YANBU // Saudi Arabia wants to meet its two fastest-growing needs - jobs and electricity - by making the materials used to absorb power from the sun.
The government hopes to create up to 15,000 jobs in the next decade by nurturing a solar industry, from solar farms to assembly plants, to factories that make raw materials.
"If this starts we can have the starting of an ecosystem," said Azzam Shalabi, the president of the National Industrial Clusters Development Program (NICDP), a government institution that recruits investors for such projects. "It is not only the jobs per se but the quality of jobs." Using the sun rather than fossil fuels to produce electricity is particularly appealing because of current oil prices, which recently topped US$119 a barrel.
The kingdom has already persuaded investors to put more than $3 billion (Dh11.01bn) into plants to make components for solar panels in the western petrochemicals hub of Yanbu and its east coast counterpart, Jubail.
Asian and European companies are conducting feasibility studies for another plant to make a different type of solar technology - called thin film - near King Abdullah University of Science and Technology in Thuwal, which conducts much of the kingdom's research into renewable energy technology.
"You need collaboration with a scientific institution," said Mr Shalabi, adding he expected plans for a plant costing about $250 million to be completed by the start of next year.
Most output from the factories would be exported to Europe and China, where government subsidies for solar panel makers have fostered the industry's growth. Keeping those materials in Saudi Arabia to make panels will have to wait for at least five years, Mr Shalabi estimates.
"Panel production in Saudi makes sense when we have a local demand," Mr Shalabi said. "You want to put the panels together because they are very labour-intensive."
Saudi Arabia would be the first country in the Middle East to host a solar panel factory. Masdar, Abu Dhabi's clean energy company, recently shelved plans to begin producing solar panels in the emirate, citing the lack of a regional market.
Saudi Arabia would have to compete in the panel manufacturing field with China, which last year became the world's biggest panel maker.
The US government is investigating whether China's subsidies to makers of solar panels, many of which are exported to developed markets, violates the World Trade Organisation's free trade rules, which do not permit subsidies that favour exports. Mr Shalabi said a Saudi subsidy for solar panel manufacturers would be unlikely.
Making the materials for solar panels would help to bridge the gap between the country's decades-old petrochemicals industry and manufacturing, which the kingdom hopes will reduce unemployment and reliance on imports.
Saudi Aramco, the state-owned oil company, last year set out a plan to develop a domestic solar industry, with expectation that most of GDP growth will come from making the panels and building solar farms. Solar power plants do not require as much labour but will be key to meeting the growing need for electricity in the kingdom, where production needs to more than double in the next 20 years to keep up with demand, according to Aramco projections.
Saudi Arabia, like Abu Dhabi, is seeking to diversify its energy mix. In the emirate, Masdar is building a 100-megawatt solar plant called Shams 1 and in January announced plans for a second one, Nour. Masdar expects Shams 1, when completed, to be the biggest concentrated solar power plant in the world.
Saudi Arabia has taken a more measured approach, aimed at driving down the cost of technology before investing in large-scale projects. Last month, Aramco awarded a contract for a 3.5mw plant near Riyadh.