Page 24 - Respond 2016 Magazine

solar and saudi

arabia: riyadh bows

to the inevitable

This year deputy crown prince Salman announced the formation of a post-oil $2 trillion fund,
accelerating a major Middle East energy transition.

By Jeremy Leggett

In 2016, the Kingdom of Saudi Arabia has a major opportunity to Investors are increasingly realising that a transformation will unfold
develop a new industry, an opportunity that became something of in energy markets in the years ahead.
an imperative in 2015. Let me examine first the opportunity, then
the imperative. In 2015, for example, the National Bank of Abu Dhabi produced
a report concluding that the great majority of global power
The opportunity involves solar energy, which is fast heading investment will be in renewables in the years ahead, with solar as a
towards becoming the cheapest unsubsidised form of energy on major player.
the planet. Last year, solar power plants cheaper than gas plants
were built in Dubai and Colorado. Another report by Deutsche Bank says solar is closing in on
coal-fired power and that prices could fall a further 40% by 2020,
A Saudi company, ACWA Power, built the one in Dubai. We can creating $4 trillion of value in the next 20 years.
expect to see more such plants around the world in 2016, and many
more beyond. Hardly anybody saw this coming, even solar enthusiasts like me.
The International Energy Agency, for example, got it horribly wrong.
The main reason is the astonishing cost reduction of solar power.
Since 2008, the average cost of a solar power plant, be it on the They estimated the forward growth of the global solar energy
ground or on a roof, has fallen more than 80%. market in 2000, 2002, 2005 and 2007. None of their projections
exceeded 20 gigawatts by 2014. The reality was nearly 180
Analysts have called this fall “the terrordome”, because it resembles gigawatts.
a steep fairground ride on graphs, and because it would strike
terror in the heart of any energy utility executive who seeks to resist Big energy utility companies have started to implement U-turns in
change and stick to the old ways. their business models in the face of this.

The cost of solar will continue to come down. Even in my cloudy In 2014 and 2015, E.ON, GdF Suez, Enel, and RWE all announced
homeland, where the sun rarely shines, solar energy will be cheaper they would be focussing growth on solar, other renewables and
than gas within three years or so. energy services, and winding down use of conventional fuels.

The first oil and gas major has yet to join them, but Statoil has set
up a renewable energy division, and Total has major investments
in solar.

The first oil majors are moving in the same direction as the utilities
because the revolution isn’t just about power, but transport.
In February 2015, we learned that Apple intends to be mass-
producing solar-charged electric vehicles within four years. In May,
we saw Tesla Motors morph into Tesla Energy, a manufacturer of
batteries not just for cars but owners of buildings, and utilities.
Within a week, it had taken $800 million of indicative orders for its
batteries, 60% of them from industry.

22 www.rtcc.org