Ann Arbor (Informed Comment) – Saudi Arabia’s massive oil deposits and its 9.53 million barrels per day (bpd) of petroleum production make it an enormous carbon polluter and the foremost enemy of climate science and of electric vehicles.
Some 38% of Saudi power plants use petroleum and 62% of electricity generation is done by domestically produced fossil gas.
But here’s the paradox. Saudi electricity demand is currently growing 10% a year . The oil and gas supplied by the government to power plants is subsidized. If the kingdom sold the oil abroad instead at $67.76 a barrel (this weekend’s Brent crude price), it would make more billions for its Vision 2030 transition to a less hydrocarbon-based economy.
In one recent year, Saudi Arabia lost $11 billion on electricity generation.
If Saudi Arabia switched to solar power for electricity plants, it would free up for export the oil and gas it now uses domestically. Further, if it doesn’t switch, it can expect the country’s electricity demand to eat up more and more oil and gas every year, a gigantic opportunity cost, since it won’t make any money from exporting them and it will have to subsidize the locals, costing even more money.
So the smart play here is to go solar, right? I mean, Saudi Arabia is potentially the . . . well, Saudi Arabia of solar. And that is what the Saudi Public Investment Fund, which has nearly $1 trillion to play with, has decided.
Just last month, ACWA Power and a consortium inked $8.3 billion in green energy deals that will eventuate in seven solar and wind farms around the country. These power generation projects will add 15 gigawatts of further renewable capacity.
Just last week, ACWA made the announcement that three projects that will ultimately generate 2.7 gigawatts of electricity have actually already begun producing some electricity. The Saad 2 solar farm in the capital of Riyadh was certified for a further 365 megawatts, bringing its total capacity to a bit over 1.1 gigawatts, and it is at least partly online. Another, at Hail in the north-central part of the country, has thrown the switch and will produce 1.4 gigawatts all on its own when fully operational. In al-Qasim in the center of the kingdom, a solar plant is putting out 1 gigawatt of power, and will double its output when it is fully implemented.
Moreover, the prices are eye-popping. The solar plant at Hail is producing electricity for a little over 1.7 cents a kilowatt hour. The Saad 2 plant has a production cost of close to 1.8 cents a kilowatt hour. The energy produced at the solar farm at al-Qasim, presumably near the provincial capital of Burayda, has a cost of less than 1.7 cents a kilowatt hour.
In the GCC countries generally, fossil gas electricity generation costs 11 cents per kilowatt hour. So these solar farms are saving a ton of money.
I perceive Saudi Arabia to have talked a good game about renewables for some years, while nothing was done on the ground. Only about 1% of current power generation is wind and solar. But ACWA has carried out major renewables installations in Morocco, Egypt and the UAE. That some renewables generation has actually begun, and that further big deals have finally been signed suggest that this time the commitment is genuine.
Despite Riyadh’s propaganda campaign against the science of climate change (it helped destroy Twitter as a public platform for scientists by helping Elon Musk take it over), the Saudi elite knows very well that the earth is rapidly heating and that the global public is gradually turning against carbon pollution. Pilgrims to Mecca are increasingly at risk of deadly heat stroke. Since Saudi Arabia’s opulent prosperity almost entirely derives from its petroleum exports, they know that they have to find another way to make money.
So, they are diversifying. For some odd reason they’ve bought an interest in a lot of the video game companies, such as Scopely, Nintendo, Capcom, Tecmo and Koei Tecmo. I guess they think nerds will pay to play for decades to come.
The transition to a prosperous non-oil economy is going to be extremely expensive, especially since the kingdom can’t know when its oil may suddenly plummet in value. Economists suspect China has already reached peak oil this year, and that its petroleum imports will drop every year from here on in, since its transition to electric vehicles is proceeding so rapidly.
“Solar Kingdom,” Digital, Dall-E / Clip2Comic, 2025
China imports about 11 million barrels a day of petroleum. Global production is about 102 million barrels a day. If China starts importing only 10, and then 9, and then 8 mn bpd, that trend will put significant downward pressure on prices.
Year over year as of Q1 of 2025, the European Union importation of petroleum fell in value over 11% and in volume some 8%. This decrease probably has more to do with the EU attempt to wean itself off Russian oil because of the Ukraine War than with the rise of EVs. But EVs are part of the equation; in 2024, 1 in 7 new car sales in the European Union were electric. Over time, European consumption of petroleum will fall, as well.
So Saudi Crown Prince Mohammed Bin Salman and his advisers weren’t born yesterday. They read these numbers for a living.
So if they can free up petroleum for export now while there is still high demand at relatively high prices, that is a positive for them. Which means switching to renewable power plants.
The Saudi elite is not taking this step for altruistic reasons. But that it makes sense economically and technologically for them to move in this direction at all is a huge bellwether for all of us.
The irony.
© 2025 All Rights Reserved