From oil to solar energy: Saudi Arabia plots a shift to renewables

From oil to solar energy: Saudi Arabia plots a shift to renewables

Life in Saudi Arabia has long been defined by the oil that flows from the kingdom. Over decades, the vast wealth it pumped out paid not just for gleaming towers and shopping malls but also for a government sector that employs a majority of working Saudis.

Now, Saudi Arabia is trying to tie its future to another natural resource it has in abundance: sunlight.

The world’s largest oil exporter is embarking, under Crown Prince Mohammed bin Salman, on an ambitious effort to diversify its economy and reinvigorate growth, in part by ploughing money into renewable energy. The Saudi government wants not just to reshape its energy mix at home but also to emerge as a global force in clean power.

Reaching that goal is a big if. But the strategy is finally making progress after fits and starts.

Riyadh tapped ACWA Power, a Saudi energy company, to build a solar farm that would generate enough electricity to power up to 200,000 homes. The project will cost US$300 million (S$396 million) and create hundreds of jobs, according to Mr Turki al-Shehri, head of the kingdom’s renewable energy programme.

By the end of the year, Saudi Arabia aims to invest up to US$7 billion to develop seven new solar plants and a big wind farm. The country hopes that renewables, which now represent a negligible amount of the energy it uses, will be able to provide as much as 10 per cent of its power generation by the end of 2023.

“All the big developers are watching Saudi,” said Ms Jenny Chase, an analyst at Bloomberg New Energy Finance, a market research firm.

“The country has made grand plans and pronouncements, but various bodies within it have failed to agree on the new way forward,” Ms Chase added. She referred to the agreement as “the first step in creating what is widely expected to be a major market.”

Saudi Arabia has talked a big game when it comes to renewables. It adopted ambitious targets for green power several years ago, but no major projects were carried out, and little changed. That is not unusual – The country’s biggest solar farm in operation covers a parking lot of the national oil company, Saudi Aramco, here in Dhahran. Lying just a couple of miles from a fenced-off area honouring the country’s first commercially viable oil well, it generates enough power for a nearby office block.

Still, the experiment with solar power has been an important catalyst, and the company built a team of experts in renewable power. The experience helped Saudi Arabia focus on conventional solar panels over another system, known as concentrated solar, in which mirrors focus sunlight to create heat.

The renewables strategy finally started to take real shape when Mr Khaled al-Falih took over as energy minister in 2016. Mr Falih made solar and wind a priority for the kingdom, and set up a new unit last year to expedite the work. Much of the staff was drawn from Aramco.

Mr Shehri, who had worked at Aramco before leading the kingdom’s renewables programme, said he faced an “extremely challenging” task. Meeting Saudi Arabia’s targets would require contracts for a series of new facilities to be awarded by the end of 2020. “The only way this was possible,” he said, “was because we have done previous work.” Saudi Arabia, with its vast oil resources, would seem an unlikely champion for renewables. But the country’s location and climate mean it has plenty of promising sites for solar and wind farms.

The costs of installing and operating those two technologies have fallen drastically around the world in recent years. That means that even in a country where oil is plentiful, renewables beckon as a cheap, and clean, alternative to traditional fossil fuels.

Source: The Straits Times

Date: March 2018

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