Saudi Arabia and renewable energy. A decade ago, this duo would have been unthinkable. But times have changed for the Kingdom with a slump in oil prices. In a bid to wean the country off oil exports, the Crown Prince Mohammad bin Salman, more popularly known as MBS, has embarked on an ambitious spree of projects.
According to Bloomberg News, the latest one has been the signing of a memorandum of understanding (MOU) with Softbank Group Corp. to build a $200 billion solar power project. It goes without saying that the scale of this sort of investment in renewable energy has never been witnessed before.
Softbank’s founder Masayoshi Son, unarguably one of the leading entrepreneurs today, has found a receptive ear in MBS, who is looking to diversify the Saudi economy as part of the Vision 2030. Recall that the Japanese Softbank Group partnered with the Kingdom’s massive sovereign wealth fund last year to create the world’s largest technology fund worth a whopping $100 billion. The kingdom has planned to build a 200GW solar plant. To assess its size, it is almost 100 times more than the next biggest solar project of 2GW announced by Solar Choice, Australia. Financing details are still unclear, but the project is likely to be divided into parts with the first stage scheduled for commencement this year. However, it should be noted that as with the host of MOUs signed in Trump’s visit to Saudi Arabia last year, only a handful materialised into something more.
Be that as it may, the adoption of solar energy will only increase in the years to come. Falling prices of solar PV panels and rising efficiency - thanks to rapid advancement in technology - has resulted in increasing competitiveness against traditional fossil based energy sources.
However, when it comes to Pakistan, investment in renewables has not had the most conducive atmosphere. A big reason is the misperception in policymaking circles of the ability of solar or wind power generation to become the “base load” i.e. the minimum power generation required.
The treatment of wind IPPs that faced considerable constraints in getting grid connections, and the lacklustre implementation of the 1000MW Quaid-e-Azam solar park is evidence of this erroneously held belief. There is a consensus among energy experts that Pakistan can achieve 25 percent of renewable energy in its total energy mix from the current paltry 5 percent. Understandably grid constraints do exist, but they can be removed to enable more induction from renewable energy sources. In this regard, the Danish government has made an offer last year to assist Pakistan’s government in tackling this issue.
Denmark is an excellent example when it comes to adoption of renewable energy. Faced by a rising current account deficit and falling foreign exchange reserves, the country decided in the 1970s to move away from imported fuel based power generation towards more renewable energy in their power mix.
Pakistan has faced this situation of sliding foreign reserves and a rising current account deficit multiple times. However, the government has instead opted for quick fixes in the form of R-LNG and coal power plants on imported fuel. Given that the likes of Saudi Arabia are instead focusing on increasing renewables while attempting to decrease the share of gas and oil based generation, it should be some food for thought for long-term policymakers in the country.
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