By: Dorothy Song

Edited By: Edu Kenedi

Saudi Arabia is simultaneously pursuing economic diversification and energy transition in line with its ambitious Vision 2030 goals. These two strategies are interconnected, but achieving both is only possible with the support of regulations and policies.

Since Vision 2030 was ambitiously set in 2015, Saudi Arabia has made progress as reflected in projects like NEOM and the Red Sea Project, which aim to reduce oil dependency and foster new sectors. Electric vehicle (EV) adoption is one of the Kingdom’s most recent initiatives in promoting economic diversification and energy transition. 

Over the past five years, Saudi Arabia has been fostering the adoption of renewable energy by deploying solar panels and wind turbines across the Kingdom, aiming to become a regional leader in renewable energy. These efforts are part of a broader strategy to enhance renewable energy generation and promote a more effective energy transition.

One of the strategies used in Saudi Arabia is the adoption of EVs, aligned with support from the country’s Public Investment Fund (PIF) and Saudi Electricity Company (SEC) to create the Electric Vehicle Infrastructure Company (EVIC) in October 2023. The official statement noted “establish its presence in more than 1,000 locations, installing over 5,000 fast chargers by 2030 in cities across Saudi Arabia.” This  could effectively help reduce carbon emissions and increase the use of renewable energy, as demonstrated by examples from other countries.

EV adoption also aligns with the goal of economic diversification, which can lead to the development of new industries in the Kingdom. Saudi Arabia lacks heavy industries, such as factories for car manufacturing. Similar to the construction of NEOM and the Red Sea Project, introducing EV production into the domestic market could create thousands of new jobs and opportunities, thereby further diversifying the economy.

Introducing more EVs appears to be an ideal strategy for achieving energy transition and economic diversification goals, as it is one of the most concrete strategies already in progress. The Kingdom has begun cooperating with countries that have a surplus of EVs, such as China. Additionally, it has an excess labor force; the average age of Saudis and foreigners living in the country was 29 in 2022. Excluding foreigners, the average age drops to 25. 

The government promotes the plan for EV adoption, as evidenced by annual meetings like LEAP, which attract advanced technology companies from around the world, including EV manufacturers. For example, at the LEAP conference, several global EV manufacturers and technology firms showcase their latest innovations, highlighting the Kingdom’s commitment to integrating these technologies into its economy. Based on these initiatives, an increase in EV adoption is becoming a foreseeable future for Saudi Arabia.

However, more EVs do not directly lead to the use of renewable energy in a country. This is because the electricity that powers the EV batteries can be generated from either fossil fuels or renewable energy sources. The direct result of EV adoption is the decrease in carbon emissions.

This obstacle diminishes the effectiveness of EVs in achieving the energy transition goals for the Kingdom. As the EV industry emerges and creates more economic opportunities, the use of fossil fuels may also increase without regulations on the source of electricity. If generating electricity from fossil fuels remains easier and more efficient than from renewable sources for EV batteries, users will continue to rely on these more harmful fuel sources.

Applying related regulations and policies are necessary for the renewable energy transition, ensuring that the use of renewable energy will increase with EV adoption. Policies such as subsidies for EV buyers or tax reductions for domestic EV manufacturers could be implemented, along with requirements for electricity sourced from renewables instead of fossil fuels.

Additionally, Saudi Arabia could advance its Vision 2030 by mandating Renewable Energy Certificates for EV charging, boosting EV and renewable infrastructure investment, and supporting green tech research. These measures aim to align EV adoption with economic growth and energy sustainability. 

These policies promise economic expansion through new green sectors and environmental benefits via reduced emissions. However, they require societal shifts towards sustainability, challenging traditional consumer behaviors and industry norms. Effectively, these strategies could make Saudi Arabia a model for sustainable development, emphasizing the nation’s move towards innovative and eco-friendly solutions within its Vision 2030 framework.

As Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said, “We have been saying all along, we are going to be the country that will produce every source of energy. But also we are going to create that word — transition.”