Despite its decades-long dominance in the oil industry, Saudi Arabia is aiming for a leading role in the global renewable energy sector.
The world’s biggest oil exporter has launched a large-scale effort to diversify its economy and stimulate growth with investments in renewable energy. Having sunlight in abundance, Saudi Arabia sees an opportunity to change its own country’s energy mix, and to become a major player in clean power worldwide. Considering the role it has played in the global energy sector for decades, “All the big developers are watching Saudi”, said Jenny Chase, an analyst with Bloomberg New Energy Finance.
In what Chase referred to as “the first step in creating what is widely expected to be a major market”, Riyadh this month awarded Saudi energy company ACWA Power a $300 million contract to build a solar farm. It will be the first utility-scale renewable energy plant in Saudi Arabia. The planned installation would generate enough electricity to power up to 200,000 homes, and create hundreds of jobs, according to Turki al-Shehri, head of Saudi Arabia’s Renewable Energy Project Development Office.
By the end of the year, Saudi Arabia plans to invest up to $7 billion to increase its renewable energy output by developing seven new solar plants and a big wind farm, the New York Times reports. “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 percent of its power generation by the end of 2023.”
This is not the first time Saudi Arabia has trumpeted its clean energy ambitions, but to date no major projects have been completed. National oil company Saudi Aramco is home to the country’s only solar power plant in operation (aside from a limited pilot project). However, as part of that project, Aramco has built a team of renewable power experts. When energy minister Khaled al-Falih set up a new unit to focus on solar and wind last year, he recruited talent mainly from Aramco, including Shehri.
While its oil resources are famously vast, Saudi Arabia also has an ideal location and climate for solar and wind farms. And, while oil prices have dropped, so have the costs of installing and operating solar and wind farms. These factors add up to a cheap alternative to fossil fuels. Producing more wind and solar power would also allow Saudi Arabia to sell more of its oil internationally.
The Saudi market’s size alone demands the attention of the global renewable energy sector. Paddy Padmanathan, Chief Executive of ACWA Power, believes that once Saudi Arabia’s energy authorities grow more accustomed to renewables, they will want ramp up production. “Most of what they will procure going forward, I am convinced, will be renewables,” he said.