The skies over Saudi Arabia are clear and bright, but confusion clouds the future of the kingdom’s solar energy initiative. The Public Investment Fund announced in March a $200 billion, 200-gigawatt solar power project in combination with its favored partner, Japan’s SoftBank. But on September 30, The Wall Street Journal reported that the project had been shelved, prompting a response from the Ministry of Energy, Industry, and Mineral Resources that it remained a “long-term goal.”

This episode illuminates two important features of Saudi Arabia’s current economic reforms: the challenges it faces employing renewable energy and the difficulty posed by complex mega-initiatives.

The kingdom’s excellent solar and wind resources, expanses of unused land, large and fast-rising electricity demand, and heavy consumption of oil for power generation (about half of its fuel burns, the other half is natural gas) make it an ideal candidate for deploying renewable energy. Generation has grown at an annualized rate of 6.3 percent over the past decade, and installed capacity, mostly held by the Saudi Electricity Company, has reached 80.5 GW, the largest in the region.

Yet, Saudi renewable plans have a checkered past. In 2013, the King Abdullah City for Atomic and Renewable Energy released plans for 16 GW of solar photovoltaics by 2032. In 2015, it upgraded this to 41 GW of solar, wind, and other renewables. It also had large schemes to introduce nuclear power, which have gone through various subsequent iterations. But the organization lacked the authority to deploy such plans, and by 2017, the kingdom had just 50 megawatts of centralized solar (excluding smaller off-grid installations). Solar companies that had established branches in the Middle East to capitalize on the Saudi bonanza were forced to turn their attention elsewhere, propelling the United Arab Emirates, Egypt, Jordan, and Morocco as the regional leaders.

Saudi Vision 2030 had an intermediate goal of 9.5 GW of solar power by 2023. In February, the Renewable Energy Project Development Office of the Ministry of Energy, Industry, and Mineral Resources awarded the first large-scale solar project, the 0.3 GW Sakaka, at world-record low prices to local, Public Investment Fund-backed private firm ACWA Power, a mainstay of the Middle East’s renewable sector. In July, it received further record-low bids for the 0.4 GW Dumat Al Jandal onshore wind project. Awarding a bit more than 2 GW per year to 2022 should reach the 2023 target, saving some 100,000 barrels per day of domestic oil consumption.

Yet in April, during Crown Prince Mohammed bin Salman’s New York trip, he signed an agreement with SoftBank, the PIF’s favored partner, for 200 GW of solar by 2030, apparently coming as a surprise to the energy ministry. It was intended to create 100,000 jobs, raise $12 billion in gross domestic product, and save $40 billion in oil consumption. The Financial Times reported that the SoftBank memorandum was indicative of a power struggle between Khalid al-Falih, minister of energy, industry, and mineral resources and effective overseer of half the Saudi economy, and Yasir Al-Rumayyan, influential chief of the PIF. The ministry was blindsided by the announcement, which reflected the PIF’s desire for an eye-catching project, and SoftBank founder Masayoshi Son’s vision for worldwide solar power. SoftBank’s Vision Fund is also intended to invest $10 billion in the Saudi Electricity Company to help it move into renewables.

This 200 GW would be vastly in excess of Saudi Arabia’s likely 100-120 GW peak demand by 2030 – it is equivalent to about two-thirds of today’s existing solar worldwide, and would require two years of the world’s current entire solar panel output. If coupled with the “world’s largest utility-scale battery,” as Son stated, some power could be stored for evening use, but likely a large part would have to be exported or simply thrown away. The grid would have to be drastically upgraded to cope with such a large amount of variable power, and export links established with neighboring countries in a volatile region.

Despite thoughts of becoming the world leader in solar production, renewable electricity exports do not generate the rents that oil and gas do, and the country would have to compete with its similarly sunny neighbors, which have smaller but still expansive unused desert lands. Further ambitions were to kick-start a domestic solar manufacturing industry, a challenging initiative in a very competitive, Chinese-dominated sector.

Now the SoftBank initiative appears in limbo, though it could resurface as a broader goal guiding the implementation of solar power in general. An alternative renewable strategy is to be unveiled in late October.

The introduction of large amounts of renewable energy is also connected to the reduction of subsidies and the restructuring of the Saudi Electricity Company. Domestic electricity, water, and diesel prices have been raised but remain low and below cost. Even so, the increases so far have provoked some domestic complaint.

Until prices reach cost-reflective levels, the Saudi Electricity Company will remain dependent on direct government payments to fund its massive investment program, which still largely concentrates on oil- and gas-fired generation. The local use of renewables, for instance rooftop solar by homes, businesses, and factories, will be unattractive unless specifically supported by a countervailing subsidy. Remote off-grid locations such as farms, water pumps, and telecom towers will prefer familiar diesel generators to solar while fuel remains priced well below world market levels.

The Saudi Electricity Company is set to be split into four generating companies, shares of which could be offered on the Tadawul stock exchange, and an independent transmission and distribution company. This would at least improve transparency of costs and help attract private investment.

As well as the new solar and nuclear energy program, other mega-initiatives have struggled to move forward. These include the initial public offering of 5 percent of state oil giant Saudi Aramco. The initial concept for the IPO overvalued the company, and underestimated the legal, accounting, and reporting complexities involved in listing on an international exchange. Initially announced in 2016 and planned for 2018, it was delayed, though Mohammed bin Salman recently stated it was on track for 2021.

Instead, Aramco is acquiring the PIF’s 70 percent of Saudi Basic Industries Corporation, and officially the IPO has been postponed until it digests its compatriot. But despite the boost to its strategic petrochemical plans the acquisition provides, Aramco had not shown great enthusiasm for the transaction, arguing it should have a discount on the market price, which values SABIC at about $100 billion.

Other privatization plans, such as the sales of stakes in airports and the Ras Al-Khair power plant, have advanced slowly. And the scheme for Neom, a futuristic new city in the northwest adjacent to Jordan and Egypt, has yet to articulate a sustainable economic proposition.

The social reforms that have been enacted, far-reaching though they are, depend crucially on a robust economy, able to support the government budget and generate jobs for young Saudis. King Salman bin Abdulaziz’s reign so far has achieved some notable economic successes, mostly in the energy sector. The OPEC and non-OPEC pact has succeeded in restoring oil prices to acceptable levels, Aramco has moved ahead with important petrochemical and refining investments at home and in India and Malaysia, and SABIC has acquired a large stake in specialty chemicals maker Clariant as part of its plan to move into more value-added products. State mining firm Maaden has expanded its gold and phosphate output.

However, most of these moves reflect where the kingdom is already capable – building on its natural-resource endowment through large, capital-intensive projects led by national champions. ACWA Power, private – albeit with a 25 percent PIF stake – is a rare but welcome example of a homegrown innovative, aggressive, and internationally competitive firm.

Subsidy reduction has been bold and wide ranging, and sets the stage for improving efficiency. But the impact on the budget has been muted by the need to compensate Saudis through the Citizen’s Account direct payments, and by reinstatement of salary raises and bonuses.

The progress made recently in renewables, with two sizeable projects finally underway, could be a template for advancing other megaprojects. Creating investor-friendly conditions, advancing pilot projects that build capacity, and moving ahead concurrently with far-reaching reforms of the power sector and tariffs will help break down an apparently dramatic goal into achievable pieces.