According to the latest news report by Bloomberg, SoftBank Group Corp. and the Kingdom of Saudi Arabia have signed a Memorandum of Understanding (MoU) to build the world’s largest solar project. The cost of the project is expected to be about $200 billion.
The project was unveiled in New York on Tuesday in a ceremony which was attended by both SoftBank founder Masayoshi Son and Saudi Arabia’s Crown Prince Mohammed bin Salman. This project is a part of the Crown Prince’s endeavor to move his country away from its dependence on crude oil.
This is the latest in a string of massive ventures by the kingdom to ramp up its renewable energy sources. This project is expected to be about 200 gigawatts, and, according to data collated by Bloomberg New Energy Finance (BNEF), this makes it about 100 times bigger than the next biggest proposed project. It will also be 1/3 bigger than what the global photovoltaic sector supplied across the world in 2017.
Prince Mohammed stated that this was a big, bold project, which was a huge step in human history and he hoped that they would succeed at it. According to data from the BNEF, Saudi Arabia generated about 77 gigawatts of electricity in 2016, of which approximately 60% was generated by natural gas and the rest from oil. Solar energy currently consists of small-scale projects that do not really impact the energy generation in the country right now. With this solar project, the kingdom would triple that output.
According to Son, this project, which is an end-to-end project covering power generation to panel as well as equipment manufacturing, will open up 100,000 new jobs and will also reduce power costs by $40 billion. The project is targeted to reach full capacity by 2030 and may cost almost $1 billion per gigawatt by that time.
He said that the kingdom of Saudi Arabia has a lot of sunshine as well as vast swathes of land that make it perfect for such a project. Additionally, Son said, the country also has great engineers, labor and, most importantly, the best and greatest vision.
SoftBank is rumored to be planning to invest as much as $25 billion in Saudi Arabia over the next 3 to 4 years. In fact, rumors say that SoftBank is going to invest about $15 billion in a new city (Neom) that the Crown Prince is planning to build on the coast of the Red Sea. Another rumor states that the Japanese company is planning to invest $10 billion through its Vision Fund in the Saudi Electricity Co. to help the utility company diversify into renewable and solar energy.
If these rumors are proved true, then it will be a big win for Prince Mohammed, who has been pushing the Vision 2030 project to diversify his country’s economy away from oil by that time.
Saudi Arabia’s sovereign wealth fund, called the Public Investment Fund, has more than $224 billion in assets. Last year, this Fund invested $54 billion in various projects. The Fund is expecting to raise more money for future investments through the sale of 5% of its share in Saudi Arabian Oil Co.
Jenny Chase, the head of solar analysis at BNEF, said that this deal was a good match. SoftBank is looking for investments and Saudi needs energy, therefore, it makes sense to sort out the financing in one fell swoop and then hammer out the details later. However, she cautioned, many times such MoUs did not result in anything happening.