreds of jobs and reduce energy costs for local residents. Solar-powered water irrigation systems were piloted in Al Jouf in 2016 for local farms, which have since been rolled out across Saudi Arabia — and more recently in Yemen.
Vibrant investment ecosystem
At every level, Saudi Arabia’s investment landscape is supporting the development of innovative, environmental, social, and corporate governance focused companies that are leveraging science and technology to create real impact on decarbonization pathways — both regionally and globally.
Saudi Arabia’s Public Investment Fund is financing the Kingdom’s giga-projects that are finding innovative approaches to harnessing renewable technologies at scale, supported by partnerships with some of the world’s most innovative energy and utilities companies. It has also invested heavily to support ACWA Power to grow its renewable energy capacity.
In 2022, Aramco announced its $1.5-billion Sustainability Fund to find and invest in local and global businesses that will support a stable and inclusive energy transition. Aramco’s National Champion initiatives — Lab7, Wa’ed and Taleed — are designed to support Saudi businesses from pre-seed to unicorn level. A core focus for these initiatives is supporting businesses that advance circular economy principles targeted at reducing the carbon footprint of the manufacturing sector and advancing clean energy technology.
Wa’ed Ventures has supported innovative sustainability-focused businesses such as Red Sea Farms, which is pioneering techniques that drastically diminish both carbon and water footprints in the food sector. By harnessing saltwater, introducing unique humidity control methods, and tapping into solar energy, they are enabling previously unthinkable cultivation in harsh terrains.
Venture capital firms like Raed, SEEDRA, and Hala are strategically positioning themselves in the green energy space, funding both local and global sustainability initiatives. For example, NOMADD Desert Solar Solutions, a Saudi and Singaporean startup, has revolutionized solar panel cleaning technology, drastically reducing water consumption — core aspects that will make solar energy viable in desert landscapes.
The country has another significant resource: a large young and tech-savvy population. Over 60 percent of Saudi people are under the age of 30 and are increasingly focusing on science, technology, engineering, and mathematics disciplines, leveraging the Kingdom’s world-class universities. The investment ecosystem at their fingertips means that significant resources will be available to those who can demonstrate an ability to bring decarbonization pathways to scale, both in the Kingdom and beyond.
As the world races towards net zero, the question remains: how can we leverage the potential powerhouses like Saudi Arabia to close the innovation gap? The Kingdom is already harnessing its vast energy resources, national vision, investment ecosystem and young talent.
What is needed now is a greater focus on demonstrating impact on the world stage, supporting knowledge sharing and collaboration between the Kingdom’s innovators and global leaders in decarbonization, ensuring that the right people can meet at the right time to spark game-changing innovation. As the world races towards net zero, the question remains: Can we leverage the potential powerhouses like Saudi Arabia to close the innovation gap?
• Roberto Croci is director, Transformation Office at the Public Investment Fund and advisory board member of Carbonaires.