Saudi Arabia embarks on massive projects in Mecca and Medina

Saudi Arabia is embarking on two ambitious projects in Islam's holiest cities, Mecca and Medina, including plans to build one of the world's largest mosques.

King Abdullah, Saudi's 88-year-old monarch, laid the foundation stone this week to mark the expansion of the Prophet's mosque in Medina from a current capacity of 200,000 worshipers to 1.8 million, the state news agency reported.

While the total cost of the project has not been disclosed, Saudi officials estimate that the state may have to pay out as much as $6.6 billion in compensation alone for the expropriation of lands, which will reportedly include the demolition of 23 hotels.

But officials hope that the grandiose expansion project, which will take place in three stages starting next month, will pay off, attracting thousands more tourists, an increasingly important source of revenue, to the kingdom.

At the same time, the oil-rich state has ambitious plans for Mecca, which attracts millions of Muslim pilgrims every year. The government is inviting bids there to build a large renewable energy plant, with a key component dedicated to solar energy, a first step towards achieving its stated ambition of becoming a solar powerhouse.

With a fast-growing population's demand for electricity threatening its status as the world's largest oil exporter, Saudi is seeking to meet the country's energy needs with alternative fuels, particularly solar energy, to allow it to export more oil and gas.

Currently, domestic consumers use some 25 per cent of Saudi's crude output, with oil accounting for roughly 50 per cent of the country's electricity production.

The kingdom hopes to attract some $100 billion in investment to develop its solar industry, according to Bloomberg News, only a little less than the $136 billion invested in solar energy worldwide last year. Saudi Arabia hopes that by 2032, solar power will provide up to a third of its domestic energy needs.

One industry official described the Saudi move as "visionary," warning that Saudi's oil, which accounts for more than 80 per cent of its revenues, would one day run out.

"The project is very visionary as Mecca has special significance around the world," Adnan Amin, director general of the Abu Dhabi-based International Renewable Energy Agency, told Bloomberg. "The case is very simple. In 25 years, they [Saudi Arabia] could become net importers of energy. That makes renewables comparatively cheaper."