• Episode number 06
  • Duration 6,36
  • Language Arabic
  • Date 10th October 2020
Saudi Arabia’s electric power industry is the largest in the Gulf region. The country’s electricity peak demand in 2007 was 35 GW, and almost doubled in size to reach 61.7 GW in 2017. That means an average growth rate of 5.31% annually. By 2030, it is expected to double again to reach a peak demand of 120 GW. This fast-paced growth in energy consumption is driven by many factors, such as population growth, strong economic and industrial development, improvements in living standards, harsh weather conditions, and low energy prices in the past.

 

To get electricity to the end-consumers, three distinct power businesses collaborate with each other to provide the nation with its power needs. These businesses are generation, transmission, and distribution. In the 1950s, Saudi Arabia had only two generation companies in Al-Ahsa and Jeddah. However, this number steadily grew to include several privately owned companies around the country that served large cities and towns. In the 1970s, the government combined all of these small players into four regional companies that are collectively known as the Saudi Consolidated Electrical Companies (SCECOs).

 

As demand and systems complexity grew further, the government took steps to restructure the electricity industry in the late 1990s, and merged all of the four regional companies to create a single, joint-stock monopoly that is vertically integrated, and called it the Saudi Electricity Company (SEC). It was tasked with carrying out all of the Kingdom’s generation, transmission, and distribution operations. At the time, the Saudi electric power industry faced several challenges, including the low operational efficiency caused by the vertical integration of the Saudi Electricity Company, the financial unsustainability of the sector due to the high dependency on government financial support, the lack of competitive players in the market, and the difficulty in securing large capital investment due to the low participation of the private sector.

 

With these clear shortcomings, there was an urgent need and interest in reforms and restructuring of the Saudi electric power industry. Efforts began with the establishment of the Electricity and Cogeneration Regulatory Authority (ECRA) in 2001 as an independent regulatory authority, with the aim of overseeing the electricity and cogeneration industries in the Kingdom. The newly created authority undertook the tasks of assessing tariffs, issuing licenses, monitoring service providers, investigating complaints, establishing the quality of service standards, regulating price control and managing the reforms. Its main objective is to ensure that consumers have access to affordable electricity supplies while providing sufficient income for service providers, and to improve energy efficiency and network reliability through new technologies and innovations.

 

Soon after, in 2005, the Electricity Law was adopted by Royal Decree, and later, in 2007, the ECRA released the Electricity Industry Restructuring Plan (EIRP) that proposed a gradual transformation of the electricity industry from a vertically integrated utility structure to a more competitive electricity sector in the future. It was revisited later in 2014 and adopted a ‘building block’ approach to the market reforms, and also suggested implementing a national competitive electricity market through five phases. The notable features included: unbundling of competitive and non-competitive business elements, rationalizing the fuel and electricity prices, and introduction of a spot wholesale electricity market. While overall progress has been slower than expected, it partly fulfilled the objectives by creating National Grid SA in 2012 to oversee and manage the transmission as a separate business unit within the SEC, and established Saudi Power Procurement Company in 2017 in the run-up to the competitive wholesale electricity market.

 

The government’s main rationale behind the reforms was that “electricity prices must reflect the economic costs of providing the electricity services, and that the electric power industry must depend for its survival and growth on the income it generates without resorting to government financial support.” The sustainability objectives as set forth in the Saudi Vision 2030 and National Transformation Program aim to transform the electricity industry going forward.

 

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