The promise of green energy has intrigued the Middle East, where concern about future reserves runs deep, but Saudi Arabia's recent plan for a multibillion-dollar investment in traditional oil projects underscores lingering concern about betting on renewables. Riyadh plans to spend $170 billon over the next five years on energy and oil refining efforts; the country's state-owned oil company, Saudi Aramco, will bankroll little more than half this endeavor, according to the Saudi Gazette. The energy giant called it unrealistic for Saudi Arabia to plow into alternative energy sources when the No. 1 cash crop of oil has built its wealth, the report states.

"I don’t think that’s surprising,” said Eurasia Group energy analyst Will Pearson of the guarded approach, adding that Saudi Aramco has long been hesitant given the state’s status as the world’s leading oil producer. Without a “huge, revolution[ary], game-changing technology,” an abrupt shift in the “fuel mix” is doubtful, said Pearson, who puts more stock in green technologies gradually scooping up market share. Given the abundance of other resources, the Saudi government is more likely to make such nascent energy sources a smaller part of its overall budget, he argued.

Despite trepidation, the Gulf country has been drawn to the "relatively unproven technologies" of biofuels and electric vehicles even though, for the most part, "people are going to be dependent on the oil sector for transport," Pearson told OilPrice.com. Given its access to sunlight, Saudi Arabia has great potential to become a major solar player but has not made “too much concrete progress so far,” he said.

Saudi Arabia is also taking aim at clean water. In a nation where water is scarce, Riyadh plans to build a desalination plant to deliver cheaper, cleaner water. Yet growing pains are bound to accompany this push away from traditional oil and gas, analysts warn. “You have to come up with the right regulatory regime,” Pearson said. While some companies are already doing “quite well” in this young energy category, traditional fossil fuels are still a less costly option, he said. An international carbon price would help but “I don’t think there’s been a lot of progress on that,” he said.

The bottom line is that the new industry has to beat traditional hydrocarbons, said Molly Williamson, a consultant and scholar at the Middle East Institute in Washington focused on Middle East and energy issues.…

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