Why Solar Energy Has Become a Priority for Business in Saudi Arabia

December 13, 2020

The Kingdom’s economy has reached an inflection point – and it’s spurring a revolution in the way we produce, consume and trade energy.

The decade-long oil price boom of 2003-2013 rocketed Saudi Arabia’s economy into the stratosphere. Almost 90 percent of the Kingdom’s wealth was and is from oil – but times are changing. Cheap, subsidized oil was plentiful during the boom, providing businesses and citizens with easy energy at an incredibly low cost.

The fluctuation in global oil prices has brought the Saudi economy to a crossroads. With decreasing margins on oil exports, the oil subsidies are becoming less sustainable and, as a result, are going away. This has increased energy costs for Saudi businesses. In fact, commercial electricity costs have already doubled, and energy costs are only expected to increase.

While oil is still plentiful, the time it takes to extract and refine the oil, combined with a high rate of consumption, have created an unsustainable situation going forward. Based on a 2015 Mckinsey Report, if the current trend continues, the Kingdom will be forced to become a net importer of oil by 2038.

To address these issues and others, King Salman and the Crown Prince Mohammed Bin Salman have launched a strategy that will make monumental changes in the way the Kingdom’s economy and society at large operate. Saudi Vision 2030 lays out a revolutionary plan for the country’s economy – including a diversification of its energy supply through massive investments in solar energy. Energy diversification will be paramount, not only to grow the Kingdom’s economy, but to help the country maintain its status as the world leader in energy production.

The Saudi oil reserves are the stuff of legend, but the country also has an abundance of another type of energy – sunlight. Advancements in solar energy technology have reduced solar energy prices by more than 80 percent, and as a result are bringing Saudi solar energy into the mainstream. The opportunity for the Kingdom to become the world’s largest producer of solar energy is within reach. With more sunlight than almost every other country on earth and plenty of space to build solar farms, solar power – along with other alternative energies like wind and nuclear – will be one of the main economic drivers for Saudi Arabia over the next 100 years and beyond.

The Saudi government has put its money where its vision is, recently inking a $200 billion deal with Softbank Group to build the largest and most sophisticated solar farm in the world. The plant is expected to reach its full capacity by 2030, forever changing the way Saudi Arabia deals in energy.

The Saudi solar farm and government-funded solar power will eventually help Saudi businesses relieve the burden of energy costs, but many businesses are currently facing rising energy costs and will need to adapt and follow suit with the nations adoption of solar energy. Energy costs are already soaring, and an immediate fix is required. Some businesses have already had to close their doors to rising energy costs. As a result, many Saudi businesses have a great opportunity to install solar panels – and reap the benefits of reduced energy costs.

Energy from the sun is free. Harnessing solar requires an initial investment in solar panels, but the investment pays for itself in six to 10 years. And businesses who use solar don’t just reap the benefits of free energy – they essentially become individual producers of energy as well. With solar power, if you produce more than you use, that energy can be sold back to the grid – potentially for a profit.

The future of Saudi solar is certain. That’s why many the Kingdom is already investing in solar power to help fuel future economic growth, and the private sector will follow. While government incentives through financing programs and others have not yet been implemented for Saudi solar power (they will come as production ramps up), many businesses are finding that investing in solar panels now are boosting their bottom lines.

Sun Capture is a solar energy services company in Saudi Arabia helping Saudi businesses bridge the gap between the current rising energy demands and costs, and the coming national move towards affordable renewable energy. To learn more about how solar can help your energy needs and bring your business in line with Saudi Vision 2030, contact us today.