Two years ago, King Abdullah City for Atomic and Renewable Energy (K.A.Care) was set up to develop and oversee Saudi Arabia’s renewable and nuclear energy strategy. At that time the Kingdom’s oil minister, Ali Al Naimi, surprised the global solar stage with his grand announcement, “Saudi Arabia aspires to export as much solar energy in the future as it exports oil now.” The news was able to gather headlines but it was considered ‘highly unlikely’ by most. Two years later, the announcement seems more like a possibility. The country is all set to become one of the primary solar energy producers of the world and is likely to attract solar energy investments from Asia, Europe and North America.
The fourth Saudi Solar Energy forum was recently held on 8th May, in the capital of Riyadh. The purpose of the summit was to share ideas from public and private sectors on developing Saudi Arabia’s solar energy sector. The summit was hosted by Dr. Khalid Al Sulaiman, Vice President of Renewable Energy, K.A.Care. The highlight of the meeting was the ‘technology showcase’, where leading figures from the global solar sector presented the contributions of the private solar sector, discussed new technologies and innovations and debated on their potential effectiveness in Saudi Arabia’s environment. The companies that participated in the conference included First Solar (FSLR), Amonix, Areva Solar, Abengoa Solar, Novatec Solar, Siemens and Soitec Solar GmbH.
The summit turned out to be extremely successful, as by the end of the meeting, Saudi Arabia officially announced its ambitious solar energy strategy that plans to add 41GW to the national grid in 20 years through investments of $109B. The country currently produces just 3MW from solar. According to the plan, 25GW will be generated from solar thermal plants and 16GW from PV panels. The country aspires to generate a quarter of its total energy from the solar sector by 2032.
Some parts of the Middle East and North Africa region (MENA) receive approximately 630,000 TWh of solar energy each year, all of which goes unused. The entire area is practically a desert, where daytime temperatures can surpass 50⁰ C (122°F). The kingdom itself lies within this region and has a desert climate characterized by warm days and cold nights with little to no rainfall. The temperature remains between 29° C and 45° C during the day, with abundant sunlight throughout the year. Therefore, the environment of the country is very solar friendly.
The Saudi government will complete all the planning and paperwork this year and the first round of bidding of 1.1GW of PV and 900MW of solar thermal projects will start in early 2013. The bidding will be followed by a formal announcement of Saudi Arabia’s first feed-in-tariff program. The second round of bidding will be held after the second quarter of 2014.
Saudi Arabia, being an industrialized nation, has immense energy requirements which are primarily met by burning its massive oil reserves. The country burns 1 million barrels of hydrocarbon daily, including 600,000 barrels of crude oil. If it starts producing from solar energy instead, then it would save at least 150,000 barrels of crude oil every day, which can be exported at a much higher price. The government plans to save 523,000 barrels of oil daily by producing electricity though renewables. It currently sells oil to domestic energy producers at $4 per barrel, when current crude oil prices hover above $90 per barrel in the international market. According to a recent estimate the country loses approximately $13B each year by selling oil at $4 per barrel.
Another significant advantage to going solar is the reduction in harmful greenhouse gas emissions. The million barrels of oil the Kingdom burns makes it one of the leading per capita CO2 emitters of the world. The environmental benefits of going solar accrue each year for generations. Furthermore, the Kingdom plans to add nearly 2 million jobs in the energy sector for its youth, who make up 60% of the total population.
The country also uses a large portion of its oil for operating the desalination plants. Due to its desert climate, the country has little reserves of fresh water; therefore the desalination plants are used to make seawater drinkable. Rising prices of oil in the international market increases the cost of fresh water. The government intends to power its desalination plants from solar energy.
A reduction in feed-in-tariffs and subsidies in European and North American markets might cause a decrease in solar panel sales, after more than a decade, but the Saudi government’s current plans have the potential to turn things around for the global solar sector.
Analysts are expecting US-based companies such as First Solar Inc. (FSLR) and SunPower Corporation (SPWR), and China-based Suntech to reap maximum benefits from the Saudi government’s incentives. Last month, a high-level US business delegation led by US Assistant Secretary of Commerce for Manufacturing and Services Nicole Lamb, met with Saudi officials to discuss the Kingdom’s long-term renewable energy plans. The delegation included representatives of leading American renewable energy producers including First Solar. On the other hand, Suntech (STP) is one of the few companies in the solar industry that has the experience of working in the desert climate. The 10MW Masdar Solar Plant in Abu Dhabi, U.A.E, uses 5MW of Suntech modules and is built right in the middle of a desert.
The Saudi investment opportunity might not be very profitable as the government might require solar power generators to set up domestic plants. Furthermore, the climate might not be perfectly ideal as the weather can get too hot, which can reduce solar panels' output capacities. The abundance of dust and frequent sandstorms translates into increased maintenance costs. The multinational corporations producing innovative products and processes with experience of working in Asian markets are best suited for this investment.
