Saudi Arabia Hopes to Export the Sun to Europe

Is Saudi Arabia serious about making the change from the world’s biggest oil exporter to a significant producer – and exporter – of renewable energy? Time will tell, but the country is certainly taking some serious first steps. The former Saudi oil minister, Ali al-Naimi, who led the country’s oil sector for 21 years, has suddenly emerged as an advocate of renewable energy. ‘As far as oil prices, and oil, I have left that behind’, he said, speaking at an event in Singapore on 24 February to launch his autobiography Out of the Desert: My Journey from Nomadic Bedouin to the Heart of Global Oil. ‘Now, I’m much more interested in solar energy, making solar panels,’ he added.

Al-Naimi is a former minister but his views are certainly echoed by current Saudi policymakers. The Saudi Vision 2030 unveiled in April last year, focused on the importance of renewable energy as an essential future source of clean energy and a vital part of the diversification programme that aims to reduce Saudi Arabia’s dependence on crude oil as the only source of energy.

The 5-year National Transformation Programme (NTP) also announced in 2016 by Prince Mohamad bin Salman established a target of 3.45 gigawatts (GW) — 4% of total power consumption — from renewable energy by 2023. Saudi Aramco recently stated that the goal of 3.45GW would be brought forward to 2020. At present, Saudi Arabia generates less than 1% of its total energy from renewable energy.

King Salman bin Abdul Aziz, who is touring Asia to promote the Saudi 2030 Vision for renewable energy and less dependence on oil, is telling his hosts that Saudi solar and wind power can extend beyond the kingdom’s borders and benefit not only the government’s coffers but meet the electricity needs of other regions as well.

Speaking at the World Future Energy Summit in Abu Dhabi in January, Falih pointed to Africa as a potential recipient of Saudi renewable energy, saying that the kingdom was developing ways to connect its renewable energy projects with Yemen, Egypt and Jordan. The Saudi government hopes not only to export power from its renewable energy sources but also supply other regions with solar panels and wind turbines.

The renewable energy push is part of a broader economic reform programme launched last year, in which Saudi Arabia is seeking to use non-oil means to generate much of its additional future energy needs, to avoid running down oil resources which are required to generate foreign exchange through exports.

Saudi Arabia produces much of its electricity by burning oil, a practice that most countries abandoned long ago because they reasoned that they could use coal and natural gas instead and save oil for transportation, an application for which there is no mainstream alternative. The Saudis burn about a quarter of the oil they produce and their domestic consumption of oil is rising at the rate of 7% a year according to some studies. Chatham House, the London based think tank, said that if this trend continues, Saudi domestic consumption could eat into its oil exports by 2021, and render the kingdom a net oil importer by 2038. By contrast, by investing in renewables, Saudi Aramco ‘open themselves up to a larger pool of investors. If a company is looking at raising capital, they typically must have a strategy around sustainability’.

The Saudis now realize that things must change. They see investing in solar energy as a way to remain a global oil power. Solar, they have decided, is an obvious alternative to oil. In addition to having some of the world’s richest oil fields, the country enjoys almost 364 days of hot sunshine a year. Solar energy prices have fallen by about 80 percent in the past few years, due to a rapid increase in the number of Chinese factories cranking out inexpensive solar panels, more-efficient solar technology, and mounting interest by large investors in bankrolling solar projects.

Nehad Ismail

Senior Analyst at Wikistrat