* Saudis grappling with surging domestic energy demand
* Solar power would help to safeguard crude exports
* Bureaucratic feuds, political uncertainty hamper plans
By Reem Shamseddine
KHOBAR, Saudi Arabia, Sept 8 (Reuters) - Saudi Arabia's ambitious plans to become a world leader in installed solar power appear to have run into the sand amid disagreements over their scale, ownership and technology.
The world's largest crude exporter announced three years ago it wanted to install 41 gigawatts of solar electricity by 2032 to help meet surging local demand for energy as the Saudi population increases rapidly and the economy grows strongly.
The decision was prompted by concerns about cost rather than about cutting Saudi carbon emissions to help combat climate change. The kingdom currently generates much of its electricity by burning crude oil, thereby reducing the amount available for export and threatening its market share.
But despite a 2013 statement that bids would soon be issued for the first solar power projects, the body set up to spearhead alternative energy development -- King Abdullah City for Atomic and Renewable Energy (K.A.Care) -- has made no progress and in January it pushed back the 2032 target to 2040.
"It hasn't been approved yet, we are in a waiting mode," said a Saudi government source who declined to be identified.
"There is a divergence of views. Everybody agrees on the goals, but they have different ideas on how to implement them."
With its sunny climate and strong demand for electricity during the summer, Saudi Arabia seems perfectly suited for solar power projects, though its high levels of atmospheric dust and soaring temperatures pose difficult technical problems.
The biggest obstacle, however, is bureaucratic. K.A.Care's relationship with the powerful ministries of electricity and oil was never clearly defined, meaning that no single department was put in charge, industry sources say.
"The key issue is K.A.Care does not belong to any particular ministry leading the initiative and does not have the balance sheet to conclude power purchase agreements directly," said Imtiaz Mahtab, president of the Middle East Solar Industry Association.
The two key players in the Saudi energy sector -- Saudi Electricity Co (SEC), under the electricity ministry, and state oil company Aramco, under the oil ministry -- need to be "in full alignment with K.A.Care's ambitions", Mahtab said.
"All this is proving very time-consuming," he added.
Regulations governing the development of the sector, long-awaited by foreign investors who set up offices in the kingdom in anticipation of huge, lucrative solar projects, have still not been approved, industry sources said.
Adding to the confusion, since King Salman took power in January, a new supercommittee headed by his son, Deputy Crown Prince Mohammed bin Salman, has started to re-evaluate all aspects of economic policy, fueling speculation that the energy sector may be restructured.
Various ministries are still reviewing the solar programme and are discussing whether to split it up into five-year phases to allow time for technologies to be tested, the sources said.
The lack of transparency and bureaucratic infighting dogging the solar initiative are familiar enough problems for foreign investors in Saudi Arabia, though they continued to show strong interest when King Salman visited Washington last week.
Veteran Saudi Oil Minister Ali al-Naimi has spoken repeatedly in defence of Saudi solar plans and they are expected to form part of the kingdom's public-facing policy at the global talks on climate change in Paris later this year. Solar and other renewable forms of energy are seen as a vital tool to reduce reliance on fossil-burning fuel and curb climate change.
But the Oil Ministry questions key elements of K.A.Care's original plans. For example, it has rejected any role for the private sector in developing renewable energy, one Saudi industry source said, preferring instead to set up its own company to spearhead development of solar projects.
Under K.A.Care's plan, local companies would team up with international solar power developers to carry out the projects with the aim of increasing technological transfers to the kingdom and boosting its private sector, thereby creating jobs.
The Oil Ministry also opposes K.A.Care's aim to install only 16GW of solar photovoltaic (PV) capacity, compared to 25GW of concentrated solar power (CSP), the same industry source said.
Concentrated solar power (CSP) is much more costly than PV. But unlike PV, it can store solar energy for several hours, a big advantage in a country where air conditioning demand remains high in summer long after the sun has gone down.
The Oil Ministry did not respond officially to a request for comment. K.A.Care did not reply to emailed requests for comment.
Solar energy in Saudi Arabia still accounts for less than one percent of the total energy it produces and few big projects are on the table.
SEC aims to include solar in its large Dheba and Waad al-Shamal power plants. However, its only concrete plan for now is as the client for a 50-MW plant being developed by the King Abdulaziz City for Science and Technology and the Finance Ministry.
SEC will buy electricity from that plant, seen as a pilot project for the utility, for 18.77 halalas ($0.05) per kilowatt hour, a very low rate that would likely not be attractive for most commercial developers.
"Based on what we've seen in other competitive markets, investors and developers will certainly be looking for a more sustainable tariff," said Raed Bkayrat, vice president of Middle East business development for First Solar.
Some industry observers say the cost of renewable energy in the kingdom is still high compared to electricity generated by heavily subsidised liquid fuel. With global oil prices having more than halved since last year, solar energy has become even less attractive.
"We need to develop a better understanding of solar power and its associated technologies, but it would be unrealistic to think that it is an alternative to large-scale power generation technologies at this time," said Sadad al-Husseini, a former senior Aramco executive and now an energy consultant. (Editing by Angus McDowall and Gareth Jones)