Thousands of solar power panels have sprung up across Europe over the past few years, thanks to generous subsidies that make the technology an attractive alternative to conventional energy.
Saudi Arabia too, wants to generate much more solar power as it lacks coal or enough natural gas output to meet rapidly rising power demand. Doing so would allow it to slash the volume of oil it burns in power plants bankrolled by billions of dollars worth of saved oil earnings.
“At world market prices, solar is competitive if you use crude oil to generate electricity,” said Maher Al Odan, a senior consultant at King Abdullah City for Atomic and Renewable Research (KA-CARE) which was set up to plan Saudi Arabia’s energy mix.
Saudi Arabia has said it wants to become a major solar producer before, but its investments amount to much less than 50 megawatts versus several countries which have added thousands of megawatts a year.
This month, KA-CARE set forth a much more ambitious plan, recommending that the kingdom aim to get more than a third of its peak-load power supply, or about 41 gigawatts (GW), from the sun within two decades at an estimated cost well over $100bn.
Making the plan work economically rests on three assumptions: that technology improvements will cut costs, that a domestic solar industry will emerge and create jobs for a booming population, and that many billions of dollars worth of exportable oil will be saved.
An average of 700,000 barrels a day of crude were used in Saudi power stations during the peak air-conditioning demand period from May to September last year, according to official data supplied to the Joint Organisations Data Initiative (JODI).
Although a rise in gas production should temper crude burning this summer, it will likely rise substantially in years ahead unless alternatives are found, and fast. “Domestic oil consumption is rising very rapidly and you get far more value for oil if it’s exported than if it’s consumed domestically,” said Paul Gamble, chief economist at Jadwa Research in Riyadh.
KA-CARE said the first two solar plants, with combined capacity of 3 GW, might be put to tender in the first quarter of next year. One of these will use concentrating solar thermal power (CSP), which Riyadh says could supply an eventual 25 GW of the total 41 GW of planned solar capacity. The other will use photovoltaic (PV), the technology expected to meet the rest of the overall goal.
CSP is relatively new and much more expensive than PV. But unlike PV, it can store solar energy for several hours, which is a big advantage in a country where air conditioning demand remains high in summer long after the sun has gone down. Both technologies will suffer efficiency losses in Saudi Arabia’s harsh, arid conditions, but long periods of intense sunshine should help compensate.
Another problem could stem from desert dust that can reduce solar energy by 10-20 percent in efficiency, according to King Fahd University of Petroleum & Minerals. KA-CARE plans to pick the best technology currently available around the world and develop it further and sees most scope for this in the comparatively immature Concentrating Solar Power market.
The program’s initial targets are
Concentrated Solar Power : 25,000 MW,
Solar photovoltaic: 16,000 MW, and
Wind energy: 9,000 MW.
Interestingly, the amount of electricity generated by 9,000 MW of wind energy at moderately windy sites is of the same order of magnitude as the 16,000 MW of solar PV–even in sunny Saudi Arabia.
Feed-in Tariffs to Build Out Program
The Kindgom’s conservative world view is revealed in the hybrid nature of their proposal. The KA-CARE program will begin with two rounds of bidding for solar PV, Concentrating Solar Thermal Power, wind energy, geothermal energy and waste-to-energy capacity.
The first round of bidding will take place in 2013.
Solar PV: 1,100 MW
Concentrating Solar Power : 900 MW
Wind energy: 650 MW
Geothermal Energy & Waste-to-Energy: 200 MW
The second round of bidding will take place in 2014.
Solar PV: 1,300 MW
Concentrated Solar Power : 1,200 MW
Wind Farm: 1,050 MW
Geothermal Energy & Waste-to-Energy: 250 MW
But unlike other jurisdictions that have recently opted for renewable auctions, Saudi Arabia plans to move quickly to feed-in tariffs to build out the program, because of their simpler administration. This may occur as early as 2015.
Of the 54,000 MW in the proposed program, nearly 90% of the capacity will be assigned through the application of technology-differentiated feed-in tariffs.
Here are some of the program’s key elements.
Maximum project size: No limit
Minimum project size: 5 MW
Technology specific targets: Flexible
Term: 20 years
Evaluation: Price and non-price factors
Feed-in tariff launch: After second auction
Review: Every three years
Localization: Domestic content requirements
The Saudi proposal makes it clear that this program is as much about industrial policy as it is energy policy. The Saudis want to be as influential internationally in renewable energy as they are now in oil exports. Toward that end, the Saudis emphasize that price is a factor, but only one factor, determining how much of which technology is developed and–equally as important–who gets to participate in the program.
The Saudi announcement could well send such powerful shock waves through the world’s oil industry that they reach the highest levels of policy makers in Canada and the USA, leading them to reconsider their recalcitrance toward the renewable revolution sweeping the globe
