Even the Saudis are looking to the sun
The nation most identified with vast oil resources is turning to wind and solar to generate power at home and help extend the life of its crucial crude reserves.
Starting this year, Saudi Arabia plans to develop almost 10 gigawatts of renewable energy by 2023, beginning with wind and solar plants in its vast northwestern desert. The effort could replace the equivalent of 80,000 barrels of oil a day now burned for power.
The effort goes hand-in-hand with a drive by the royal family to broaden the economy following two years of budget deficits tied to low oil prices.
“Renewable energy is not a luxury anymore,” says Mario Maratheftis, chief economist at Standard Chartered. “If domestic use continues like this, eventually the Saudis won’t have spare oil to export.”
In all, Saudi Arabia is seeking US$30 billion ($42b) to US$50b worth of investment in renewables, Energy Minister Khalid Al-Falih said this month. The kingdom would award its first tenders to build 700 megawatts of solar and wind energy in September, he said.
The Government has already raised domestic energy prices to slow demand growth and called for greater
Renewable energy is not a luxury anymore. Mario Maratheftis, Standard Chartered
efficiency, according to the King Abdullah Petroleum Studies and Research Centre. Failing to tap more sources, including renewable energy, natural gas or even nuclear reactors, could erode the oil exports still vital to the economy, the centre wrote in an October report.
The cornerstone of an economic transformation plan championed by Deputy Crown Prince Mohammed bin Salman, a son of the king, is the sale of as much as 5 per cent of Saudi Arabian Oil Co. With the company worth about US$2 trillion, according to estimates from the prince, the share sale would be the world’s largest initial public offering.
Saudi Aramco, as the state energy producer is known, already earns most of the kingdom’s income. It is driving the country’s first steps toward a renewable energy industry.
Saudi Aramco already runs the country’s biggest solar plant, a 10 megawatt facility on a parking lot roof. In January, it started the kingdom’s first commercial wind turbine to power a facility in the northwest.
The solar panels cut the need for the equivalent of about 30,000 barrels of oil and the wind turbines will eliminate demand for about 19,000 barrels, according to Aramco.
Without alternative power sources, the kingdom would be forced to increase its crude burn, which can reach 900,000 barrels a day in summer, according to data from the Joint Organisations Data Initiative.
Saudi Arabia has taken steps to substitute natural gas for oil in power plants, a change that’s had “immense” impact on the crude burn, Opec said in its Monthly Oil Market Report released last month. The use of crude for domestic power has fallen by nearly a third since the Wasit gas plant began operations in March 2016, according to the Opec report.
Gas and the renewable projects planned for completion by 2023 could save about 300,000 barrels of oil from being burnt for power, according to estimates based on International Energy Agency and Opec data.
— Bloomberg