U.S. diplomatic cables leaked to WikiLeaks reveal something close to desperation in Saudi officialdom about keeping oil exports alive while at the same time growing domestic electricity generation rapidly. These twin challenges are interrelated and growing progressively worse, because what the leaked cables do not say is that Saudi Arabia is currently burning well over a million barrels a day of oil -- rising by 8% a year -- in its electric power plants. This is more oil going up in smoke in the desert Kingdom than it's exported to the U.S.. In a nation that produced 9.7 million barrels a day in 2009, while consuming 2.6 million barrels a day for all national uses, that is an incomprehensible waste, and the cables infer that senior Saudis fully appreciate this.
"Senior officials have pointed out to us that oil is literally the lifeblood of the Kingdom", one cable observes. It contributes 45% of GDP and more than 80% of government revenue. Accordingly, Saudi officials express strong concerns about American talk of seeking energy independence, and in particular "calls to end dependence on all imported oil." They would much prefer to see talk of "energy interdependence," the U.S. diplomats note. As a February 2010 cable puts it: "they are concerned that the drive to promote non-traditional and green forms of energy is likely to restrict the available share of what has historically been Saudi Arabia's most politically important (sic) market."
Meanwhile, the cables note that Saudi electricity demand is growing by 10% per year. Generation capacity must double in the next decade if the economy is to grow as projected. Yet brownouts were already beginning to affect Saudi industry for the first time in October 2009.
The main reason that the Saudi government views massive new electricity generation as imperative is employment. The Saudi rulers have no alternative but to create jobs to meet the needs of a rapidly expanding young population, accustomed to living in a "welfare society". Prince Sultan is reported as telling US diplomats that this is King Abdullah's biggest problem.
Options are few. The government cannot easily remove existing support for fuel, food and water. Lifting fuel subsidies quickly, for example, would create a political crisis, so an Oil Minister is reported as saying.
A February 2010 cable notes that the King has called for diversification of the Saudi economy over then next 20 years so as to create "a veritable social revolution in work habits, education and the participation of women in the workforce." Officials believe that without such a revolution they will not be able "to avoid some of the problems countries like Yemen are experiencing."
The current revolution in Tunisia, where an autocrat has been dethroned by popular revolt, must be deepening this sense of crisis in Riyadh by the day.
So a schizophrenic attitude to renewables emerges. The Saudis fear clean energy for what it can do to oil exports, but at the same time are more interested in developing domestic renewable energy resources because they know that electricity generation, at the levels required, cannot be met without them. Constraints on available gas do not allow otherwise.
All this will not be news to those who follow energy-market news closely. As with so much other leaked WikiLeaks material, what is interesting is the American diplomats' reaction to it, in reporting back to Washington. "Sharing scenarios of where we see the world's energy economy going over the next 30-50 years will... help," the February 2010 cable says, "in part by driving the point home that the transition is both inevitable and going to take a long time. We should couple that with a clear message on our willingness to help them develop their own renewable sources of energy (what better solution than to have Saudi Arabia become the Saudi Arabia of solar energy), while also making it clear the terms on which we would welcome continued Saudi participation in the U.S. energy market." The cable cites an example of how U.S. cleantech business may be able to help and then concludes as follows. "Persuading the Saudis we are serious will not be easy, but there is a real desire to find a way to re-establish a partnership with the U.S. on its core economic interests. To the extent that we can calibrate our approaches on a range of energy issues (e.g., climate change, investments, fuel subsidies) with the Saudis to reach this end, we will be more successful at making the Saudis real partners for the next 20 years in new areas."
I find it encouraging to see American diplomats thinking like Silicon Valley visionaries when it comes to the role renewable energy industries can have in generating a secure and sane world a couple of short decades from now. For example, meaningful solar programs in oil consuming and oil producing countries alike can boost domestic energy security while creating a virtuous circle of other security and social upsides.