The tension had been building for some hours in New York City, but when the deal finally came it was well worth the wait. The provisional agreement that was announced just before midnight could well turn out to be the tipping point in the global quest for renewable energy.
Mohammed bin Salman, crown prince of Saudi Arabia, the world’s biggest exporter of oil, and Masayoshi Son, the far-sighted founder of high-technology finance house SoftBank, signed a memorandum of understanding that looks set to revolutionize the solar energy industry.
With a potential value of $200 billion by the time the project is completed in 2030, the deal is one of the biggest in the history of the Kingdom. Only the project to develop Neom, the futuristic urban development straddling the northern borders of the Red Sea, is bigger — with an estimated cost of $500 billion.
Amid tight security at the Plaza Hotel on the fringe of Central Park, reporters had been summoned to a “big” announcement. As the clocks ticked toward midnight, it did not disappoint.
“It’s a huge step in human history. It’s bold, risky and we hope we succeed doing that,” the crown prince told the media.
Son elaborated enthusiastically: “We will create the world’s biggest solar-power generating facility. It would not have been possible without the vision of the crown prince. We have a long-term vision too, and here the two visions have come together.”
The bare statistics are mind-boggling. The New Solar Energy Plan 2030 will eventually generate up to 200 gigawatts of electricity in the Kingdom, will create up to 100,000 jobs and add $12 billion to the Saudi gross domestic product (GDP).
Just as important, it will save up to $40 billion annually of energy costs, and leave the Kingdom with more oil and gas to export to global markets.
The provisional agreement with SoftBank, announced late at night at the Plaza Hotel, is set to revolutionize the renewables industry.
Frank Kane
Khalid Al-Falih, the Saudi energy minister and chairman of Aramco, and Yasir Al-Rumayyan — the managing director of the Kingdom’s Public Investment Fund (PIF), which will oversee the project — who were both in attendance at the late-night event on Tuesday, looked as though they had pulled off a major coup. They had.
The solar deal follows the $45 billion investment by PIF in SoftBank’s Vision Fund (SBVF), a $100 billion investment fund aimed at the booming world of innovative high-technology. By 2030, it will make the Kingdom a leader in the field of solar renewable energy. “It will be a totally new ecosystem in the Kingdom,” Son said.
In an official statement, PIF said: “The key components of the New Solar Energy Plan will be the establishment of an electricity generation company in Saudi Arabia. Specifically, under the terms of the agreement, the PIF and SBVF will seek to commission by 2019 the Kingdom’s first two solar generation projects with 3GW and 4.2GW of solar capacity respectively.
“By 2030, the plan commits the parties to manufacture and develop solar panels in Saudi Arabia for solar power generation, between 150GW and 200GW.”
That is 100 times bigger than the next largest planned solar project, a 2GW facility in Australia, and around 30 percent more than the total existing photovoltaic (solar panel) capacity in the world last year, according to figures from Bloomberg.
But the deal will go further. It also commits PIF and SoftBank to explore the manufacturing and development of energy storage systems. Batteries have so far proved the weak link in the renewables industry, as they are as yet unable to efficiently store the abundant energy the sun produces.
After an initial phase during which solar panels will be imported, the Kingdom will also set itself up as a manufacturer and exporter of solar panels, leading to the creation of new jobs in the high-tech field, which will advance the ambitious plans for economic diversification under the Vision 2030 strategy to reduce oil dependence and boost the private sector.
While the deal will reduce Saudi Arabia’s consumption of oil and gas for electricity generation, it will also free up precious reserves of fossil fuels for export to the world’s energy markets. Despite increased use of renewable sources like solar, wind and hydro-generation, and the rise of electric vehicles, the world is still producing and consuming more oil than at any time in history, and that situation looks set to continue for at least the next two decades.
The Kingdom is also planning an ambitious project to build and operate at least 16 nuclear power plants over the next 25 years at a cost of $80 billion.
The initial seed capital for the solar project — estimated at around $5 billion by Son — will come from the Vision Fund resources, backed by capital-raising on international debt markets.
“The Kingdom has great sunshine, great size of available land and great engineers, great labor, but most importantly, the best and greatest vision,” Son said.
• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on
Twitter @frankkanedubai