Enormous Saudi Arabian solar push could lead to new Middle East energy era

If we covered the entire land surface of the emirate of Dubai with solar panels, it would generate about 200 gigawatts – the same size as Saudi Arabia’s planned solar power venture with Japan’s SoftBank, announced at the end of March.

This mindboggling scale – equivalent to two-thirds of all the existing solar worldwide - might make this gigaproject seem unrealistic. But even something a quarter the size would lead Middle East solar power into a new era.

The $200 billion non-binding agreement with SoftBank, signed during Crown Prince Mohammed bin Salman’s US tour, builds on a much smaller October accord, part of the kingdom’s Vision 2030 target for 9.5GW of solar power by 2023 (the country’s current peak power demand is about 75GW). Now, the first phase of this giant scheme is intended to fulfil most of that target as early as next year.

Riyadh’s previous ambitious solar programmes have led to very little result. So, although momentum has finally been picking up, there will be industry scepticism. Still, even if it leads to “only” a few tens of gigawatts installed over the next decade, that would still be a major advance.

Taken literally, the implications of the full 200GW scheme are striking. It would require two years of the world’s current manufacturing of solar panels. Saudi Arabia has just one large solar plant under construction, the 0.3GW Sakaka project, awarded to local firm Acwa Power in February at a cost of $302 million. It will take more than 600 Sakakas to make up the planned SoftBank scheme. The Saudi grid and its electricity market would need to be drastically upgraded to cope with such large and shifting amounts of variable power. And it also casts doubts on the plans for large amounts of nuclear power, discussions for which were also on the Crown Prince’s agenda in the US.

Saudi Arabia’s current peak power demand is likely to grow by 2030 to some 100GW-120GW, or more if efficiency measures do not take hold. Peak demand in summer is almost twice the winter’s low, due to air-conditioning use, but of course solar generation is also higher in summer. The result is that the future Saudi Arabia with 200GW of solar capacity might have 80GW surplus in summer daytime hours, and almost as much in winter daytime. Solar power is cheap enough now that the country might afford to throw some of it away, but it would want to use as much as possible productively.

Masayoshi Son, the founder of SoftBank, has said the giant solar plant will have the “largest utility-scale battery” to provide evening power. It will have to have – even the US has only about 1GW of battery storage installed to date, although Bloomberg New Energy Finance predicts about 45GW will have been installed worldwide by 2024. At a rough estimate, and allowing for falls in battery costs, this might add another $150bn or more to the price-tag.

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However, on an annual basis including night-time periods, and assuming all surplus electricity is stored for later use, the panels might generate about 70 per cent of the kingdom’s total electricity demand, and save some $40bn of oil and gas fuel annually.

Saudi Arabia could also export some of the surplus. But it is surrounded by sunny desert countries with solar ambitions of their own. Political and commercial hurdles make the idea of long-distance cables to Europe, through some combination of Iraq, Turkey, Syria or Libya, look fanciful.

Of the neighbouring large markets, Egypt is building an interconnection with Saudi Arabia, and Cairo is more than an hour behind Riyadh, which could allow Egyptian solar power to contribute to the Saudis’ evening demand. The GCC grid is seriously underutilised at present and does not have a commercial model for electricity trading.

The kingdom would really need a big consumer to its east to export its surplus afternoon power beyond the sunset. Iran is ruled out politically, so Riyadh would need to work with the UAE and/or Oman on links to the giant and growing electricity markets of south Asia. And this would require the tricky creation of a cooperative mindset on a regional solar masterplan, rather than competition.

Such a giant investment will, no doubt, also be intended to generate long-term value by creating a Saudi solar industry. This has to be done with care. It is unlikely that the kingdom can make cheaper solar panels than China’s, and mandating use of its own will push up costs and risks. Insufficient local content was a reason given for rejecting Masdar’s lower-priced bid in favour of Acwa’s for Sakaka.

However, there are many other solar components for which Saudi Arabia could encourage local production. If this were on a GCC-wide basis, it would also build scale and bring down costs for the ambitious solar programmes in Dubai, Abu Dhabi and Kuwait.

For now, this immense scheme is still just a piece of paper. The obstacles it faces are not really technical and economic, but those of organisation, financing and future planning. If Saudi Arabia can progress even on a smaller part, it can lead the Middle East into the next phase of mass solar deployment and collaboration.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis