By David Fickling
YOU KNOW that horror movie trope where the babysitter gradually realizes the crazed killer is phoning, not from some distant location, but from inside the house? Something similar is happening in the oil market.
That鈥檚 because Saudi Arabia, the world鈥檚 biggest net exporter of crude, is using renewables to drastically reduce its petroleum consumption. The threat to the kingdom鈥檚 producers isn鈥檛 coming from the heartlands of electric vehicle adoption in Shenzhen, Oslo, or San Francisco 鈥 it鈥檚 right inside the house.
This is an extraordinary reversal. Since the start of the 21st century, Saudi Arabia鈥檚 oil consumption has increased more than any other country barring China and India. It鈥檚 doubled to 2.3 million barrels per day, greater than the incremental demand from Africa, Latin America, or the former Soviet Union.
Between a quarter and a third of the country鈥檚 consumption goes into crude- and fuel oil-fired generators that provide electricity to ride out summer heatwaves. The government wants to replace all of that with renewables, with a target of 130 gigawatts (GW) by 2030 鈥 roughly equivalent to all the solar power in India. Such a switch could represent the over the next five years, according to the International Energy Agency.
It鈥檚 not news that the country has such ambitions. One of the cornerstones of Vision 2030, the program announced in 2016 to wean the kingdom鈥檚 economy off hydrocarbons, was to switch the grid to an exclusive gas-renewables mix.
However, such bold pronouncements are typically heavily discounted where Saudi Arabia is concerned. This is a country that鈥檚 been working on an unfinished one-kilometer skyscraper since 2013, and recently to review the feasibility of The Line 鈥 an implausible science fiction city being built to house nine million people inside a 170 kilometer-long tower.
Kpler, a data company that tracks commodities flows, reckons of the planned 130 GW will be online by 2030. Such a serious shortfall would be enough to sustain crude in power generation well into the future.
It might be time to start reevaluating whether that skepticism is warranted, however. There鈥檚 certainly a huge gap between promise and execution where the kingdom鈥檚 megaprojects are involved. Still, when it comes to building humdrum energy infrastructure (as opposed to, say, a cube-shaped hollow tower as tall as ), one of the world鈥檚 biggest petroleum producers has a decent track record.
That鈥檚 now finally showing up not just in wells and export facilities, but in renewables, too. After years in which the only major solar project connected was a relatively modest 0.3-GW plant in the deserts between Jordan and Iraq, generators are now being plugged in at a rapid pace.
Since the start of 2024 alone, ACWA Power Co., the country鈥檚 biggest electricity and water developer, started commercial operations at four solar facilities totaling about 4.9 GW. Roughly the same amount is due to start up by the end of next year, the company , shortly after completing a 7.125 billion riyal ($1.9 billion) capital raising. Last month, it signed deals with Saudi Arabia鈥檚 main utility to build another 15 GW, to be delivered by the middle of 2028.
The broader plan is for ACWA to hit , sufficient on its own to provide all the electricity that Saudi Arabia generated from oil last year. Much more is in the pipeline from other developers.
With ACWA giving investors detailed timelines of further near-term completion dates, the onus is increasingly on the skeptics to explain why the recent run of successful project execution is going to be broken. Thanks to abundant sunlight, Saudi solar plants at less than half of the . Arrays of panels also tend to be much more simple, in engineering terms, than the petroleum extraction, transport, and refining complexes in which the kingdom has long excelled.
Getting those renewables built is also crucial for the country鈥檚 overriding obsession: its position in the oil market. One justification given by Saudi Arabian Oil Co. President Amin Nasser for cutting back maximum output capacity last year was that removing crude from the domestic grid would boost exports as effectively as drilling extra wells. The plans to eliminate oil from the grid by 2030 are still 鈥渙n track,鈥 he told Aramco investors last week.
Saudi Aramco鈥檚 competitors might want to reflect on that. For Nasser, the country鈥檚 transition is reason enough to trim investments intended to meet hypothetical future demand. The kingdom鈥檚 grid uses more oil than all the cars and scooters in India. If such an enormous consumer of the world鈥檚 crude is going away by the end of the decade, an already oversupplied market risks heading still deeper into glut.
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