Amidst all the gloomy news of ratings downgrades and a slowing Saudi economy there is at least one ray of sunshine and it could be a very large ray indeed. It is called solar power and KSA, in addition to having an abundance of hydrocarbons, is blessed with some of the world’s most intense sunlight and huge tranches of open, flat desert wonderfully well suited for solar farms.
Turning the sun’s rays into electricity has been on the radar in Saudi Arabia since the 1970s. But it was only in this century that the government began to get serious about generating an alternative energy source. It has set an ambitious, some would argue overly ambitious, target of generating 20% of the kingdom’s electricity from solar power within 25 years.
Like many such schemes, sceptics will point to the “loud talk, no walk” syndrome: highly paid consultants generating big ideas that either don’t fit the Saudi picture or fall afoul of the inertia inherent in a huge and stifling bureaucracy.
But that ignores a hard reality that is starting to make solar an easier sell. Roughly one quarter of the kingdom’s oil production is being sold at cost, $4 bbl, to run hugely inefficient, environmentally unfriendly plants generating electricity in a country that just keeps demanding more and more of it. Domestic consumption is increasing at a rate of 7%, as the population continues to expand rapidly and shows no inclination to conserve when with electricity rates so heavily subsidized there is no incentive to do so.
You don’t need to be an economic whiz kid to clock that such a situation is unsustainable. So all of a sudden, solar is starting to make a lot of economic sense. Especially if you factor in that, rather than buying the panels from abroad, China mostly, you make them yourself, using polysilicon. And polysilicon is derived from, you guessed it, quartz or pure sand of which, it need not be pointed out KSA, has a huge abundance.
The goal is not just to build for the domestic market but ultimately to export solar panels to the world and in the process create high tech jobs for Saudi Arabia’s ambitious, educated and fast growing youth population.
Realising both the obvious and the opportunities, both Saudi Aramco and Saudi Electricity entered the solar market some time ago. Saudi Aramco has several solar projects either commissioned or already completed. And Saudi Electricity has partnered up with General Electric to build the ‘Green Duba’ an integrated solar combined cycle plant. The plant will be built along the Red Sea in the northwest part of the kingdom and will have the capacity to generate power equivalent to supplying roughly 600,000 homes for a year.
Other companies in play include state owned Taqnia, run by Prince Turki bin Saud bin Mohammed Al Saud. The prince is bullish about the future, telling Atlantic Monthly magazine last year “we have a clear interest in solar energy and it will soon be expanding exponentially in the kingdom.”
Another company worth watching and already in the market is privately owned Acwa Power. It has signed a deal to build a solar farm in Dubai and sell the electricity it generates at a very competitive 5.84 cents a kilowatt-hour. As CEO Paddy Padmanathan told the Atlantic Monthly: “All of a sudden, renewables are becoming a very competitive proposition.”
So much so that Prince Turki says Taqnia can do even better and drop the price to 5 cents a kilowatt-hour. It is a sure sign that the competitive juices are starting to flow in the Saudi solar energy market.
So: inexpensive, energy efficient, carbon friendly and job creating – what’s not to like about Saudi’s solar future?
The challenge that the rising solar industry and the government face is all about turning around a country and a culture that has always placed oil first. That’s not to say that oil won’t remain the most important energy source. It will. Rather it is to make the case politically and economically that solar can be a very useful junior partner, one that will free up hydrocarbons for the world market whilst liberating Saudis from what in both the economic and environmental sense is an increasingly unhealthy addiction to oil.
Follow Bill Law on Twitter @BillLaw49
