Japanese tech company SoftBank has announced plans to build a $200 billion solar power project in Saudi Arabia. CEO Masayoshi Son and Saudi Crown Prince Mohammed bin Salman spoke about their plans in New York for the building of the largest solar project in the world and signed a memorandum of understanding.
The project is expected to take more than 10 years to complete and the initial investment is $5 billion. The partners are joint investors in Vision Fund, the world’s largest private equity fund. It will provide $1 billion of the initial investment and the rest will come from loans that will be paid off by revenue generated by selling electricity.
Son believes that the project will be able to fund its own expansion. The estimate for completing the entire project is in the region of $200 billion.
Expectations are that the project will be completed by 2030. It is expected to generate far more energy than any existing solar power facility, producing 200 gigawatts by 2030. The Tengger Desert Solar Park in China is the largest solar power facility at present and generates a little more than 1.5 gigawatts.
All the solar projects around the world currently generate about 400 gigawatts.
Solar parks and batteries to store energy generated by the panels for measured distribution will be constructed all over Saudi Arabia. The solar panels are expected to be installed this year and start producing electricity by mid-2019. Panels will initially be imported, but future manufacturing will take place in Saudi Arabia. The project will include everything from power generation to panel and equipment manufacturing.
Current power generation
Saudi Arabia currently generates power by burning oil. The demand for electricity in Saudi Arabia has risen by about 9% a year since 2000. Domestic consumption means that less oil is available to sell abroad.
Saudi Arabia signed the Paris Agreement on climate change, and as a country, it is particularly vulnerable to climate change. Prince Mohammed has promoted clean energy since the Fukushima nuclear disaster. In the light of these factors, a solar power system is a logical investment.
Prince Mohammed believes that the project will save Saudi Arabia $40 billion in power generation costs and create 100,000 new jobs.
This is another step by Saudi Arabia’s crown prince to diversify its economy into areas other than oil. High-profile investments have already been made into technology and there are plans for a new $500 billion city. Prince Mohammed has a reputation as a savvy investor. Saudi Arabia’s sovereign wealth fund spent about $54 billion on investments last year alone.
With SoftBank looking for investments and Saudi Arabia needing energy, this agreement will deepen SoftBank’s ties with the country and help to advance the crown prince in his ambition to diversify the economy.
It appears that SoftBank has plans to invest billions in Saudi Arabia over the next couple of years. Son told reporters at the briefing in New York that Saudi Arabia has great sunshine, available land, engineers, and labor, but most of all, the greatest vision.