Let’s play a word association game. We say Saudi Arabia, you say...?
If it’s anything other than sheikh, desert, Mecca, middle east or oil, you’ve done well. The kingdom is synonymous with crude. Black gold has built Saudi’s roads, propped up its monarchy and given the nation a seat at the world’s top table. One would not therefore expect its 80-year old oil minister to be a cheerleader for renewable energy.
Ali al-Naimi appears, however, to have brought his pom poms to the Paris climate change conference this week. ‘In Saudi Arabia, we recognise that eventually, one of these days, we are not going to need fossil fuels,’ the minister said. ‘I don’t know when, in 2040, 2050 or thereafter.’
When that time comes, Saudi intends to be prepared, by becoming a ‘global power in wind and solar energy’.
‘Hopefully, one of these days, instead of exporting fossil fuels, we will be exporting gigawatts, electric ones,’ al-Naimi said. ‘Does that sound good?’
It sounds unrealistic. Yes, Saudi Arabia’s vast deserts could provide abundant wind and solar energy at some point in the future. Yes, the country could be a major net exporter of energy in a post-fossil fuel era, given its size, location and population. But why would it make the change?
As oil production slows and the costs of extraction rise, Saudi Arabia will remain in possession of some of the largest and most easily extracted reserves in the world. Its comparative advantage will still be in fossil fuels for a long time.
It may well use the profits from oil to invest in solar and wind power, as assurance against the day when the last drop dribbles out of the Arabian sands. But its incentive to do that only really kicks in relatively late after supplies start to dwindle.
In practice, this means we shouldn’t expect any radical shift from oil to renewables any time soon. Al-Naimi even said that this isn’t the time. ‘You say decarbonise. Are you willing to have me go back home and shut all the oil wells? Can you afford that today? What will happen to the price if today I remove 10 million barrels per day of the market?’
The time may not be right for the market this year or next, but it won’t be right for Saudi until long after this current economic cycle has come and gone. Though al-Naimi did say today's cheap oil doesn't make solar power uneconomic, his real message is that Saudi won’t disappear into poverty and insignificance when the oil does run out.
He may be right, but Saudi Arabia’s share of the world’s sunlight is a lot less than its share of the world’s oil – it produces 11-12% of our crude but cover’s only 1.4% of our land surface (albeit a very sunny 1.4%). The transition to renewables is unlikely to be welcomed there, given what it will do to the country's revenues and worldwide political influence.