A two-hour drive from Riyadh, the capital of Saudi Arabia, rows of solar panels stretch to the horizon like waves on an ocean. Despite having almost unlimited oil supplies, the kingdom is embracing solar and wind energy, partly in an effort to maintain a leading position in the energy sector, which is critical to the country but is rapidly changing.
Faisal Al Omari, CEO of a recently completed solar project called Sudair, said he was looking out over 3.3 million panels, covering 22 square kilometers of desert, and would tell his children and grandchildren about their contribution to Saudi Arabia's energy transition . “I'm really proud to be a part of it,” he said.
While petroleum production continues to play a crucial role in the Saudi economy, the kingdom is betting its chips on other forms of energy. Sudair, which can light 185,000 homes, is the first of what could be many giant projects aimed at increasing production from renewable energy sources such as solar and wind power to around 50 percent by 2030. Currently, renewable energy is responsible for a negligible amount of Saudi electricity. generation.
Analysts say achieving that hugely ambitious goal is unlikely. “If they get 30 percent, I would be happy because that would be a good signal,” said Karim Elgendy, a climate analyst at the Middle East Institute, a research organization in Washington.
Still, the kingdom plans to build solar parks at a rapid pace.
“The volumes you see here are not seen anywhere else, only in China,” said Marco Arcelli, managing director of Acwa Power, the Saudi developer of Sudair and a growing force in the international electricity and water industries.
The Saudis not only have the money to expand quickly, but are also freed from the lengthy permitting processes that hinder such projects in the West. “They have a lot of investment capital and can move quickly and pull the trigger on project development,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, a research institution in Washington.
Even Saudi Aramcothe crown jewel of the Saudi economy and producer of almost all its oil, is seeing a changing energy landscape.
To gain a foothold in the solar sector, Aramco has taken a 30 percent stake in Sudair at a cost of $920 million, the first step in a planned solar portfolio of 40 gigawatts – more than the average UK energy demand – intended to meet most of the government's ambitions. for renewable energy.
The company plans to set up a large facility that stores greenhouse gases underground. It is also funding efforts to make so-called e-fuels for cars from carbon dioxide and hydrogen, notably at a refinery in Bilbao, Spain, owned by Repsol, the Spanish energy company.
Aramco's computer scientists also train artificial intelligence models, using nearly 90 years of oil field data, to increase the efficiency of drilling and extraction to reduce carbon dioxide emissions.
“Environmental management has always been part of our modus operandi,” said Ashraf Al Ghazzawi, Aramco's executive vice president for strategy and business development.
Yet pressure to accelerate the energy transition may be increasing in Saudi Arabia and elsewhere in the Middle East and North Africa, a region with a young, environmentally conscious population and which could be particularly vulnerable to climate change.
“Countries from the MENA region, including Saudi Arabia, will face the consequences of climate change and extreme temperatures and water scarcity,” said Shady Khalil, chief campaigner for Greenpeace Middle East and North Africa, an environmental group.
While Saudi Aramco, the world's largest oil company, insists that oil has a long future, it seems to indicate that the country is not locked in a pollution-causing past, but rather is a Silicon Valley company focused on innovation.
Recently, the company invited a group of journalists to a presentation in which young Saudis described green practices, such as using drones instead of hauling trucks to search for oil or restoring mangrove swamps along tropical coastlines to absorb carbon dioxide.
Over the past two years, Saudi Arabia has ordered Aramco to sharply cut oil production to nine million barrels per day, in line with agreements within the group known as OPEC Plus. In January, Aramco announced that the Saudi government had ordered the country to halt efforts to increase the amount of oil it could produce.
According to Aramco, these decisions are not a harbinger of declining fossil fuel consumption. Executives emphasize that the company will continue to invest in oil while sharply increasing natural gas production.
These fuels will “continue to play a very important role” until 2050 and beyond, Mr Al Ghazzawi said, arguing that renewables as well as oil and gas will be needed to meet growing demand. “We have always felt that there should be parallel and simultaneous investments in new and conventional energy sources,” he said.
The executives said Aramco is well positioned for the decades ahead. The combination of some of the world's largest fields and careful management, they say, means the country can produce oil at a very low cost: an average of $3.19 per barrel. The company is also betting that it can make its oil more attractive by reducing the emissions caused by its production – a trait that is not currently rewarded by markets but could eventually command a premium.
“I think the market will eventually appreciate low-carbon products and prices will become even more profitable,” said Ahmed Al-Khowaiter, Aramco's executive vice president for technology and innovation.
It's easy to see why Aramco and the Saudi government would be wary of damaging one company dating back to 1938. Aramco remains one of the most profitable companies in the world: in the first quarter of this year it earned $27.3 billion and said it would pay out $31.1 billion in dividends, mainly to its main owner, the Saudi government.
However, it follows that if Aramco reduces its investments in oil, it will be able to pay even higher dividends to the government, which can be used in a wide range of efforts to diversify the economy.
Aramco says it will put about 10 percent of its investments into low-carbon initiatives, but these steps are not reflected much in its financial results. “I just don't think it moves the needle,” said Neil Beveridge, an analyst at research firm Bernstein. “Oil production is really responsible for the vast majority of revenues.”
It will likely take years for some of Aramco's initiatives to bear fruit, but conditions already appear ripe for solar energy. Saudi Arabia has a blazing sun and vast areas of land that can be populated with solar panels. Add to that a close relationship with China, which supplies much of the renewable equipment, including the panels at Sudair, and “they build them at a very low price,” said Nishant Kumar, a renewable energy analyst at Rystad Energy, a research firm . .
Sudair, for example, will sell its power at around 1.2 cents per kilowatt hour, a near-record low at the time it was agreed.
“They know very well that the economy can only be efficient if they can continue to benefit from the ever-decreasing cost of solar energy,” says Paddy Padmanathan, former CEO of Acwa Power and now a renewable energy entrepreneur.
The kingdom is betting that abundant, cheap electricity could attract energy-intensive industries such as steel. Acwa is helping to build what will likely be the world's largest plant for making green hydrogen, with a view to exporting it to Europe and other places with higher costs.
The only problem, analysts say, is that Saudi Arabia is not moving as quickly as it could be. Mr Kumar estimates it may only achieve about half of the ambitious 2030 target for solar installations. The wind lags even further behind. One reason: The government has not created the conditions that could bring in rival companies that could boost production, analysts say.
For example, Acwa will be heavily relied upon to achieve ambitious renewable energy targets. “We believe it is difficult to ignore the operational and financial risks,” Citigroup analysts recently wrote. The company is listed on the stock exchange, but is 44 percent owned by the Public Investment Fund, the main financing vehicle for Crown Prince Mohammed bin Salman's initiatives.
Yet renewable energy is already creating jobs. Acwa, for example, has 3,840 employees, of which approximately 1,900 are in Saudi Arabia. The opportunity to work in cleaner energy companies appeals to younger Saudis.
Acwa led by example by installing large numbers of solar panels in a recently built factory on the Persian Gulf to convert seawater into drinking water. Desalination requires enormous amounts of electricity; the solar energy reduces the need to use the electricity grid and therefore reduces emissions.
The developers of two adjacent factories are following suit. “The use of this technology is very important,” said Nawaf Al-Osimy, technical head of the factory known as Jazlah. “The more you use, the more sustainable it is.”