Saudi Arabia will auction off another 3.3 GW of solar in 2018 and could be on its way to producing so much solar energy that it can be an exporter to its neighbors.
The Middle East has some of the most abundant energy assets in the world, but it's not just oil that investors should be keeping their eyes on. Saudi Arabia and the United Arab Emirates, in particular, have extremely high solar insolation, which makes solar energy very attractive for powering their grids.
Slowly, countries are starting to realize that it's a lot cheaper to power their grids with solar energy than domestically produced oil, which could be sold overseas. That realization is creating a multibillion-dollar opportunity for solar developers and manufacturers.
In 2017, Saudi Arabia dipped its toe in the renewable energy business with tenders for 300 MW of solar and 400 MW of wind projects. The prices bid by developers for solar were so low, in one case only 1.8 cents per kWh, that solar beats the cost of all natural gas and oil plants currently operating in the country.
2018 will mark a more serious investment in solar with 3.25 GW of tenders expected along with another 800 MW of tenders for wind energy. By 2023, Saudi Arabia plans to have 9.5 GW of renewable energy capacity and hopes to be exporting electricity from wind and solar to neighboring countries.
Given abundant land and solar insolation, the Middle East will be a perfect place to develop solar energy, replacing high-cost fossil fuel plants that are currently providing electricity. Economically, solar and wind are a win-win for countries like Saudi Arabia and the UAE.
Most countries with large solar markets have used subsidies or policy incentives to drive adoption. In the Middle East, we're seeing market forces drive adoption because the cost of solar has gotten so low that it's a no-brainer for these oil-producing countries.
The advantage is that they get lower-cost electricity than from burning oil and natural gas, thereby freeing up more fossil fuels they can export, generating revenue for their countries. It's a win-win and, for the solar industry, this could be an important new market heading into 2018's tenders.