Saudi Arabia slows its $109 billion solar program

A Saudi man walks past a field of solar panels at the King Abdulaziz City of Sciences and Technology, Al-Oyeynah Research Station, Saudi Arabia. [Photo/Agencies]

Saudi Arabia is delaying by eight years its target to complete a clean-energy program including $109 billion in solar power, saying it needs more time to assess what technologies it will use.

The project was originally intended to produce one-third of the nation's electricity from solar panels by 2032 and more from wind, geothermal and nuclear reactors. The ambition was to save more crude oil for export.

"We have revised the outlook to focus on 2040 as the major milestone for long-term energy planning in Saudi Arabia," said Hashim Yamani, president of the King Abdullah City for Atomic and Renewable Energy, the royal agency established to oversee renewable energy policy.

The comments at a conference in Abu Dhabi on Tuesday are a blow to the kingdom's effort to feed its rapidly growing population's demand for more electricity. The world's largest oil exporter is having to divert crude supplies for domestic power generation during the hottest summer months, reducing its main source of income.

King Abdullah's government set out its ambitions for diversifying its energy supplies in May 2012, the year after an influential Chatham House paper suggested business-as-usual policies would leave the kingdom a net oil importer by 2038.

A plunge in oil prices is only concentrating officials on how to get value out of the program, said Paddy Padmanathan, chief executive officer of ACWA Power International, a Riyadh-based power plant developer likely to build some the plants.

"Does the reduction in oil price mean everything is going to go backward? I don't think so," said Padmanathan. "It focuses everybody's mind on efficiency and on thinking long term."

The Chatham House paper by Glada Lahn and Paul Stevens of estimated Saudi Arabia consumes a quarter of its oil production, or 2.8 million barrels a day, for domestic energy needs, and that that the sum will rise as the economy expands.

Saudi Arabia's population has quadrupled to about 30 million people in the last 40 years. Its energy consumption is similar to the United Kingdom's, which has double the population, according to the Chatham House paper. Per capita, Saudi Arabia consumes about as much as the US and double Japan's level, the paper said.

Part of the delay appeared to be linked to the kingdom's desire to build its own renewable manufacturing business with money from the program. Currently, most solar panels are made in China, and companies such as General Electric Co in the US, Siemens AG of Germany and Vestas Wind Systems A/S of Denmark make wind turbines.

Industrial knowhow

"One of the key benefits they want to capture is the industrialization and knowledge development," Padmanathan said. "If they are going to invest so much in this sector they want to make sure they have the whole value chain."

ACWA and other power plant developers expected Saudi Arabia to seek partners last year to build the first solar plants under the program, Padmanathan said. "I remain frustrated," he said about the delay.

Saudi Arabia will consume about 129 gigawatts of power by 2032, Yamani said in his speech. The nation wants to be able to build solar plants with 80 percent of the components made domestically, making it a regional hub for exports of renewable energy technology.