This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 1/22/2020

Overview
Saudi Power Sector
The Saudi Arabian electricity generation, transmission, distribution and smart-grid power sector continues on a growth curve and is racing to keep up with growing electricity demand. Domestic consumption rose at rate of 2.5 percent through 2017 and declined slightly to 2 percent in 2018.  Saudi Arabia currently relies on liquid petroleum for approximately 60 percent of its electricity generation feed stock requirements. To reduce consumption of oil in the generation of power, Saudi Arabia is eager to upgrade its entire power generation, distribution, and transmission sector. Apart from increasing its non-oil generation capacity, the Kingdom is looking to replace its outdated transmission and distribution infrastructure (D&T), implement smart-grid technology, and promote international grid connectivity.

Saudi Arabia faces an enormous task in expanding its power-generation capacity. It is estimated that the Kingdom needs to increase power-generation capacity from 82GW in 2018 to 160GW in 2040. This translates into installing 5GW in capacity and distribution infrastructure each year through 2020. To achieve this, the government is looking to make a yearly investment of approximately $5 billion in generation and $4 billion in distribution (D&T).  Moreover, Saudi Arabia intends to privatize all electricity generation by 2025.   The newly privatized power-generation companies are expected to need substantial investment to increase efficiency, meet environmental standards, and replace aging power plants.

The major power-sector actors in Saudi Arabia are:

  • Ministry of Energy, Industry, and Mineral Resources (MEIM) is the government agency that handles policy and planning in the power sector.
  • Saudi Electricity Company (SEC) is a government-owned Public Investment Fund (PIF) entity (over 80 percent of shares) that currently provides most of Saudi Arabia’s electricity, with a generation capacity of 78GW in 2018. It also carries out all transmission and distribution.
  • Saline Water Conversion Corporation (SWCC) is the government agency that is responsible for desalination and power pants.
  • Saudi Water Partnership Company is a government-owned company that acts as an off taker with a clear mandate to facilitate private sector participation in independent water and power projects (IWPP).
  • Aramco is the government-owned company that manages Saudi Arabia’s oil and gas production. It is involved in power generation alongside SEC, as the primary supplier of feed stock.
  • Electricity and Co-Generation Regulatory Authority (ECRA) is the Kingdom’s independent regulatory body for Saudi Arabia’s energy sector.
  • King Abdullah City for Atomic and Renewable Energy (KACARE) was established by royal decree in 2010. It focuses mainly on nuclear energy and technology localization in the burgeoning renewable energy sector.
  • Power and Water Utility Company (MARAFIQ) is a government-owned entity that currently provides most of the power to the two industrial cities of Jubail and Yanbu, found in the Eastern province and the Al-Madinah Province, respectively.
  • King Abdul Aziz City for Science and Technology (KACST) is a scientific government institution that supports and enhances scientific applied research. It coordinates the activities of government institutions and scientific research centers in accordance with the requirements of the development of the Kingdom. 
Power Distribution and Grid
Segments of Saudi Arabia’s current grid are outdated and inefficient. There is a plan to replace old substations, transformers, and other infrastructure to reduce energy wastage. MEIM expects most of this improvement to take place between 2020 and 2025, with operations continuing to 2030. What’s more, there is a plan to link the Central and Western regions with $4 billion to be invested in distribution projects annually.

The Kingdom of Saudi Arabia is the 12th largest consumer of generated electricity. The main feed stocks are crude oil and gas. The Kingdom, given significant increases in demand, must work toward greater efficiency and diversification of electricity generation, including alternative and renewable energy. At the same time, grid modernization and better connectivity should ensure that the Kingdom is always able to meet peak demand. Given the growth and diversification of Saudi Arabia’s economy and the Kingdom’s desire to diversify the power mix, the Kingdom  continues to be the most important market for electricity generation technology and equipment in the Middle East. “Made in the USA” technologies are highly respected and sought after, offering promising opportunities for U.S. companies.

Sub-Sector Best Prospects
The following technologies offer continuing opportunities for US exporters: smart meter, smart grid, alternative energy sources following grid upgrades, energy-efficiency systems,  geospatial information technology, and big-data management.
The National Transformation Program highlights the following initiatives it intends to carry out in this sector over the next five years:
  • Expand fuel efficiency in power generation; and
  • Increase percentage of power plant electricity generation through strategic partners from 27 percent to 100 percent by 2020;
  • Increase power generation capacity to3.45 GW
  • Eliminate subsidies on electricity and water.
Opportunities
Alternative Energy
In line with the Kingdom’s Vision 2030 strategy, the Saudi government is planning to develop 30 solar and wind projects over the next nine years as part of a $50 billion program to boost power generation and cut oil consumption. It is seeking to use more natural gas and renewable energy for power generation so that the nearly 800,000 barrels of oil that are currently burnt each day for the purpose can be freed up for export.

In its 2015 strategic plan, MEIM announced its plan to move away from oil and instead add more natural gas and renewable sources to its energy mix. In 2017, the MEIM formed the Renewable Energy Development Office with the responsibility for tendering out 9.5 GW of mainly PV solar and wind by 2023, with the intermediate goal of 3.45 GW by 2020. As renewable energy comes online, there will be increased demand for integration technology into the national grid.

National Renewable Energy Program of Saudi Arabia
Saudi Arabia’s National Renewable Energy Program (NREP) is a long-term, multifaceted renewable-energy strategy designed to balance the domestic power mix in order to deliver long-term economic stability and prosperity to the Kingdom, whilst working toward carbon reduction commitments.   The NREP is led by MEIM directly supporting Saudi Arabia’s National Transformation Program (NTP) and Vision 2030. The office responsible for the delivery of the NREP is the Renewable Energy Project Development Office (REPDO), part of MEIM.    The Program is being phased and rolled out in a systematic and transparent way to ensure that the Kingdom benefits from the cost-competitive nature of renewable energy.    The National Renewable Energy Program aims to substantially increase the share of renewable energy in the total energy mix, targeting the generation of 3.45 gigawatts (GW) of renewable energy by 2020–approximately 4% of generation capacity–and 9.5GW by 2023.    The initial target of 3.45GW of renewables by 2020 will involve three rounds of tendering that will procure a mix of wind, solar PV, concentrated solar power (CSP) and waste-to-energy technology. The NREP targets 700 MW, 1.02GW and 1.73GW respectively across the three rounds that started in 2017. The NREP will target a further 6.05GW by 2023.   Round one consists of two projects: 300 MW solar PV and 400 MW wind. The 300 MW Sakaka solar PV project launched on February 20, 2017.   The second one for a 400 MW wind power project at Dumat Al-Jandal was awarded to EDF and Masdar.   Sixty companies secured pre-qualifications to bid in round two of the Saudi Arabia National Renewable Energy Program for a Combined Capacity of 1.5 GW.  Targets is 27.3 GW by 2024; and 58.7 GW by 2030.

Program Governance:
The NREP is a strategic initiative governed by MEIM that is led by Khalid A. Al-Falih, Minister of Energy, Industry and Mineral Resources in the Kingdom.  MEIM’s supreme control of the program consolidates the efforts of various stakeholders across the Kingdom, including the King Abdullah City for Atomic and Renewable Energy (KACARE), the Electricity and Co-Generation Regulatory Authority (ECRA), Aramco, and the Saudi Electricity Company (SEC).    All projects that fall within the NREP will be procured in a fair, open and transparent manner via a purpose-built e-procurement portal. The selection of bidders, tendering procedures and the award of contracts will be open to public examination. An independent selection panel will evaluate all bids, and the names of bidders will be made public following selection. Tenders are awarded to the company or consortium that, while meeting the minimum localization content requirement for that tender, puts forward the lowest levelized cost of electricity.   The NREP is a strategic initiative that serves NTP and in doing so serves to catalyze domestic job creation and drive growth in the Kingdom’s non-oil economy. It is the vision of the NREP to serve the NTP goals related to domestic job creation, capacity building, and localization of the renewable energy value chain.   Under the NTP, the NREP directly serves to:
  • Incentivize the private sector to manufacture goods and provide services locally to encourage both the public and private sectors to rely on local products and services. (NTP 2020)
  • Raise the local content in the total expenditure of the public and private sectors from 36% to 50%. (NTP 2020)

Smart Grid/Distribution & Transmission
To better equip its grid system for peak power demand, the Kingdom of Saudi Arabia recently led a Gulf Cooperation Council project to link grids of the member states. This has introduced the region to international power trading. Moreover, the Kingdom is looking to build a 3GW link with Egypt, estimated at $1.6 billion. Links with Turkey, Yemen, and the entire Arab region have also been discussed. Due to dissimilar peak load times, these links would be well-suited to trading electricity, improving the efficiency of each country’s grid.

In further pursuit of efficiency, the Kingdom is investing billions to install smart meter technology. SEC has been funding various projects to install 12 million smart meters by 2025,replacing all old meters in the country. By communicating energy consumption instantly via the internet, smart meters will allow the Kingdom to better manage its usage. Installing such technology will facilitate the future integration of variable power sources like solar and wind, whose output is more erratic than that of traditional hydrocarbon plants.

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