Saudi Arabia, Bahrain Discuss 2 GW PV Initiative

• Bahrain and Saudi Arabia team up for a groundbreaking solar power plant to fuel Aluminium Bahrain’s growth amidst rising energy costs and strict environmental regulations.

Bahrain is negotiating with Saudi Arabia to develop a 2-GW solar power plant, primarily aimed at supplying clean electricity to Aluminium Bahrain (Alba). The initiative comes as Alba faces mounting energy challenges due to stringent environmental regulations and surging energy costs, according to CEO Ali Al Baqali. High gas prices are notably impacting the company's operational expenses.

Alba is largely owned by Bahrain’s sovereign wealth fund, Mumtalakat, which holds over 69%, while Saudi Arabia's Sabic Industrial Investment Co. owns a 20.6% stake. In 2023, Alba produced 1.62 million tonnes of aluminium, making it the largest aluminium producer outside China.

How will Bahrain and Saudi Arabia's solar initiative impact Aluminium Bahrain's energy costs?

- Reduction in Energy Costs: The development of a 2-GW solar power plant will enable Aluminium Bahrain (Alba) to secure a more stable and potentially lower cost of electricity compared to relying solely on conventional energy sources, particularly natural gas, whose prices have been volatile.

- Sustainability Initiatives: By utilizing solar power, Alba can align itself with global sustainability efforts, reducing its carbon footprint and complying with increasingly stringent environmental regulations. This shift will help the company in securing international contracts, as many global customers prioritize sustainable practices.

- Long-term Energy Security: The solar initiative is expected to enhance energy security for Alba by diversifying its energy supply. This is especially important in a region where energy prices can fluctuate due to geopolitical factors or changes in global markets.

- Incentives for Local Industries: The collaboration between Bahrain and Saudi Arabia could lead to evolving policies aimed at promoting the use of renewable energy within local industries. This could create competitive advantages for Alba compared to other aluminium producers that may not have access to similar renewable energy resources.

- Potential for Cost Predictability: Solar power, once installed, has lower and more predictable operating costs, which could help Alba in financial forecasting and strategic planning, allowing for better budget management in the long run.

- Impact on Profit Margins: A significant reduction in energy costs through solar energy could directly improve Alba’s profit margins, making it more competitive in the global aluminium market. Lower operational costs could also allow for reinvestment into the business or innovation in production processes.

- Job Creation and Economic Growth: The solar power project may create jobs not only in the construction and maintenance of the solar installations but also in associated sectors. This could stimulate the local economy and create a skilled workforce in renewable energy.

- Strengthening Bilateral Relations: The collaboration on renewable energy projects may strengthen economic ties between Bahrain and Saudi Arabia, fostering a cooperative approach to addressing regional energy challenges and encouraging further investments in clean technologies.

- Influencing Energy Policies: The scale of the initiative may encourage both governments to prioritize renewable energy policies, potentially leading to favorable regulations, subsidies, or incentives for industries that adopt clean energy solutions.

- Increased Competitiveness: By integrating solar power, Alba can potentially lower its production costs relative to competitors who do not utilize renewable energy sources, enhancing its position in the global aluminium market against rivals from countries with cheaper energy sources.