Ali Al Naimi, the Saudi oil minister, said the increased reliance on unconventional energy sources did not threaten his country's role as the world's biggest oil exporter.
Saudi takes the long view on energy
Ali Al Naimi, the Saudi oil minister, yesterday said the increased reliance on unconventional energy sources did not threaten his country's role as the world's biggest oil exporter because demand was also increasing.
"I don't think anyone should fear new supplies when set against increasing global demand," Mr Al Naimi said in a speech at the Brookings Doha Center.
"More companies and nations are competing for their slice of the energy pie, that's true. But the pie is getting bigger and there is enough to go around."
His comments come as the United States experiences a boom in shale oil and Saudi Arabia prepares for its own plunge into alternative energy that could turn it into a major market for solar power.
The kingdom, which is losing potential revenues because of the high domestic consumption of fossil fuels, last year announced a revamp of its energy sector - which has sent the crisis-ridden solar industry flocking to the country.
In a white paper released in February by the King Abdullah Centre for Atomic and Renewable Energy, the plans were specified: 41 gigawatts of solar energy out of an overall renewables target of 54GW that will also draw on geothermal, wind and waste-to-energy projects by 2032.
"During peak [demand] hours, utilities have to depend on expensive fuel. That can easily be offset by solar power," said Vahid Fatuhi, the president of the Emirates Solar Industry Association.
While most of its electricity is generated by burning natural gas, the kingdom has had to increasingly rely on oil to augment scarce gas resources.
As industrial and urban growth, coupled with generous subsidies, pushes up demand for electricity and petrol, Saudi Arabia faces the prospect of having to cease oil exports in the coming decades if the trend went unchecked.
The first round of tenders to provide alternative energy is scheduled for later in the first half of the year and is expected to call for 500-800 megawatts of capacity.
This is about half of what Abu Dhabi expects to build under plans to generate 7 per cent of its electricity from renewable sources by 2020. By then, Saudi Arabia could be generating 23.9GW from solar arrays, if the ambitious timetable is kept. The economics of solar power are convincing.
The US department of energy's national renewable energy laboratory (NREL) has calculated that solar irradiance - a measure of how well photovoltaic panels perform - is the second-highest in the world behind Chile in some parts of Saudi Arabia, far outstripping Germany, the biggest producer of solar power.
According to the NREL, solar-generated electricity costs about seven US cents per kilowatt hour under Saudi conditions, excluding degradation costs. If the opportunity cost of burning oil instead of exporting it at above US$100 a barrel is taken into account, crude-fired power plants generate electricity at almost twice the price.
Last year, the country pumped 193 million barrels of oil into power generation, official data showed.
Saudi Arabia's energy revolution has grabbed the attention of the solar industry.
Years of overproduction have brought down panel prices but have also led to a spate of bankruptcies. New opportunities are lapped up with enthusiasm.
"Everyone is searching for new markets and is keen to get into Saudi Arabia," said Moritz Borgmann, project manager at Apricum, a German consultancy that has shifted from advising the Saudi government to helping solar companies to find their way in the kingdom.
As is typical for doing business in the Arabian Gulf, solar companies coming to Saudi are likely to end up joining forces with a local partner.
"The successful model will be one in which experienced foreign players and domestic companies cooperate," said Mr Borgmann.
Foreign companies will also be expected to help to create job opportunities in the kingdom.
Last month, the Saudi-based Advanced Electronics Company signed a memorandum of understanding with Kaco New Energy of Germany to develop opportunities including setting up a photovoltaic inverter manufacturing facility in the kingdom.
* with additional reporting by Dow Jones