The country, which is usually associated with huge oil resources, is beginning to switch to energy production from the sun and wind. Cause? Reduced oil consumption.
Oil savings could quadruple if in Riyadh, according to the plan, by the end of this decade, energy projects that use gas are developed, according to Wood McKenzie’s estimates. In general, the energy received from all new investments will be equal to the energy received by Saudi Arabia as a result of burning oil during the winter months.
Efforts to change the country’s energy profile are the result of actions by the ruling royal family. After a two-year budget deficit caused by low oil prices, the Saudi elite decided to continue developing the economy. In this case, the development of the economy means the development of industry, and this, in turn, requires more energy resources.
“Renewable energy is no longer a luxury,” comments Mario Marateftis, chief economist at Standard Chartered. “If domestic oil consumption remains at the current level, the Saudis will no longer have to save money to be able to export raw materials,” he adds.
According to the Minister of Energy of Saudi Arabia, Khalid Al-Falih, Saudi Arabia is counting on a sum of from 30 to 50 billion dollars of investment in renewable energy sources.
“The terms of renewable energy contracts will be so motivating that the cost of energy production will be the lowest in the world,” said the Minister of Energy of Saudi Arabia at a press conference. The first companies will have to build plants capable of generating 700 MW of wind and solar energy.
Saudi Aramco, the largest oil producer in Saudi Arabia, is responsible for most of the income of the Arab kingdom, filling 1 for every 10 barrels of oil sold in the world. In addition, the company has taken the first steps to include renewable energy sources in the economy.
To date, Saudi Aramco has created the country’s largest 10 MW solar power plant on the roof of a parking lot in the east of the country. In January, the company launched the first commercial wind turbine in the northeast. According to Aramco, these facilities contributed to reducing the demand for oil by 30,000 barrels per day due to solar panels and 19,000 barrels per day due to wind turbines.
At the moment, it became known that Saudi Arabia will build a wind farm worth $ 500 million. The consortium will be responsible for the project implementation, led by the French energy giant EDF and Masdar from Abu Dhabi. These organizations established cooperation in early 2018.
The tender concerned the construction of a 400 MW wind plant. According to commentators, this is Saudi Arabia’s first major step towards the development of the renewable energy sector and an attempt to generate electricity from sources other than natural gas or oil. The authorities of Saudi Arabia emphasize that the tender is, first of all, the first step towards diversifying the country’s energy balance. The wind energy project should provide energy to approximately 70,000 households per year.
Saudi Arabia also began working with a fund owned by the Japanese technology group SoftBank, with the installation of solar installations worth $ 200 billion.
Investments in renewable energy sources lead to an increase in the number of new jobs and the development of related industries. One example is the Saudi Arabia Mining, which produces phosphates. The company is building a new industrial town in the north-west of the country.
Without switching to alternative energy sources, Saudi Arabia will be forced to increase oil burning. Previous efforts have reduced domestic oil consumption by almost a third.
According to OPEC and the International Energy Agency, investment in renewable and alternative energy sources by 2023 will allow Saudi Arabia to reduce oil consumption by 300,000 barrels of oil.
“Alternative energy sources are a key factor in the country’s economic transformation,” says Fabio Skachchavillani, chief economist at the Oman Investment Fund. “This region has a great competitive advantage when it comes to low energy production costs, and this advantage will grow thanks to investments in renewable energy,” he adds.
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