Will Saudi turn to green energy?

Every country in the world is having to look towards green energy, but in the Middle East, it appears the idea of green energy intrigues them, as concern about future reserves run deep. But Saudi Arabia's recent plan for a multi-billion-dollar investment in traditional oil projects underscores lingering concern about placing their money onrenewables.

The largest city of Saudi Arabia, Riyadh, plans to spend US$170 billion over the next five years on energy and oil refining efforts; the country's state-owned oil company, Saudi Aramco, will bankroll little more than half this endeavor, according to the Saudi Gazette. The energy giant called it unrealistic for Saudi Arabia to plow money into alternative energy sources when the number one cash crop of oil has built its wealth.

It was reported by the International Monetary Fund that in 2005 oil accounted for 90 percent of Saudi Arabia's export earnings, 70-80 percent of state revenue and 44 percent of the GDP, so it shows why they are wary at moving away from it.

"I don't think that's surprising," said Eurasia Group energy analyst Will Pearson of the guarded approach, adding that Saudi Aramco has long been hesitant given the state's status as the world's leading oil producer, an article Amid Push For Renewable Energy, Saudi Arabia Cautiously Turns Over Green Leaf states.

Without a "huge, revolution[ary], game-changing technology," an abrupt shift in the "fuel mix" is doubtful, said Pearson, who puts more stock in green technologies gradually scooping up market share. Given the abundance of other resources, the Saudi government is more likely to make such energy sources a smaller part of its overall budget, he argued.

Despite hesitation, the Gulf country has been drawn to the "relatively unproven technologies" of biofuels and electric vehicles even though, for the most part, "people are going to be dependent on the oil sector for transport," Pearson told OilPrice .com. Given its access to sunlight, Saudi Arabia has great potential to become a major solar player but has not made "too much concrete progress so far," he said.

Water plans

Saudi Arabia is also taking aim at clean water. In a nation where water is scarce, Riyadh plans to build a desalination plant to deliver cheaper, cleaner water.

Yet growing pains are bound to accompany this push away from traditional oil and gas, analysts warn.

The bottom line is that the new industry has to beat traditional hydrocarbons, said Molly Williamson, a consultant and scholar at the Middle East Institute in Washington focused on Middle East and energy issues. "If you develop an alternative energy source that is effective, that is available, that is reliable, but it is the equivalent of US$12 a gallon for gasoline, it's not going to make it," she said.

The Saudis need water and electricity to match their population growth. Currently, Saudi Arabia's 30 desalination plants produce about 21 percent of the world's total desalinated water production.

Nearly 70 percent of the local water drunk in cities comes from desalinated sea water. As the population grows, Saudi Arabia may spend another US$40 billion to build more desalination plants.

The government of Saudi Arabia has recently approved the construction of a US$300 million dollar facility that is designed to turn waste into energy. The facility, will burn 180 tonnes of waste per day, in order to produce 6MW of generating capacity and 250,000 gallons of distilled water.

Outside of Saudi

Apart from Saudi Arabia, Egypt, which is facing dwindling oil and gas reserves, announced it would host a Dutch factory that will play a key part in its bid to create solar energy.

Energy importer Morocco is planning to embark on a large solar energy project with a US$9 billion price tag that is expected to produce about 40 percent of the country's power by the year 2020. The North African state also has a windmill farm near the city ofTangiers.

But in the UAE, they are four years into the Masdar Initiative, their plan to create a new 'greenprint' for urban design.

Masdar City was launched in 2006 with an announcement that the government of Abu Dhabi, an oil- and natural gas-rich emirate of the United Arab Emirates, would build a city just outside the capital demonstrating a new way of living with sustainable technologies.

Will Saudi go by the UAE's example? It certainly seems they are overly cautious when their economy relies so much on oil.

 

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