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| Oil-rich Saudi Arabia is expected to begin a major push into solar power in an effort to conserve its most important export. The technology could include solar plants like this one in the California desert, which uses mirrors to concentrate the sun's rays. |
NEW YORK
(CNNMoney) -- The United States may be known as the Saudi Arabia of coal thanks
to its large deposits. But under an expected investment push, Saudi Arabia
could soon become the Saudi Arabia of solar power.
Early next
year the oil rich kingdom is expected to announce a plan to get up to 10% of
its electricity from the sun by 2020 -- a more aggressive national policy than
what's in place in the United States.
The reason
is mostly economic. The Saudis currently generate over 50% of their electricity
by burning oil, which can consume up to an eighth of the country's total oil
output.
That made
sense when oil was $10 a barrel. But at $100 a barrel it makes more sense for
the Saudis to install solar panels and sell their oil on world markets.
Moreover,
their electricity consumption is set to double by 2020.
"This
is eating into the Saudis' ability to export oil," said Logan Goldie-Scot,
lead analyst for the Middle East and North Africa at the research firm
Bloomberg New Energy Finance.
New Energy
Finance estimates that given the projected price for both oil and solar panels,
the Saudis stand to make 11% return on their money if they make big investments
in solar power.
"Saudi
Arabia has come around to the idea that this makes economic sense," said
Goldie-Scot.
That's
attracted the attention of developers worldwide who are grappling with solar
subsidies drying up in nations burdened by mounting debt like Italy, Spain and
Germany -- traditional solar powerhouses.
So Saudi
Arabia represents a rare opportunity.
"Everyone
is flying to Riyadh to make sure they are in on the bids," said
Goldie-Scot.
Still, any
Saudi solar commitment would likely translate into just a few gigawatts of
solar power by 2020, said Goldie-Scot. That compares to world-leader Italy's
eight gigawatts of solar installed in the last year alone. A gigawatt can power
roughly 700,000 U.S. homes.
Kevin
Smith, chief executive of U.S. solar developer SolarReserve wants to put one of
his company's solar thermal power plants in the Saudi desert.
He said it's
not just short-term profits motivating the Saudis.
"The
Saudis, one of the largest oil producing nation's, realize that there's
limitations as to how long that's going to last," said Smith. "They
are looking at their long-term energy plans."
Smith contrasted
that with renewable energy policy in the United States.
About half
the U.S. states have a renewable energy mandate similar to Saudi Arabia's. But
at the national level this area is pretty much left to tax credits. Companies
can't count on tax credits as they make long term investment plans because
there's no guarantee the credits will be extended when they come up for renewal
every few years.
"We
have a tendency as a government to look at short term issues -- what's the
price of oil today, what will it be tomorrow, what should we do," he said.
"That's why we've moved from 20% or 30% imported oil 30 years ago to 50%
or 60% today, and there's no end in sight unless we put in some type of long
term program."
Challenges
in the desert: While the Saudis may shoot for an aggressive solar plan, there's
no guarantee they'll hit it.
While it
may seem counterintuitive, the Arabian desert isn't actually the most ideal
spot for solar.
While the
near constant sunshine is good, solar panels become less efficient if they get
too hot.
Dust is
also a problem.
"They
actually have guys with brushes continuously cleaning these panels," said
Brett Prior, a senior analyst at GTM Research, speaking of a solar power
project in neighboring Abu Dhabi.
Another
challenge is natural gas, said Prior, which can also be used to generate
electricity. As is the case in the United States, cheap natural gas is making
it hard for renewables to compete.
Saudi
Arabia currently uses all the natural gas it produces and hasn't had much luck
finding new reserves. But the country sits right next to Qatar, which is
currently developing the world's largest natural gas deposit.
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