Saudi Arabia’s long-awaited drive to free up more oil revenue by shifting to solar power generation is expected to pick up speed next quarter, according to local developers eyeing contracts.
“I’m fully expecting within the first quarter 500 megawatts to come out in tenders and then it’ll ramp up,” said Paddy Padmanathan, the chief executive officer of Acwa Power International in Riyadh. “That will be a game changer for the region.”
The world’s biggest crude exporter also burns more oil than any other country to generate electricity. According to the most recent International Energy Agency figures, the kingdom consumes at least 900,000 barrels a day at peak periods of the year to keep the lights on — an amount worth over $16 billion a annually based on current oil spot prices. Integrating more solar power onto the Saudi grid could free up more crude for export.
An 2011 report by London-based researchers at Chatham House, “Burning Oil to Keep Cool,” said that Saudi Arabia was burning so much oil domestically that it could become a net energy importer by 2038 if it didn’t change its habits. Little has changed in the past five years, according to Glada Lahn, who co-authored the report.
Government Pressure
“The original constraint was the fear of domestic demand threatening to outrun capacity in the electricity sector particularly,” Lahn said in a telephone interview. “The fact that the oil price was high during that time really made it acute.”
Lower oil prices squeezed Saudi Arabia and “put pressure on the government to diversify, she said.” The country has seen “an increase in liquid fuel use.”
Lahn, who continues researching the intersection of resources and the environment at Chatham House, expects energy demand to continue to rise at a pace of about 4 to 5 percent per year through to 2030. The highest demand peaks for electricity are in the middle of the day to run air conditioners, which correspond perfectly to solar energy, she said.
The kingdom originally set a target in 2010 to install 41 gigawatts of clean power by 2040, the equivalent of about 30 nuclear reactors. That initiative was forecast to cost more than $100 billion and produce a third of the nation’s electricity from solar. New plans were announced in April, changing the program to 9.5 gigawatts by 2030. The intention is still to meet the original target, according to Acwa’s Padmanathan.
“Ambitions have not been scaled down,” he said. “They will get to even more than that by 2040. We’re going to do 9.5 gigawatts by 2023, minimum. They haven’t said we’ll do this and stop.”