Why the Saudis could wind up in the solar export business

What could it mean for the CSP industry when an energy behemoth with unparalleled solar resources and gigantic financial clout like Saudi Arabia sees that it is their advantage to go into the solar export business? Over the next decades, that's what we might find out.

By Susan Kraemer

Just as Saudi Arabia has earned a vast income from oil over the last century, it could equally well earn a similarly vast amount from solar, spread over a much longer period in the future. The Kingdom is blessed with an abundant supply of solar potential. If the Saudis were to use up each day’s solar energy supply, or 12,425 TWh of electricity, each day would provide a 72 year supply.

With its now 57 partners from 16 countries, the once merely visionary Desertec is transforming into the very grounded and practical Desertec Industrial Initiative (Dii) beginning to put together the first projects of an industrial-scale market proposed by 2050, shipping solar power from the deserts of the North African and Middle East (MENA) region to the EU nations.

So far, the nations like Tunisia and Morocco who have joined Dii - have had to rely on CDM and world bank funding to get them off the ground. But with its vast oil wealth, Saudi Arabia could self-fund a much larger investment.

With its extraordinary resources, both financial and natural, the Kingdom would seem like a natural to ship solar from the deserts to supply Europe’s demanding renewable energy requirements.

High level interest

Recent indications of high level interest include the Saudi-owned King Abdullah City for Atomic and Renewable Energy (K.A.CARE) which says on its website “In establishing solar energy, and especially CSP, potential exists in the years to come for linking–in to similar facilities being installed in North Africa that seek to supply energy to Europe at certain times of the year.”

Saudi Arabia was the only one of the oil-rich Gulf nations to bring official representation to the third annual Dii conference in Berlin at the end of last year, with a keynote speech from K.A.CARE Vice President Dr. Khalid Al-Suleiman.
Also in attendance was ACWAPower, which was until 2004, was fully owned by the Saudi Kingdom, and is closely aligned with it. ACWAPower CEO Paddy Padmanathan noted that it was extremely encouraging to see the level of support shown at the highest levels by Germany, given that the conference was held at hosted at the the German Ministry of Foreign Affairs; ‘in a very prominent German government building’ and that German Chancellor Angela Merkel gave a ringing endorsement of the Dii partnership.

Saudi solar exports

Outside the presentation, in response to a question, Padmanathan explained why it would be in the Saudi interest to export solar to the EU.

“Is Dii of interest to the Kingdom of Saudi Arabia? Absolutely. Because the Kingdom of Saudi Arabia - regardless - has decided for its own benefit, that it needs to move away from just using oil for power generation,” he pointed out. “So it has decided that over the next twenty years, it’s going to move something like 50% of its electricity generation across to renewable energy.”

He detailed how the decision means that just its own internal market will require an enormous investment in solar power, that is unparalleled globally.

“Given that the Saudi Arabia is an enormous consumer of electricity - today we consume 55 GW, and over the next twenty years we are going to increase that to 120 GW - and if we are then going to shift 50% of that to renewables, it’s a very big, very significant market that we are creating for ourselves.”

A staggering 60 GW, half of all electricity generated, will come from non-fossil fuels, with CSP providing the most from a single resource at 25 GW.

Economy of scale

However, it is the chance to exploit economies of scale that are the key reason for Saudi interest in exports, according to Padmanathan, who comes to ACWAPower from over 30 years of experience as a professional Civil Engineer.

ACWAPower is well placed to facilitate the export of solar using CSP technologies - both tower and trough - from Saudi Arabia. The firm, that was privatised in 2004, has built 6,485 MW of power generation plants, and is increasingly the preferred bidder for the new CSP projects being built in the region, including Abu Dhabi’s Shams 1 and Morocco’s Ouarzazate CSP project.

ACWAPower is currently on track to be awarded the winning bids for the first 100MW and 50MW projects that will begin the 25 GW of domestic CSP projects for the Saudi’s own use. Details from the bids indicate that there is faster payback for a larger project, an example of the economy of scaling up.

“If we can then also create a platform to export power into Europe, the market will be that much bigger,” Padmanathan explained. “Which in turn will allow more innovation to happen, more cost competitiveness to be derived by improvement of manufacturing capability, more competition, so that all of us, over a period of time can benefit.” 


The business case for Saudi solar exports is echoed by Adnan Amin, Director General of the International Renewable Energy Agency (IRENA).

“This is increasingly recognised in Saudi Arabia as a serious business opportunity, which could offset the costs of deploying new power-generation infrastructure,” Amin told CSP Today in an email.

“Europe, with a tremendous need to source renewable energy to meet its emissions targets and its renewable energy targets, would be very open to importing competitively priced renewable energy.”

Turkey an EU customer?

According to the Dii’s strategic framework “Desert Power 2050: Perspectives on a Sustainable Power System for EUMENA” one connection point for the Saudis would be across the Red Sea up into Turkey. While having few of the renewable resources of Saudi Arabia, Turkey - along with Egypt and Saudi Arabia itself - is expected to have the highest populations and power demands in the region by 2050. This combination of high demand but low potential puts Turkey in what Dii tallies as the Importers group.

While turkey is not yet an EU member, it is well on the way to becoming one, and the EU makes acceptance into the EU contingent upon renewable energy supplying some 20% of a nation’s electricity. This might be difficult for Turkey to meet, with few of the renewable resources of the Saudis. So Turkey itself could also be the recipient of potential Saudi solar exports.

Alternate route through Egypt

The Saudis have already begun to partner with Egypt in load sharing on the grid with swaps that will allow both countries to share one total electricity output, time-shifting each nation's peak periods, which are several hours earlier in Saudi Arabia than Egypt. But this could become more than Egypt can absorb as the Saudis ramp up their ambitious domestic plans.

“Saudi Arabia would be in a position 15 years from now to export substantial amounts,” Amin indicated. At that point Egypt becomes more of a conduit than a partner.

“If they go to scale on renewables, it makes sense to think about outlets, and the most feasible outlet is Egypt-North Africa-Europe,” he explained. “The Saudis have started recognising the possibility of connecting the grid quite easily to Egypt. If you establish the connection to Egypt, then you can connect to the North African grid, and if that’s connected into Europe, you have a motorway for renewable energy.”

“The Kingdom of Saudi Arabia recognises that Dii is a perfect enabler to engage in this conversation, and to take this conversation back into Europe,” Padmanathan said.

“Desertec, as we look at it is an invaluable network of organisations that can seriously influence decision making in Europe: to get Europe to understand and recognise that renewable energy generated in the MENA region; where we have the benefit of the resource - the sun, the wind - and where we also have large tracts of land where we can install the capturing devices, and given where the capital costs of solar has come down, that renewable energy from MENA can be generated on a very, very cost competitive basis.”

To comment on this article write to the author, Susan Kraemer

Or contact the editor, Jennifer Muirhead

© CSP Today  |  LEGAL NOTICE  |  +44 (0) 207 375 7584  |  Editor@csptoday.com

http://social.csptoday.com/emerging-markets/why-saudis-could-wind-solar-export-business?utm_source=http%3a%2f%2fuk.csptoday.com%2ffc_csp_pvlz%2f&utm_medium=email&utm_campaign=CSP+ebrief+14+Jan+12+en&utm_term=SolarReserve+launched+EOI+for+100+MW+CSP+project+in+Humansrus%2c+South+Africa&utm_content=64847