Saudi Arabia’s Solar Power Goals: As Challenging as They Are Big
Saudi Arabia and Japan’s SoftBank Group Corp. signed a memorandum of understanding on Tuesday to develop 200 gigawatts of solar power capacity by 2030 in the desert kingdom, with a price tag of $200 billion. Here’s a few points to keep in mind:
The Size
It’s a hundred times larger than anything else on the drawing board worldwide and double what the global photovoltaic industry supplied last year, according to data compiled by Bloomberg New Energy Finance.
Or, as Bart Lucarelli, managing director for power and utilities at AWR Lloyd, puts it: “Surreal and unprecedented.”
If built at one site, a 200-gigawatt solar farm would cover about 2,023 square kilometers (781 square miles), or double the size of Hong Kong, according to Bloomberg News calculations.
Despite the jaw-dropping size in the headline numbers, the project will be built in stages. The first portion will generate 7.2 gigawatts and come online in 2019.
Just an MoU
The deal signed this week is a memorandum of understanding, which no one is obligated to follow through on.
“This is just an MoU, not a binding agreement to build,” said Benjamin Attia, an analyst for GTM Research. “Let’s see if more detailed plans will be released in May after the feasibility study is completed.”
The Cost
SoftBank’s Vision Fund will invest $1 billion for the first phase of the project. It’s unclear where the rest of the massive investments will come from.
“My feeling is that raising $200 billion over the time period will be a big ask,” Christopher M. Dent, a professor at the University of Leeds, said by email. “But with the solar power sector growing globally at the huge pace it is, one never knows what might be possible by 2030.”
Large international renewables developers may find attractive Saudi Arabia’s clear energy policy outlook and financial resources, which mean that the country should be able to offer predictable returns through long-term power purchase agreements, according to Francesco Menonna, an analyst at BMI Research.
But lenders won’t be interested until Saudi Arabia decides how it will award those PPAs. The country can either opt for feed-in tariffs, which would show developers how much they can earn, or it can hold auctions, where builders compete to provide the cheapest prices.
We’ve Heard This Before
Saudi Arabia announced ambitious long-term solar power deployment plans in 2012 and 2016, but not much happened, according to Assaad Razzouk, Group CEO of Sindicatum Sustainable Resources. The nation failed to generate investor interest in a plan to add 41 gigawatts of solar power by 2040.
“I would reserve judgment until I see the first 5 to 10 gigawatts under construction,” Razzouk said. “There is a lot of work that the two parties, and a whole ecosystsem for the companies around them, that has yet to be done.’’
Grid Constraints
The project is bigger than most countries’ total generation capacity, including France and Canada, and more than double Saudi Arabia’s current 77 gigawatts, according to data from Bloomberg New Energy Finance and the CIA World Factbook.
To handle that much power, the country would need “huge investments” to upgrade its grid, according to Dent.
“By 2030, storage technology may be sufficiently advanced to accommodate more intermittent renewables like solar and wind into the grid,” he said. “But this remains speculative.”
It would also require large-scale battery storage facilities or exports to avoid curtailments. A key feature of the project will be the construction of “the largest utility-scale battery” in two to three years that will supply power to consumers in the evenings, Masayoshi Son, SoftBank’s founder, told reporters in New York this week.
Build Out
After the first phase is complete, that still leaves installing an average of more than 17.5 gigawatts of capacity per year until 2030, which is more than what was brought online last year in the U.S., the world’s biggest solar power market after China, BMI’s Menonna said.
“Such accelerated growth would require Saudi Arabia to develop the world’s second-biggest solar supply chain in a matter of a few years,” he said. “This is not technically impossible, but certainly it will be challenging.”
Most Promising
The short-term plan of connecting 7.2 gigawatts of capacity over two sites by mid-2019 is promising, according to GTM’s Attia.
And a more feasible long-term goal would be up to 40 gigawatts by 2030, said Robin Mills, chief executive officer of Dubai-based consultant Qamar Energy, who noted that it would still require suitable grid upgrades.
“Saudi renewable progress has been slow so far, though accelerating,” Mills said. “Overall I would be very skeptical of the 200 gigawatts, but several gigawatts is realistic and would be economically attractive.”
Source: Bloomberg L.P.
