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Saudi Arabia's superpowered sunshine dream

Saudi Arabia surprised observers earlier this year when it announced a massive renewables deal. But is it doable?

In March, Saudi Arabia and Japan's SoftBank signed a $200bn agreement for the construction of a whopping 200 gigawatts of solar power generation capacity, scheduled for completion in the kingdom by 2030. This would turn the country into the world's largest solar producer.

The scale of the project is epic. Equivalent to two-thirds of all the existing solar worldwide, it's about 100 times larger than the next-biggest proposed development—in Australia. Projected output would more than double what the global photovoltaic (PV) industry supplied last year. The project would also overtake the original Saudi target of a far more modest 9.5GW of renewable energy by 2023, as outlined in the country's National Renewable Energy Programme, which was launched just two years ago.

The solar deal comes against the background of Vision 2030, an ambitious package of reforms aimed at transforming Saudi Arabia's economy, reducing reliance on oil income while creating jobs for the young and increasingly educated population.

Renewables haven't traditionally been a priority in Saudi Arabia, despite rampant domestic demand for energy. The decision to take them seriously appears at a time when the economics of solar power have changed dramatically in the region.

The United Arab Emirates, in particular, has seen a dramatic fall in the cost of new solar projects, achieving world record low bids for both PV and concentrated solar power in 2016-17. A Saudi tendering round in 2017 managed to further undercut these prices, with a new world record low cost bid of 2.34 cents/kWh for PV power, making solar competitive with any energy technology in the kingdom.

But there's also reason to manage expectations about the latest SoftBank deal. The non-binding agreement must be seen in the context of recurring fanfare announcements under the de facto leadership of Crown Prince Mohammed bin Salman, with some past decisions considered impulsive. The kingdom has struggled to follow up with what some would see as overly-ambitious economic plans, including the National Transformation Programme. Its far-reaching goals set for 2020 have often proved unattainable.

The deal also appears to have bypassed the all-important energy ministry, the result of direct negotiations involving the crown prince and the Saudi Public Investment Fund. The way the agreement was reached has fuelled speculation about internal power games between the different Saudi institutions leading the country's ambitious economic transformation.

Technically possible

Robin Mills, chief executive of Dubai-based Qamar Energy, urges caution: "There's enough land and sun and it's technically not as crazy as it might seem, but it would require a huge amount of storage and interconnectivity with neighbouring countries. But compared to current Saudi progress, and with all the logistical, organisational and financing challenges, it's clearly never going to be achieved by 2030."

Others are more optimistic. The World Bank's former head of the Middle East and North Africa region, Jonathan Walters, argues that Saudi solar targets "aren't large compared to what Saudi Arabia has achieved in its oil investments, so project implementation capacity shouldn't really be in doubt. The economics of solar are improving extremely fast, and it would be hard for a very sunny country to resist the lure of such a cheap resource." 

“With solar economics improving fast, it’s hard for a very sunny country to resist the lure” Walters, ex-World Bank

In the event that current plans for epic-scale solar power materialise, practical issues will arise. Current targets under the SoftBank deal would more than triple the country's current power generation capacity within slightly more than a decade-a massive addition, far beyond Saudi energy needs. Some power might be exported, but only if agreements could be reached with neighbours in a region of fragile political relations.

Whether or not the current reform projects, including major solar schemes, materialise over the coming years will reveal how serious the Saudi government is about radical economic change, and whether it can translate hype into reality.

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