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Solar Power: The New Saudi Oil Which Could Lead Region’s Energy Supply Chain By 2030

Venture may cost $200 billion, add 100,000 jobs in the kingdom; Plan envisions 200GW of solar capacity in Saudi Arabia by 2030 — i.e. half of the world’s 400 gigawatts of combined solar energy supplied last year.

May 18, 2018 (BE2C2) — Recently, Saudi Arabia and Japan’s SoftBank announced the world’s biggest solar power generation project.

The announcement has drawn unprecedented global attention to the memorandum signed between the two, The MoU seeks to build the world’s largest solar power project in Saudi Arabia at a cost of $200 billion.

The plan envisions 200GW of solar capacity in Saudi Arabia by 2030, adding 100,000 local jobs and and shave $40 billion off power costs making cheap pollution-free electricity for domestic consumption and export to Asia, the Middle East and Europe — the Saudi solar vision dovetails SoftBank’s plan dubbed “Asia Super Grid,” a plan to connect Asian nations by grids and undersea cables to distribute clean energy.

The agreement to build the giant 200-gigawatt project was signed by Crown Prince Muhammad Bin Salman and SoftBank Group Corporation in New York in March — it’s the biggest sign of Kingdom’s practical moves to wean its economy off oil.

“It’s a huge step in human history,” Prince Mohammed bin Salman told Bloomberg. “It’s bold, risky and we hope we succeed doing that.”

Once built, the development would almost triple Saudi Arabia’s electricity generation capacity, which stood at 77 gigawatts in 2016, according to BNEF data. About two thirds of that is generated by natural gas, with the rest coming from oil. Only small-scale solar projects working there now — a 300-megawatt plant in Sakaka on public-private partnership was bid in October.

The said PV project received a lowest bid of 1.79 cents/kWh, the cheapest price ever recorded — a significant development in the region and in the global solar power supply chain.

Many observers believe the Saudi-SoftBank mega project is no less significant than the discovery of oil in Saudi Arabia given the economy of its scale.

“I believe that the multifaceted impacts of the “new Saudi oil” will be reflected in two key economic aspects: reduced domestic consumption of crude oil and the development of a source of energy parallel to the existing one,” commented Ibrahim Al-Othaimin in his article in The Saudi Gazette.

Many experts believe  solar production cost has already beaten production of conventional energy. Technological advancements that have enhanced the output efficiency of solar panels have driven the cost of solar down significantly over the past 5 years. The price is expected to continually decrease due to further advancements in solar cell technology and energy storage and enhancements in solar cell manufacturing.

The mega project partners seek to take advantage of this and take lead in the region.

The 66th annual report of British Petroleum (BP) shows Saudi Arabia ranked fifth in the world in oil consumption in 2016, with an average consumption of 3.91 million barrels per day. “Wasteful energy consumption is estimated at $80 billion, a figure sufficient to build 5,000 schools,” said Khalid Al-Falih, Minister of Energy, Industry and Mineral Resources.

“The per capita consumption of gasoline in Saudi Arabia is five times higher than the global average. One of the objectives of the financial balance program is to gradually reduce energy subsidies and to link energy prices to the reference price during the period from 2017 to 2020,” he added.

The solar project will undoubtedly contribute to the reduction of domestic consumption of energy and increase oil export capacity. Consequently, the government is expected to save $40 billion of burned petroleum liquids annually and use it instead in electricity production and export. In addition, the project will relieve the huge financial burden imposed on the government due to the use of conventionally produced electricity.

Moreover, the giant project capable of generating 200 gigawatts of energy, i.e. half of the world’s 400 gigawatts of combined solar energy supplied last year, will go beyond meeting domestic demands to possibly allow the export of the surplus solar energy. Hence, Saudi Arabia will have another source of energy that is equal to oil in significance.

Saudi Arabia locally owns all supplies for the project including high quality copper, silica and metal wires, which will be provided free of charge for the project’s transfer of technology cycle based on vertical integration.

The abundance of solar energy in the Kingdom also adds value to the project. Therefore, Saudi Arabia may not only become a solar energy exporting country, it could actually seize control of the field itself.

A simple calculation as per the published research in the field shows that the net profit of exporting one gigawatt, i.e. one million kilowatts, is $149,328,000. Assumptions of this calculation are as follows:

– export rate is one gigawatt of energy per hour or 8,640 gigawatts per year,

– only 85 percent of the total annual production capacity of the project has been calculated in order to leave some margin for maintenance periods and expected adverse weather conditions,

– only $0.02 per kilowatt is the calculated profitability after taking into consideration the costs of production and delivery of energy to clients.

“This giant project will definitely change the global renewable energy industry. It will contribute to laying the foundations for the post-oil chapter in Saudi Arabia. The balance of power will undoubtedly change, as will Saudi Arabia’s position on the global economic map,” Ibrahim Al-Othaimin wrote.

Saudi Arabia also plans to build at least 16 nuclear reactors over the next 25 years at a cost of more than $80 billion. Electricity demand in the country has risen by as much as 9 percent a year since 2000, according to BNEF.






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