The Saudi government and an investment fund led by Softbank’s Masayoshi Son announced they planned to invest $200bn in solar PV by 2030. The funds will be spent within Saudi Arabia.
Although the agreement attracted substantial coverage, many of the implications were not properly examined. In the bullet points below I note some of the main consequences of the deal if it is carried forward.
1, Today $200bn will pay for about 200GW of photovoltaic capacity. ($1m per megawatt). Prices of panels continue to fall, as do ‘balance of plant’ costs. I assume therefore the funds pay for 230GW of capacity. In reality, it will be more. I estimate that panels in Saudi Arabia will generate at a capacity factor of about 18% (although Saudi is sunny, it is also hot, which depresses output). 230GW at 18% utilisation generates 363 TWh a year. Current Saudi total demand is about 340 TWh. In other words the Kingdom’s plans see PV generating more electricity in 2030 than the whole country uses today.
2, Saudi demand peaks at around 65 GW in summer afternoons, driven by air conditioning. At these times the 230 GW of solar PV may be generating up to 130 GW of electricity. Although Saudi demand is still growing, total power production at peak from PV is going to substantially exceed national usage. Either Saudi will store power, export it to neighbouring countries, turn it in synthetic fuels or waste it. It will probably be a mixture of all four outcomes.
3, 230 GW of PV is more than 50% of the world’s total installed solar photovoltaics today. Saudi demand for panels and associated electronics are going to buoy the world market for PV, pushing costs down further.
4, World electricity demand is about 25,000 TWh. Saudi solar will cover about 1.5% of this.
5, The Kingdom plans to build 16 nuclear reactors, with probably 20GW of capacity. If the PV plan goes ahead and storage and synthetic fuels absorb excess supply and make it available at night, it is unclear why Saudi Arabia would also want to build new nuclear. Either you build this much PV or nuclear, not both. Somebody has got their numbers wrong.
6, About 60% of current Saudi electricity is generated from oil. At 40% combustion efficiency and the current $70 a barrel, the raw cost of the oil burnt in a Saudi power station is about 11 US cents per kWh. In some Gulf states, the price agreed for PV output is about 3 cents per kWh and Saudi should achieve a similar figure. PV will cut the production cost of electricity in Saudi almost four fold.
7, Switching from oil to PV for electricity generation will save Saudi Arabia about $22bn a year or $700 a head of current population.
8, At an estimated value of 1.5 MWh per barrel of oil and 40% combustion efficiency in an oil-fired power plant, the Kingdom currently uses about 900,000 barrels a day to generate electricity. This is just under 1% of total world oil production. If PV completely replaces oil in Saudi power production, it will reduce world greenhouse gas emissions from combustion by about 0.4%. (But of course the Kingdom will actually just sell the oil elsewhere!)