Saudi Arabia is seeking investors for a $109 billion plan to create a solar industry
that generates a third of the nation’s electricity by 2032, according to
officials at the agency developing the plan.
The world’s
largest crude oil exporter aims to have 41,000 megawatts of solar capacity
within two decades, said Maher al- Odan, a consultant at the King Abdullah City
for Atomic and Renewable Energy. Khalid al-Suliman, vice president for the
organization known as Ka-care, said on May 8 in Riyadh that nuclear, wind and
geothermal would contribute 21,000 megawatts.
“We are not
only looking for building solar plants,” al- Odan said in an interview in
Riyadh yesterday. “We want to run a sustainable solar energy sector that will
become a driver for the domestic energy for years to come.”
The
comments highlight the scale of Saudi Arabia’s ambitions to boost renewable
energy use as a way to pare back on oil consumption used for domestic
desalinization and power plants, potentially saving 523,000 barrels of oil
equivalent a day over the next 20 years.
For the
solar panel manufacturers such as First Solar Inc. (FSLR) and SunPower Corp.(SPWR), the Saudi Arabian market would open a huge new market as European
countries reduce subsidies to keep a lid on installations. Panel sales may dip
this year for the first time in more than a decade from 27,700 megawatts
installed last year, according to a survey of analysts by Bloomberg on March 9.
‘Less
Profitable’
“These
markets are likely to be a lot less profitable than existing markets,” Vishal Shah, an analyst at Deutsche Bank AG in New York, wrote in a note to clients
yesterday, noting the Saudis may require bid winners to supply from factories
built in the nation. “It looks like both First Solar and SunPower would need to
set up local manufacturing.”
First Solar
dropped 4.9 percent yesterday, taking its slide this year to 55 percent.
SunPower slid 0.7 percent, for a 16 percent decline this year.
Ka-care is
the government agency set up in April 2010 to oversee the nation’s renewable energy strategy. Its plans are likely to be approved later this year,
al-Suliman said, according to a copy of the presentation he gave on May 8.
The
government is targeting 25,000 megawatts from solar thermal plants, which use
mirrors to focus the sun’s rays on heating fluids that turns a power turbine.
Another 16,000 megawatts would come from photovoltaic panels, according to the
Deutsche Bank note.
Bidding
Round
Citing
government officials, Deutsche Bank said the capacity would be added in
competitive bidding starting with 1,100 megawatts of PV and 900 megawatts of
solar thermal in the first quarter of 2013. A second round of bidding is due in
the second half of 2014.
That
tendering process would differ from the European system, where developers are
granted above market rates for solar power they produce. Germany, Spain, Italy
and the U.K. have slashed rates under those feed-in tariffs to control a surge
in installations.
Saudi
Arabia currently has about 3 megawatts of solar installations, trailing Egypt,
Morocco, Tunisia, Algeria and the United Arab Emirates, according to Bloomberg
New Energy Finance.
“The Saudi
Arabian government has a powerful incentive to diversify its energy mix to
reduce dependence on oil,” said Logan Goldie-Scot, an analyst at New Energy
Finance in London. “The state could generate an internal rate of return of
approximately 12 percent if it built a PV plant and sold the displaced oil on
the international markets.”
The analyst
is assuming initial capital costs for the solar projects of about $2.17 per
watt of capacity installed.
Wind and
Nuclear
Persian
Gulf oil producers are seeking to reduce their reliance on fossil fuels for
power generation to maximize exports of valuable crude and allocate natural gas
to petrochemicals production. Ka-care estimates Saudi Arabia’s peak electricity
demand will reach 121,000 megawatts in the next 20 years, with half of that
power generated using hydrocarbon fuel.
Other forms
of renewable energy such as nuclear, wind, geothermal, will only generate
21,000 megawatts of the peak-load required by 2032, al-Suliman said in his
presentation.
Saudi
Arabia is considering different options to generate electricity from nuclear
energy, according to al-Suliman. Under the so-called “Balanced Scenarios”,
Saudi Arabia would build 16 nuclear reactors by 2030 with a capacity of 14,000
megawatts of electricity.
Nuclear
Cooperation
The country
signed a nuclear cooperation agreement with China in January, following three
accords signed last year with France, South Korea, and Argentina. The cost of
developing the reactors may reach $100 billion, according to officials from Ka-
Care.
Saudi
Arabian Oil Co. sees “technical” potential to produce 25,000 megawatts of
electricity from wind in Saudi Arabia, Faisal Habiballah, head of solar at the
company known as Saudi Aramco, said Feb 20. There is also geothermal energy in
the western parts of the Kingdom, he said.
The capital
cost of installing the 41,000 megawatts should be around $82 billion, al-Odan
said. The rest of the $109- billion investment will go to train the Saudis to
run the solar plants as well as for maintenance and operation, he said.
Once the
strategy, which includes new regulations and financial incentives for private
investors, is approved “we will start implementation directly,” al-Odan said.
Saudi
Arabia may burn 850 million barrels of oil a year, or 30 percent of its crude
output, to generate electricity by 2030 if doesn’t become efficient in energy
consumption, Electricity & Co-Generation Regulatory Authority Governor
Abdullah Al-Shehri said in a presentation in Riyadh May 8.
To contact
the reporters on this story: Wael Mahdi in Cairo at wmahdi@bloomberg.net; Marc
Roca in London at mroca6@bloomberg.net
To contact
the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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