Saudi Arabia and Solar Energy
In these blog series, we will bring Solar topic closer to you via country by country examples. If you are interested to learn how a certain country is addressing this topic, please write us and we will give our best to honor your wish(es). OK – the next one – Saudi Arabia.
Since this is its solar map, one would say its grid system is probably nearly 100% renewables powered with solar plants, PV panel rooftops and Solar Street Lights all over the place. Although seems logical, the renewables are only at 5%, with this figure being significantly increased during past 4 years. But why? Isn’t this country one of the most sun abundant regions in the world? Let’s start from these macro facts.
The Kingdom of Saudi Arabia is geographically the fifth-largest state in Asia and second-largest state in the Arab world (with religion playing an important role). Its economy is the largest in Arab world with a leading role in OPEC. It has 32 million inhabitants with middle level GDP per capita. Saudi Arabia is the world's largest oil producer and exporter, controlling the world's second largest oil reserves and the sixth largest gas reserves. 90% of export earnings comes from oil industry (undiversified economy). On the other hand, energy demand is on a multi year rally (7% a year and rising) which put Saudi Arabia as oil and gas world’s twelfth-largest consumer (cc 33% of Production is domestically absorbed). About 50% of drinking water comes from desalination, 40% from the mining of non-renewable groundwater and 10% from surface water (all processes powered by oil). Aha, it’s getting clearer now-everything is running on oil and gas because, although non-renewable, illogical and polluting, these energy inputs are also abundant and cheaper than solar. Problem solved. Or is it?
With domestic fossil fuel demand surge and solar system component prices, like PV panels, batteries, LED lamps and other, being more than 70% lower than a decade ago, in order to preserve a leading position as world’s biggest oil exporters and export revenues related, Saudi’s decided to satisfy as much domestic demand as possible by Solar power. So, partially because of global climate green initiatives as well as increased domestic demand and mostly due to much cheaper components, Saudi Arabia decided to do this:
Large-scale Solar on-grid farms Significant lowering of fossil-fuel subsidies Feed-in-Tariff Net metering residential models 41 gigawatts of solar capacity plan by year 2032 and annouce this: Residental PV on-grid systems Solar Street Lighting Feed-in-Tariff lowering due to competitiveness with other energy sources Fossil-fuel subsidies significant lowering Water systems powered by solar Solar-to-Diesel systems and Green initiatives participation.
For instance, Near Riyadh, the government is preparing to build a commercial-scale solar-panel factory. On the Persian Gulf coast, another factory is about to begin producing large quantities of polysilicon, a material used to make solar cells. And next year, the two state-owned companies that control the energy sector—Saudi Aramco, the world’s biggest oil company, and the Saudi Electricity Company, the kingdom’s main power producer—plan to jointly break ground on about 10 solar projects around the country. Saudi Arabia produces much of its electricity by burning oil, a practice that most countries abandoned long ago, reasoning that they could use coal and natural gas instead and save oil for transportation, an application for which there is no mainstream alternative. Most of Saudi Arabia’s power plants are colossally inefficient, as are its air conditioners, which consumed 70 percent of the kingdom’s electricity in 2013. If this trend continues, domestic consumption could eat into Saudi oil exports by 2021 and render the kingdom a net oil importer by 2038. Solar, they have decided, is an obvious alternative. In addition to having some of the world’s richest oil fields, Saudi Arabia also has some of the world’s most intense sunlight. Now, Saudi rulers say, things must change. Their motivation isn’t concern about global warming; the last thing they want is an end to the fossil-fuel era. Quite the contrary: they see investing in solar energy as a way to remain a global oil power. The fact that Saudi Arabia, an ardent booster of fossil fuels, has found compelling economic reasons to bet on solar is one of the clearest signs yet that solar, at least in some cases, has become a cost-effective source of power. Some of government imposed policies are: toughened energy-efficiency requirements for air conditioners, imposed the country’s first-ever fuel-economy standards for cars and insulation requirement in new buildings, as well as moving to require that new power plants be more efficient than the ones they replace.
Topic situation just a few years ago: what Saudi leaders don’t appear likely to do, at least anytime soon, is cut the fossil-fuel subsidies. Many Saudis view cheap energy as a birthright, and any increase in prices would be hugely unpopular. The Saudis spend about $80 billion a year—more than a third of the kingdom’s budget—on domestic energy subsidies. Solar power is likely to cost more than electricity from the existing conventional plants—but only because those conventional plants get oil at a subsidized price. This explains why the government, not the private sector, is making most of the investment in solar. The Saudi Arabia Solar Industry Association (SASIA) is formed. Private companies are waiting for the government to offer up a slate of contracts that would, in effect, allow solar energy to compete with artificially cheap oil-fired electricity. And today: global installed solar PV capacity has reached 321 GW from 2.4 GW in 2007. At Saudi Arabia, National Renewable Energy Program (NREP) targets 9.5 GW of renewable energy by 2023 with an interim target of 3.45 GW by 2020 under the National Transformation Program; mostly solar. One of the most important commitments made by Saudi Arabia in Vision 2030 was a pledge to guarantee the competitiveness of renewable energy by gradually liberalizing the fuel market and engaging the private sector. These measures will not only grant renewable technologies a level-playing field with conventional power generation, but should also help increase non-oil revenues for the government. Going forward, centralized and decentralized battery storage applications combined with solar PV are expected to compete in the foreseeable future head to head with solar thermal power.
Consistently low to medium oil and gas prices will not slow down solar growth; it is rather the opposite. Due to dramatically reduced income from oil sales, Saudi Arabia announced a hike in gasoline, diesel, and natural gas and electricity prices for consumers, which will improve solar power’s competitiveness. Saudi Arabia needs to find the right balance between reducing the consumption of fossil fuels for power generation and maintaining relatively low electricity costs for the end user. 2016 was a record-setting year across the MENA region. The year 2017 announces itself as the year for a further roll-out of solar energy in the MENA region (Middle East and North Africa). It is expected to see further adoption of storage solutions (e.g. batteries, pumped hydro, etc.) across the Middle East. Storage and demand response solutions provide additional flexibility to the transmission system and allows to curb peak load. And lighting accounts for around 13% of electricity consumption of the whole society.
The world’s most petroleum-dependent country is building a city that will operate without revenue from it. City’s CEO Al Rasheed bills KAEC as a non-oil economy. “The city is privately funded and receives no direct oil revenue to fund its development,” he says.
While KAEC’s economy may not be dependent on oil, the city is powered by it. At KAEC, Saudis have a “near constant need” for air conditioning. As such, the city will feature a solar air conditioning and refrigeration system that will reduce up to 40 percent of the current annual energy consumption. Other green elements include solar-powered street lights and CCTV systems. For all reasons stated above and many more, we at EnGoPlanet are receiving more and more inquiries about Solar Street Light and Solar benches from Saudi Arabia. Our aim is to accomplish all (pending) projects so our clients and community in general would be more than happy to refer us as a reliable, flexible and cost-efficient company.