Authored by Kieran Cooke, re-posted from Climate News Network
The announcement by Deputy Crown Prince Mohammed bin Salman of Saudi Arabia sent tremors through global energy markets.
He said that the desert kingdom – the world’s biggest oil exporter – would, within 20 years, no longer be dependent on oil revenues and plans to use an estimated US$2 trillion in assets to diversify the country’s economy and invest in companies and projects around the globe.
Great news, say the renewable energy specialists. Now is the time for Saudi Arabia – for years, one of the countries most opposed to any serious global action on tackling climate change – to use its massive financial resources to invest in renewable energy, and in particular solar.
“In 2016, the Kingdom of Saudi Arabia has a major opportunity to develop a new industry,” says Jeremy Leggett, a leading solar specialist, in an article written for Saudi’s national finance daily, Al Eqtissadaih.
Not only have has Saudi Arabia been hit by recent declines in global oil prices, which account for more than 90% of government revenues, it is also consuming more and more of its own oil reserves to generate power.
Leggett, founder of the independent solar energy company Solarcentury, points out that there has been what he calls an “astonishing” cost reduction in solar power in recent years – with the cost of the average solar power plant falling more than 80% since 2008.
He says: “The opportunity is for Saudi Arabia, with its fuel resource – the sun – and its capital from its oil revenues, to become a major player in the new global solar industry: a hub in what is likely to become the biggest industry in the world a few decades from now.”
Whether or not there is the political will within the tightly-knit and secretive Saudi ruling circle to invest in a solar future is the big question.
The announcement by Prince Mohammed, made in the course of an interview given to the Bloomberg news agency, made no mention of developing renewable energies.
The Prince – second in line to the Saudi throne – said the aim was to sell shares in Saudi Aramco, the state-run oil company, and create what would be the world’s largest sovereign wealth fund to invest in companies and projects around the globe.
“The opportunity is for Saudi Arabia to become a major player in what is likely to become the biggest industry in the world a few decades from now”
The sale of shares, said the Prince, “will technically make investments the source of Saudi government revenue, not oil.
At successive climate change negotiations, Saudi Arabia has generally been opposed to any global action that might have a negative impact on its oil exports.
However, the fall in the price of oil has seriously affected the Saudi economy. Last year, the country recorded a budget deficit of US$98 billion, the highest ever.
As a result, generous fuel, water and electricity subsidies have been reduced, and there are indications that taxes on fossil fuels will be raised.
In the course of last December’s Paris climate conference, Saudi officials told Climate News Network that while the kingdom planned to diversify its energy sources, frequent dust storms in the country’s deserts could inhibit the workings of solar installations.
Solar experts disagree, pointing out that solar plants have been built and operate successfully in several desert areas. Earlier this year, one of the world’s biggest solar installations began operations in the desert of Morocco.
Other solar plants operate in the Gulf States of Dubai and Abu Dhabi. And a Saudi company, ACWA Power, played a major role in the construction of the plants in Morocco and Dubai.