Solar’s Big Failure

“The world’s biggest solar project has failed.”

Eye-catching headline! And true. But not a surprise.

The March 2018 announcement had been widely touted, for many reasons: Softbank, teaming up with the Public Investment Fund of Saudi Arabia, announced they would build “the world’s biggest solar project:” a 200-gigawatt, $200 billion solar energy generation plant in Saudi Arabia. Here we were, in a country which is the emblem of the petroleum age, with the largest oil reserves in the world, and the government was going point its energy future up towards the sun, not down under the ground. And 200-gigawatts, for those to whom the numbers aren’t immediately meaningful – that’s 200 times the size of a large coal generation plant, and 1000 times larger than the average-sized solar generation facility only a few years back. Wow!

But it didn’t work.

In late September, the project was canceled (with much less fanfare than the original announcement). What happened? Is large solar losing its charm?

What happened was… something that happens in many countries, and many infrastructure programs. It’s a problem that happens way too often. And it’s a problem that has nothing to do with the advantages of solar energy. We call it “announcement-itis.” It’s a problem anyone working with governments, large companies and large financial institutions will recognize in a heartbeat: someone at the top of a food chain will demand that they want a big announcement, and they want it now. It might be about a big conference coming up, or domestic politics, or just about their wanting to look good at the next round of dinners and cocktail parties. Someone wanting to look good to the boss follows through, and voila, announcement! Inconveniences like planning, detailed review, and practicalities? Someone else’s problem.

When Softbank and the Saudi PIF made their big announcement, in the storm of publicity a couple of things were immediately clear: one, 200 GW of intermittent power is a major technical challenge for an electricity grid. Especially when the entire national grid is about ¼ of the size (the generation capacity of the entire country of Saudi Arabia is about 55 GW) … And two, this was no orderly, thought-through tender, but instead a sole-source procurement, completely outside ongoing power sector development plans.

Today, many people are disappointed. Certainly, the heads of Softbank and Saudi PIF are unhappy, having to eat some crow as the announcement gets walked back. Some who may have seen the headline in terms of a shortcut to faster growth of solar and a faster decline in fossil fuel consumption will have been disappointed. Yet this failure may turn out to be a good thing for Saudi Arabia, and for the growth of solar energy.

The megaproject was clearly agreed independently of Saudi Arabia’s pre-existing solar tender program, a program managed by the Saudi Renewable Energy Project Development Office. The program is not off to a very fast start, with only 50 MW of solar PV generation installed to date in the country (that would be one two- thousandth of the capacity of the Softbank project). But the Energy Project office had been doing many of the right things, instilling some confidence in the market through the creation and early implementation of a tender program. Such tender programs have been wildly successful in many countries, beginning with Brazil and South Africa, and perhaps most visibly today India. The first Saudi tender was awarded in 2017 to ACWA Power, one of the Gulf’s blue-chip power companies with an excellent track record. Another tender, for a 400 MW, $500m wind farm, is in process. The program is moving somewhat more slowly than originally announced, and is still lacking an announced broader strategic framework, but it’s clearly along the lines of what has worked very well for many countries. Those countries have gained growing solar generation capacity, increasingly at cheaper prices than power from alternative sources, and gotten get effective, working projects –not just paper announcements.

Bigger is not always better. The silver lining for Saudi Arabia is that the failure may refocus officials on what they already started to build, and what should be successful – an orderly tender program for growing the country’s solar power capacity. And the silver lining for the rest of the world? Maybe the failure is big enough to discourage bigger announcements, at least until underlying realities justify them. And to keep countries focused on growing solar through well-organized tenders which will give them both solar generation and cheaper electricity. Bigger may not be better, but in utility solar, tender is better!

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