Saudi Arabia poised to become solar powerhouse

NEW YORK (CNNMoney) -- The United States may be known as the Saudi Arabia of coal thanks to its large deposits. But under an expected investment push, Saudi Arabia could soon become the Saudi Arabia of solar power.
Early next year the oil rich kingdom is expected to announce a plan to get up to 10% of its electricity from the sun by 2020 -- a more aggressive national policy than what's in place in the United States.

The reason is mostly economic. The Saudis currently generate over 50% of their electricity by burning oil, which can consume up to an eighth of the country's total oil output.

That made sense when oil was $10 a barrel. But at $100 a barrel it makes more sense for the Saudis to install solar panels and sell their oil on world markets.

Moreover, their electricity consumption is set to double by 2020.

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"This is eating into the Saudis' ability to export oil," said Logan Goldie-Scot, lead analyst for the Middle East and North Africa at the research firm Bloomberg New Energy Finance.

New Energy Finance estimates that given the projected price for both oil and solar panels, the Saudis stand to make 11% return on their money if they make big investments in solar power.

"Saudi Arabia has come around to the idea that this makes economic sense," said Goldie-Scot.

That's attracted the attention of developers worldwide who are grappling with solar subsidies drying up in nations burdened by mounting debt like Italy, Spain and Germany -- traditional solar powerhouses.

So Saudi Arabia represents a rare opportunity.
"Everyone is flying to Riyadh to make sure they are in on the bids," said Goldie-Scot.
Still, any Saudi solar commitment would likely translate into just a few gigawatts of solar power by 2020, said Goldie-Scot. That compares to world-leader Italy's eight gigawatts of solar installed in the last year alone. A gigawatt can power roughly 700,000 U.S. homes.
Kevin Smith, chief executive of U.S. solar developer SolarReserve wants to put one of his company's solar thermal power plants in the Saudi desert.
He said it's not just short-term profits motivating the Saudis.
"The Saudis, one of the largest oil producing nation's, realize that there's limitations as to how long that's going to last," said Smith. "They are looking at their long-term energy plans."