Masayoshi Son, Softbank’s CEO, announced the agreement with Saudi Crown Prince Mohammed bin Salman to create a 200-gigawatt solar initiative in the sun-drenched oil producer by 2030.
“We have just signed an MOU to create the world’s biggest solar power generation project,” Son said in New York on Tuesday. “The Kingdom has great sunshine, great size of available land and great engineers, great neighbors, but most importantly, the best and greatest vision.”
A statement on the memorandum of understanding provided by the Saudi embassy in Washington said it will create an electricity company in Saudi Arabia that will build solar panels and invest in battery technology. Initially, there would be two large Saudi solar electricity generation projects, one with a capacity of 3 gigawatts and one at 4.2 gigawatts.
According to the memorandum, exporting either panels or some of the power generated by them is a possibility. Saudi Arabia is also seeking a role in solar research and development.
In the past year, the kingdom has signed agreements with U.S. and other foreign companies, but only a small number of deals have moved forward. Mohammed is touring the United States in an effort to woo foreign investment in the kingdom as part of his effort to transform and diversify the economy there.
“Importantly, these projects will help create up to 100,000 direct and indirect jobs in the Kingdom. Additionally, it will increase the GDP by 12 billion dollars and save up to 40 billion dollars annually,” said the statement from the Saudi embassy.
But some analysts were skeptical that the plan will emerge as it is being described.
“Saudi Arabia generally releases big numbers on long time frames, which are then subject to revision, and Softbank likes to announce big numbers too,” Bloomberg New Energy Finance solar analyst Jenny Chase said in an email.
Chase wrote about her skepticism on Twitter Wednesday:
“However, there seems no obvious reason why 200GW by 2030 is impossible if Saudi Arabia needs the daytime electricity; the solar industry can deliver it, Softbank has an appetite for making investments,” Chase continued by email. “That said, the first 7.2GW phase is the interesting bit; this is a lot of solar, but could be delivered over 2-3 years as an indication of Saudi Arabia’s real capacity to implement the plan.”
Benjamin Attia, an analyst for GTM Research, was also most intrigued by the smaller scale plans that were most concrete and immediate.
“We do see kind of a little bit of promise, at least in the short term, in this phase one that has been announced; there are some details around that, and the timeline is quite aggressive,” he added. “They’re saying a 3-gigawatt and 4.2-gigawatt project that will be interconnected in the middle of next year.”
“If even part of that were to be built, it would drastically shift the trajectory of the solar market in Saudi Arabia,” he said.
Attia said 200 gigawatts of solar could provide 95 percent of the country’s current electricity needs, but because solar is available only during the day, it would have to be paired with massive battery installations.
“There’s no reason why they shouldn’t shoot for the moon,” he said. “But there are very few details, and we’ve seen a history of grand claims and nonbinding agreements.”
The news comes just as Saudi Arabia, home to some of the world’s largest petroleum reserves, is also pursuing the construction of a pair of nuclear power reactors. The kingdom says it wants to build the plants to curtail the burning of oil to generate electricity at home. Doing so would free up more oil for exports, the kingdom’s main source of revenue.
Saudi electricity consumption doubled between 2005 and 2015. During the peak summer months, when temperatures soar past 120 degrees Fahrenheit, the kingdom burns about 700,000 barrels of oil a day for air conditioning. Add in industrial and transportation use, and Saudi Arabia’s domestic crude consumption has neared 3 million barrels a day, more than a quarter of its total output.
And with a growing population, Saudi Arabia will need more electric power for water desalination plants.
“I think it’s a waste of a resource to burn oil in a stationary application,” said Dale Klein, a former member of the Nuclear Regulatory Commission and professor of mechanical engineering at the University of Texas at Austin. “Oil is better for airplanes, automobiles, trucks in mobile utilities.”
Environmentalists have long said the kingdom could turn to solar energy. It gets twice as many sunlight hours as Germany, yet Germany has 1,700 times as much solar capacity. And by burning oil and gas for electricity, it has one of the largest per capita rates of greenhouse gas emissions in the world, which could shrink if the country turns toward renewables.
Major solar installations, like nuclear plants, could also help free up oil burned for electricity at home for export abroad — which might hint at one additional motivation for the agreement.
“This MOU and the sub-project coming out of it will enable the exportation of more oil,” said the Saudi embassy statement.