Interest in Solar Energy Rises, Even in Saudi Arabia

Countries around the world are showing increased interest in developing solar energy but perhaps none is more unusual than Saudi Arabia, which exports more oil than any other nation.

May 25, 2014 at 3:56PM

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Countries around the world are showing increased interest in developing solar energy but perhaps none is more unusual than Saudi Arabia, which exports more oil than any other nation.

At a recent petrochemical conference in Bahrain, Khalid Al-Falih, the CEO of the Saudi Arabian Oil Co., or Aramco, noted that demand for crude oil in Saudi Arabia has risen "to the point where volumes meant for exports may fall to unacceptably low levels in the coming two decades."

Al-Falih said his company has made preliminary plans to develop facilities that would generate 300 megawatts of solar power in remote areas of his country, where diesel fuel is currently used to generate power.

The Aramco CEO also pointed to the company's move to set up a small solar-power generator in Saudi Arabia's Farasan Island in the southern Red Sea, not only to avoid burning diesel fuel, but also because of the steep cost of shipping the fuel there.

Until now, Saudi Arabia's renewable energy initiative has been under the control of the King Abdullah City for Atomic and Renewable Energy, or KaCare, a government agency. Two years ago, KaCare announced that it was seeking $109 billion in investments to establish a solar energy industry by 2032.

But progress on that initiative is too slow, according to Gasem al-Shaikh, who runs the energy unit at Saudi Binladin Group, and that is why Aramco is taking over Saudi Arabia's effort to establish a solar energy industry.

"The government solar plan is moving very slow, and we are hearing about it for some time, but it's not maturing as fast as it should," al-Shaikh said in an interview with Bloomberg News in Manama, Bahrain's capital. "The country can't wait. We are burning more [fossil fuels] every year, and that's why Saudi Aramco now is taking the lead."

Another nation moving toward greater reliance on solar energy is sunny South Africa.

In January, the business information and analytics company IHS reported that South Africa is the emerging market offering the best opportunity for establishing a solar energy industry. As of the final quarter of 2013, on IHS's 100-point rating scale, South Africa scored 66, 17 points ahead of its closest rival.

"South Africa has very good solar resources in terms of power generation potential and the potential for solar is higher than initially thought," says Silvia Macri, a senior research analyst for Middle East and Africa renewables at IHS.

South Africa has begun several large solar energy projects, and some already have been completed. One completed project is called Herbert 1, a 22-megawatt plant in the Northern Cape province. And the French company Soitec is building a 44-megawatt plant in the country's Western Cape province.

Nikki Van Houten, the marketing manager at Sun Tank, South Africa's leading solar heating company, says demand for renewable energy is rising in the country.

"Since the country's electricity supplier Eskom started having problems with coal supplies in 2008, the solar industry has exploded, helped along by government subsidies," Van Houten says. These subsidies cover about 40 percent of the cost of solar systems.

Despite the recent growth in South Africa's solar energy infrastructure, it still has a long way to go, according to Wim Jonker Klunne of the Center for Scientific and Industrial Research in Pretoria. "At the moment, I don't see much innovation from the solar power industry," he says.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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