When the world’s largest producer and exporter of oil sets a plan in motion to end its own oil addiction and move to a low-carbon economy, it speaks volumes about the potential for our global renewable energy aspirations. Perhaps just a few short years ago, the idea of Saudi Arabia moving away from an oil-based economy would have been more in the realm of fiction, not fact, but as they say, the times, they are a changin’.
Deputy crown prince Prince Mohammed bin Salman, who is next in line behind the crown prince, and his father, King Salman, has taken some bold steps in his role as chairman of the Council for Economic and Development Affairs, and the latest is an ambitious plan to move the country to an investment-based economy.
In a press conference this week, the 31-year-old Prince Mohammed announced his “Vision 2030” plan, which gained approval from the Saudi cabinet later that day, and although the plan is estimated to cost upwards of $2 trillion dollars to achieve, it’s not unrealistic for Saudi Arabia, as there is probably no other country that has the potential to pull this off.
“We have developed an oil addiction in the kingdom of Saudi Arabia, among everyone. That is dangerous, and that is what has hampered the development of many different sectors in recent years.” – Prince Mohammed bin Salman
Although it would be nice to attribute this change of direction to the desire for a cleaner, more sustainable future, it’s more of a practical decision than anything else, as the county has been suffering from an economic shortfall for the last couple of years. This redirection toward an economy with a stronger private sector and an emphasis on investing, rather than oil production, could help Saudi Arabia maintain its current state of wealth for decades to come, even as much of the world is preparing to transition away from fossil fuels as well.
According to Bloomberg,
“Last year there was near-panic among the prince’s advisers as they discovered Saudi Arabia was burning through its foreign reserves faster than anyone knew, with insolvency only two years away. Plummeting oil revenue had resulted in an almost $200 billion budget shortfall—a preview of a future in which the Saudis’ only viable export can no longer pay the bills, whether because of shale oil flooding the market or climate change policies. Historically, the kingdom has relied on the petroleum sector for 90 percent of the state budget, almost all its export earnings, and more than half its gross domestic product.”
As part of the Vision 2030 plan, the country will target the deployment of 9.5 GW of renewable electricity capacity, which acknowledges the country’s lack of “a competitive renewable sector at present,” and although this transition to a more renewable energy system in the country will take some serious capital, the plan calls for the sale of 5% of Saudi Aramco in order to create a sovereign wealth fund and build up its current public wealth fund to $2 trillion (from its current $160 billion) to fund the transition.
Perhaps the most ambitious part of the Prince’s claims is that he believes the country could manage to weather a major global transition away from oil, even if it were to happen in the next five years:
“I think by 2020, if oil stops we can survive. We need it, we need it, but I think in 2020 we can live without oil.”