From The Atlantic
The fate of one of the biggest fossil-fuel producers may now depend on its investment in renewable energy.
Prince Turki bin Saud bin Mohammad Al Saud belongs to the family that rules Saudi Arabia. He wears a white thawb and ghutra, the traditional robe and headdress of Arab men, and he has a cavernous office hung with portraits of three Saudi royals. When I visited him in Riyadh this spring, a waiter poured tea and subordinates took notes as Turki spoke. Everything about the man seemed to suggest Western notions of a complacent functionary in a complacent, oil-rich kingdom.
Turki heads two Saudi entities that are pushing solar hard: the King Abdulaziz City for Science and Technology, a national research-and-development agency based in Riyadh, and Taqnia, a state-owned company that has made several investments in renewable energy and is looking to make more. “We have a clear interest in solar energy,” Turki told me. “And it will soon be expanding exponentially in the kingdom.”
Such talk sounds revolutionary in Saudi Arabia, for decades a poster child for fossil-fuel waste. The government sells gasoline to consumers for about 50 cents a gallon and electricity for as little as 1 cent a kilowatt-hour, a fraction of the lowest prices in the United States. As a result, the highways buzz with Cadillacs, Lincolns, and monster SUVs; few buildings have insulation; and people keep their home air conditioners running—often at temperatures that require sweaters—even when they go on vacation.
The Saudis burn about a quarter of the oil they produce—and their domestic consumption has been rising at an alarming 7 percent a year, nearly three times the rate of population growth. According to a widely read December 2011 report by Chatham House, a British think tank, if this trend continues, domestic consumption could eat into Saudi oil exports by 2021 and render the kingdom a net oil importer by 2038.
That outcome would be cataclysmic for Saudi Arabia. The kingdom’s political stability has long rested on the “ruling bargain,” whereby the royal family provides citizens, who pay no personal income taxes, with extensive social services funded by oil exports. Left unchecked, domestic consumption could also limit the nation’s ability to moderate global oil prices through its swing reserve—the extra petroleum it can pump to meet spikes in global demand. If Saudi rulers want to maintain control at home and preserve their power on the world stage, they must find a way to use less oil.
Solar, they have decided, is an obvious alternative. In addition to having some of the world’s richest oil fields, Saudi Arabia also has some of the world’s most intense sunlight. (On a map showing levels of solar radiation, with the sunniest areas colored deep red, the kingdom is as blood-red as a raw steak.) Saudi Arabia also has vast expanses of open desert seemingly tailor-made for solar-panel arrays.
Some of Saudi Arabia’s most prominent industrial firms, as well as international electricity producers and solar companies big and small, have lined up to profit from what they see as a major new market. The fact that Saudi Arabia, an ardent booster of fossil fuels, has found compelling economic reasons to bet on solar is one of the clearest signs yet that solar, at least in some cases, has become a cost-effective source of power.
But the Saudis’ grand plan has been slow to materialize. The reasons include bureaucratic infighting; technical hurdles, notably dust storms and sandstorms that can quickly slash the amount of electricity a solar panel produces; and, most important, the petroleum subsidies that shield Saudi consumers from any real pressure to use less oil. The kingdom is a fossil-fuel supertanker, and though the captain knows that dangerous seas lie ahead, changing course is proving exceedingly hard.
Nasser Qahtani is an oilman through and through. On a credenza in his Riyadh office, he has a souvenir glass block that holds a shot of crude from Saudi Arabia’s biggest oil field. He spent about 15 years working at an Aramco petroleum-processing plant. And he has a master’s degree from Texas A&M University, which is why he has two Aggies coffee mugs on his bookshelf. “That’s for my easy days,” he told me one morning, pointing to the smaller one. “That’s for my tough days,” he deadpanned, pointing to the bigger mug.
Saudi leaders carefully calibrate the kingdom’s output to keep that global price where they want it: high enough to fill Saudi coffers but low enough to avoid spurring competitive threats. For years, analysts have debated how much oil Saudi Arabia has in the ground, with some alleging that the kingdom is far less flush than it lets on. Saudi officials maintain that they face no immediate crisis, but they talk about the need to keep in check competitors such as the U.S. shale-oil industry. A serious reduction in the oil they have available for export would hinder their ability to fend off such threats.
Few places better illustrate Saudi Arabia’s energy challenge than the country’s Red Sea coast. Along a stretch of black highway running north from the coastal city of Jeddah lies a string of new infrastructure. All of it is big. All of it is named for King Abdullah bin Abdulaziz al Saud, who died in January after leading the country for a decade. And much of it was built by Aramco, which, beyond being an international oil giant, is the Saudi government’s go-to player for getting things done. There’s the new King Abdullah Football Stadium, the new King Abdullah University of Science and Technology, the new King Abdullah Economic City, and the new King Abdullah Port. To the north of all this development, in the village of Rabigh, sits an enabler of growth: a massive, oil-fueled power plant.
Solar power presents an alluring alternative. The kingdom first began experimenting with energy from the sun in the 1970s. In 1979, the same year that unrest in the Middle East sparked a global oil shock and President Jimmy Carter had solar panels installed on the White House roof, the United States and Saudi Arabia jointly launched a solar-research station about 30 miles northwest of Riyadh, in a tiny village called Al-Uyaynah, which at the time lacked electricity.
Work at this site languished in the 1990s and early 2000s but has picked up in the past few years. In 2010, the King Abdulaziz City for Science and Technology, the research agency that runs the station, built a small experimental assembly line there to manufacture solar panels. A year later, it more than quadrupled the line’s capacity. It plans to expand the facility again over the next several months, this time by a factor of eight.
Prince Turki told me that Saudi officials want to add another factory elsewhere in the kingdom; it will be one of the largest outside of China. The goal, he said, is not just to install solar panels across Saudi Arabia but to export them—a way, Saudi officials hope, to create high-paying tech jobs for the kingdom’s large population of young people. (Some two-thirds of Saudis are younger than 30.) Officials also want to bankroll solar installations in other countries, to boost the market for Saudi-made panels. Among the potential locations is the United States, where Turki envisions the kingdom undercutting other solar providers in part by tapping cheap development loans from Saudi banks.
The disconnect between aspiration and reality is even starker at the King Abdullah University of Science and Technology, one of the big projects along the Red Sea coast. The multibillion-dollar campus has both a world-class solar-research lab and some stupendously energy-inefficient amenities—including, in the middle of the desert, a hotel where I found my room chilled to about 62 degrees Fahrenheit and a nine-hole golf course fully lit for nighttime play.
The entire campus went up in about three years. It has a town square with a Quiznos sandwich shop, a Burger King, and a grocery store with an extensive selection of dates and nonalcoholic beer, all across the street from a towering white mosque. It has steel-and-wood offices and houses with red-tile roofs, both of which evoke suburban California. And it has a faculty of experts recruited from around the world.
Among them is Marc Vermeersch, a Belgian physicist and materials scientist who arrived in January after spending several years in Paris heading up solar work at Total, the French oil giant. Vermeersch told me that although no expense was spared in setting up the university’s solar laboratory, the money wasn’t wisely spent. The lab includes half a dozen highly specialized printers—including one that cost about $1 million—that apply coatings to surfaces, a process important in researching futuristic solar-panel technologies. But because Saudi Arabia wants to ramp up solar power soon, Vermeersch and his colleagues are reconfiguring the lab to focus on nearer-term research, work he hopes will pay off in the next few years.
The university houses an incubator for technology start-ups, including a firm founded on the premise that there’s good money to be made in keeping solar panels clean in the desert. The company’s creator is Georg Eitelhuber, an Australian-born mechanical engineer who came to the university in 2009, the year it opened, to teach physics at a high school on the campus. “King Abdullah made me an offer I couldn’t refuse,” Eitelhuber told me kiddingly, in an Aussie accent.
Aramco is the most important player in the kingdom’s shift to solar power. The company’s initial forays have been tiny—a solar-panel array next to one of its office buildings, for example—but its plan to break ground on 10 or so bigger solar projects next year seems to represent the start of a more serious commitment. A high-ranking Saudi official told me he expects Saudi Arabia to develop an initial tranche of a few gigawatts of solar capacity over the next five years. The projects will be in places where the cost of conventional fuel is high, either because the sites are remote or because they use diesel. (Saudi Arabia has historically had to buy large quantities of diesel at international prices because its refineries can’t process enough to satisfy domestic demand.)
Even at these cherry-picked sites, solar power is likely to cost more than electricity from the existing conventional plants—but only because those conventional plants get oil at a subsidized price. This explains why the government, not the private sector, is making most of the investment in solar. Private companies are waiting for the government to offer up a slate of contracts that would, in effect, allow solar energy to compete with artificially cheap oil-fired electricity.
One of the biggest firms waiting in the wings is Acwa Power International, which is based in Riyadh and owns and operates power and desalination plants in the Middle East, Africa, and Southeast Asia. In the past few years, Acwa Power has signed contracts to produce solar power in several countries—places where the price of conventional electricity is higher than in Saudi Arabia.
Acwa Power hasn’t yet developed any solar projects in Saudi Arabia. But Prince Turki told me that Taqnia, the state-owned company he chairs, is finalizing a deal to provide solar energy to the Saudi Electricity Company for 5 cents a kilowatt-hour—even less than the price Acwa Power recently agreed to in Dubai. “It’s the cheapest in the world that I know of,” Turki said.
That deal may be a tantalizing sign of things to come, but the goal Saudi Arabia announced three years ago of building 41 gigawatts of solar capacity remains a distant glimmer. In January, Saudi officials announced that they were pushing back the target date from 2032 to 2040—and even with the longer time frame, skeptics have dismissed the goal as a mirage.
Proving them wrong would require reshuffling an economic deck that the kingdom’s leaders have stacked for decades to favor petroleum. In that sense, Saudi Arabia’s energy challenge is a more extreme version of the one that faces the rest of the world. But if the kingdom’s leaders can find the political courage to act decisively, Saudi Arabia, of all nations, could become a model for other countries trying to shift away from oil.