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‘Renewable energy absolutely necessary’ – Saudi

Renewable energy absolutely necessary for Saudi

Oil saving win-win drives Saudi solar power boom...

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May 23, 2013 4:56 by



According to a Reuters study of average selling prices reported by four of the top-10 manufacturers, silicon-based modules have fallen from around $3.5-$4.5 per watt (W) in 2008 to less than $0.8/W last year.

Bernstein estimates Saudi oil fired power costs at about 16 U.S. cents/KWh, based on a modern power station with an efficiency of around 37 percent, compared to less than 9 cents/KWh for solar, assuming an installation cost of $1/W.

Solar power is still economically unattractive in a U.S. market awash with cheap natural gas. In Saudi Arabia, where a lack of gas forces it to burn up to 800,000 barrels a day of oil in summer, solar remains attractive even at well below $100.

“Falling oil prices reduce the incentive, but don’t kill it until oil hits $50/barrel,” Parker said.

According to a study by European engineering giant ABB, Saudi oil fired power plants have an average efficiency rate of less than 30 percent.

If valuing Saudi oil fed into these plants at international market prices of around $100, oil fired power costsSaudi Arabia far more, around 26 cents/KWh because its inefficient plants get less power from each barrel they burn, Robin Mills, chief analyst at Manaar Energy Consulting, said.

At a capital cost of $2/W for utility-scale projects, solar could produce electricity at around 12.6 cents/KWh, Mills said in a study for the Emirates Solar Industry Association published in early 2012. (http://link.reuters.com/paw28t)

Costs have continued to fall since then, dragging solar costs down to 9.9 cents/KWh when capital costs for large scale projects are around $1.50/W, he said.

Saudi Arabia’s light crude <ARL-OSP-A> has been sold at an average of more than $108/barrel since the start of 2013, according to Reuters calculations, making solar power even more attractive by saving millions of barrels a week from power plant furnaces.

Bloomberg New Energy Finance agrees that utility scale solar photovoltaics costs are likely to average around $1.52/W globally this year.

At that installation cost, solar power offers Saudi Arabia an internal rate of return (IRR) on its investment of nearly 22 percent at $108/barrel. Even a drop in oil prices to $94 would still give an IRR of over 20 percent,Logan Goldie-Scot, lead Middle East analyst at Bloomberg New Energy Finance said.

Although Saudi power plants buy the oil they use at a fraction of international market prices, reducing the number of barrels burned at home still effectively increases potential Saudi export revenues by billions of dollars a month.

“The opportunity cost of oil argument is the key driver behind Saudi Arabia’s program,” Logan Goldie-Scot, Lead Analyst, MENA Region at Bloomberg New Energy Finance said.

“The fact that the Kingdom of Saudi Arabia has a clear rationale underpinning this makes it likely that it will be realised.”



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