We asked an oil and gas man last week, “Why do you spend all that money on exploration when you could spend it swinging away from oil and gas to renewables?” He hummed and hawed for a bit, then said that this was how the oil companies retain their valuation. His issue was that renewable energy is not so profitable as gas deals and so this was the company’s priority.
We then mentioned that if every oil company burned its reserves, we’d all be dead or dying in a 5 degree world. He didn’t know that, he said. So we made it a priority to see if any oil companies begin to look outside at renewables, at the level they spend on oil can gas exploration.
It now turns out that Saudi Arabia says that it will begin offering loans for renewable energy projects and manufacturers of renewable-energy components as the kingdom seeks to diversify its economy away from crude oil.
This is a significant amount of money, some 105 billion-riyal ($28 billion) in its Saudi Industrial Development Fund and it has just opened this up for renewable applications. The program will give loans of as much as 1.2 billion riyals ($320 million), depending on a company’s ownership, targeting renewable-energy component manufacturers as well as independent production projects. The fund will also offer financing for firms in other sectors that want to start using such energy.
Renewables projects are plentiful and even a fund of this size could find itself exhausted in next to no time, depending upon the rate of return they insist upon. Let’s be clear this is no Aramco specifically, but it is the same pot of money.
“Whether you’re in manufacturing, agriculture or retail, if you want to deploy renewable energy, we will finance it,” said Ibrahim Almojel, the fund’s director general. “For renewables to be adopted in the kingdom, we need to support it.”
The world’s largest oil exporter is working to develop new industries to wean itself from crude, but it will invest in local renewable-energy facilities and factories to make components for solar and wind farms, but it will also take a look at overseas companies as long as the project is in Saudi. The country wants to shift away from petroleum burning to generate electricity, which means renewables or gas and the fund has already had discussions with retailers and agriculture producers.
Vision 2030 is the name used to describe Saudi’s life after oil, and in January the government raised the fund’s capital by about 60%.