Saudi Solar Investing

Saudi Arabia's Secret Weapon

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10,000 solar panels a day.

That's what will need to be installed in order for Saudi Arabia to achieve its goal of 6 gigawatts of solar by 2020.

Folks, that's no small hill to climb — that's Mount Everest!

Although due to the environment and geography in the region, such a tall order could prove to be a massive growth opportunity for a kingdom that has a hard time providing jobs for its young people...

According to the IMF, 1.5 million of the two million jobs created in Saudi Arabia over the past four years have gone to foreigners, while the unemployment rate for Saudi nationals is around 12%.

As reported by analyst Gertjan Hoetjes:

Companies have traditionally been reluctant to employ Saudis, who are paid more than foreigners and enjoy more job protection. In addition, many Saudis prefer to work in the public sector, since private employers offer comparatively lower salaries, unattractive benefits packages, and demand longer working hours.

There is also a mismatch between the skills of young Saudis and the needs of private sector employers. With Saudi institutions of higher education focusing on theoretical rather than vocational aspects of education, graduates do not meet the requirements of companies searching for technical and vocational specialists.

Sound familiar?

In any event, a booming solar industry in Saudi Arabia could ultimately boost hiring for both skilled and unskilled workers. Because while most of the early entrants into Saudi's solar space will be foreign, the location serves as an excellent breeding ground for solar manufacturing.

Saudis Securing Energy Supply

Saudi Arabia enjoys significant solar radiation levels. After all, it is a desert.

As well, much of this desert contains massive deposits of clear sand, which is required to manufacture silicon solar cells. Local manufacturing could certainly flourish with calls for increased production — which, of course, would come as a welcomed gift for Saudi officials desperate to employ the nation's young people.

Of course, six gigawatts of solar is just the tip of the iceberg.

Last year, after Saudi Arabia's oil minister called climate change one of humanity's most pressing concerns, Saudi officials launched a plan to source 41 gigawatts of solar projects in an effort to serve more than 30% of that country's electricity production by 2032.

The climate change argument aside, I suspect this is more about energy security.

Consider this brief analysis from Adam Rasmi of the Daily Star:

Saudi Arabia’s surging domestic oil consumption — coupled with its inadequate supply growth — could turn the kingdom into a net oil importer by 2038. Guzzling more than a quarter of its 11.1 million barrel per day production in 2011, Saudi Arabia is the fifth-largest oil consumer in the world. The kingdom even recently surpassed Germany’s consumption level, despite having less than one-third of Germany’s population and one-fifth of its economic output. Continued consumption growth, if left unchecked, could devastate the country’s economy in the coming years.

Now consider this...saudisolarmap

In order for solar to provide 100% of Saudi Arabia's electricity needs, it would require 141 gigawatts of installed solar generating 226.2 billion kWh. This would be equal to an area of about 33 miles by 33 miles.

Now, it would cost about $190 billion to install 141 gigawatts of solar generating 226.2 billion kWh. This is the equivalent of 139 million barrels of oil.

However, if the Saudis sell that oil equivalent for 25 years at $105 per barrel, they would end up generating more than $364 billion...

As you can see, there is a significant economic and energy security advantage here by using solar instead of fossil fuel for utility-scale power generation.

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Of course, we're not really expecting 100% solar. After all, without an enormous amount of storage capacity, it would be impossible to utilize solar power at night. As well, storage would also significantly increase integration costs.

But 30% solar?

Not only is that doable, but it offers a much needed buffer against depleting oil resources while creating thousands of jobs in the process.

It's a win-win.

Heck, even Saudi Aramco, the national oil company, has committed to installing one full gigawatt on its own.

If you're looking for a way to play Saudi Arabia's burgeoning solar market, you would be wise to take note of the solar companies already on the inside of Saudi Arabia's solar circle...

Five Plays on Saudi Solar

Next week at the Sheraton Hotel & Towers in Riyadh, Saudi officials are hosting a meeting with some of the biggest solar players on the planet to discuss that country's future solar plans.

Topics of discussion will include opportunities for Saudi Arabia as a manufacturing hub for the Middle East, government polices, development costs, and local and international partnerships.

In attendance will be the following companies:

  • SunEdison (NYSE: SUNE)
  • First Solar (NASDAQ: FSLR)
  • E.ON (PINK SHEETS: EONGY)
  • Jinko Solar (NYSE: JKS)
  • Canadian Solar (NASDAQ: CSIQ)

Don't sleep on the coming Saudi solar boom. It will be impressive — and it will be insanely profitable.

To a new way of life and a new generation of wealth...

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Jeff Siegel

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Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets.  He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.


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