1A Commentary on the 2025 IEA

Future of Electricity in the Middle East and North Africa

Report

Commentary

Amro Elshurafa

Sept 2025 | KS--2025-CO27

A Commentary on the 2025

IEA

Future of Electricity in

the Middle East and North

Africa

Report

2A Commentary on the 2025 IEA

Future of Electricity in the Middle East and North Africa

Report

About KAPSARC

KAPSARC is an advisory think tank within global energy

economics and sustainability providing advisory services to

entities and authorities in the Saudi energy sector to advance

Saudi Arabia’s energy sector and inform global policies through

evidence-based advice and applied research.

This publication is also available in Arabic.

or materials contained therein) (the “Document”) shall not be used without the proper attribution to KAPSARC. The Document shall

not be reproduced, in whole or in part, without the written permission of KAPSARC. KAPSARC makes no warranty, representation or

undertaking whether expressed or implied, nor does it assume any legal liability, whether direct or indirect, or responsibility for the

accuracy, completeness, or usefulness of any information that is contained in the Document. Nothing in the Document constitutes

or shall be implied to constitute advice, recommendation or opinion. The views and opinions expressed in this publication are those

of the authors and do not necessarily reﬂect the ofﬁcial views or opinion of KAPSARC.

Legal Notice

4A Commentary on the 2025 IEA

Future of Electricity in the Middle East and North Africa

Report

Earlier this month, the International Energy Agency (IEA) released

The Future of

Electricity in the Middle East and North Africa

report, which reviews historical trends in

the electricity sector and projects its developments to 2035. Given Saudi Arabia’s size and

importance in the region, the report, as expected, devotes considerable attention to the

Kingdom. While the report offers useful analysis, some of its findings on Saudi Arabia are

inaccurate.

For example, the IEA (2025) projects that Saudi Arabia will still

burn around 30-40 TWh of oil for power generation by 2035, and

it assumes that renewable energy deployment will reach about

100 GW by then (in its “STEPS” scenario), but both estimates are

misaligned with the demonstrable progress already underway

and with the Kingdom’s clearly stated and more ambitious

targets.

On subsidies, the IEA (2025) relies on the price-gap approach,

which is not well-suited to the realities of oil-exporting

economies. This method overlooks how ongoing reforms

reshape demand, and it systematically overstates subsidy

levels. Further, the true opportunity cost of domestic oil

consumption cannot be captured by equating it to border prices.

More nuanced, bottom-up approaches, such as those employed

within the Organisation for Economic Co-operation and

Development (OECD), are more policy-relevant for exporters

like Saudi Arabia.

In what follows, we provide additional context and details

to ensure a more accurate understanding of Saudi Arabia’s

electricity sector and its ongoing transformation.

The Displacement of Liquid Fuels in

Power Generation

Saudi Arabia is undertaking a strategic initiative to displace

liquid fuels from its power sector, driven by a commitment to

enhance efficiency, reduce emissions, and optimize domestic

resource use.

The Kingdom has set a clear target to displace over one million

barrels of oil equivalent per day (MBDOE) by 2030, with the

largest portion coming from the utilities sector, i.e., nearly 860

MBDOE. This builds on tangible progress already achieved,

with liquid fuel consumption in the power sector projected to

decline from 845 MBDOE in 2024 to 747 MBDOE by the end of

2025. More than 60% of this reduction comes from efficiency

gains in the water desalination sector in the form of liquid to gas

conversion.

A Multi-Front Approach

The goal to displace liquid fuels from the power sector is

ambitious, and it requires careful planning and orchestration. To

achieve it, the Kingdom has adopted a holistic and multi-faceted

strategy.

On the gas front, the Kingdom is making substantial

investments in its gas exploration and production, notably at

the Jafurah unconventional gas field. This is being coupled with

a widespread program to convert existing oil-fired power plants

to more efficient gas-fired generation, which will ensure that

gas becomes the primary fuel for baseload power. Expansion of

the gas network infrastructure is also underway.

Complementing the gas developments, Saudi Arabia is

executing a highly ambitious renewable energy and battery

strategy. By 2030, nearly 50% of the total installed capacity of

200 GW will come from renewable and storage technologies

subject to demand growth. With over 12 GW of renewable

capacity already connected to the grid and over 45 GW in

various stages of tendering or construction, the Saudi Power

Procurement Company (SPPC) is advancing projects at an

unprecedented pace. Battery storage has also received its fair

share of attention. Nearly 30 GWh of battery storage capacity

has been tendered, and 8 GWh are already connected to the

grid. The SPPC is running the tendering process at pace to

ensure that the targets will be met in a timely manner.

In the energy intense water desalination sector, efforts are

also underway to convert plants from liquid fuels to gas.

Furthermore, the strategic transition from energy-intensive

thermal desalination methods (e.g., multi-stage flash) to the

more efficient reverse osmosis will, as the IEA (2025) report also

acknowledges, significantly reduce both liquid fuel consumption

and overall energy demand.

Furthermore, the Kingdom is leading regional efforts in energy

efficiency policies on both the supply and demand sides.

Regarding supply, there are energy efficiency mandates on

existing and new assets in the utilities sector, including power

generation, transmission, distribution, and desalination. On

the demand side, the Kingdom has implemented standards for

cooling, refrigeration, water heating, and more. These measures

are designed to reduce overall energy consumption and peak

electricity demand, which in turn reduces the need for liquid-

fueled peaker plants.

In addition to what has been mentioned above, a few sample

numbers can translate the qualitative initiatives outlined above

into measurable impact. According to the Joint Oil Data Initiative

Sept. 2025

5A Commentary on the 2025 IEA

Future of Electricity in the Middle East and North Africa

Report

(JODI), crude oil burn in July 2025 was 161,000 barrels per day

(b/d) lower year on year (or 21%). Similarly, according to JODI, fuel

oil consumption in July 2025 was down by more than 140,000 b/d

compared with July last year, and the total oil burn of 1.167 million

b/d for July 2025 was the lowest since 2019. The country is already

seeing the fruition of its efforts to replace liquids.

Figure 1.Saudi Arabia’s adoption of a holistic approach for its energy transformation covering all sectors.

Source: Author.

SAUDI ARABIA’S

MULTIFACETED ENERGY

TRANSFORMATION

PLANS

Renewable Energy

Deployment

Set an aggressive target, supported

by strong tendering. Targets

dominated by PV and wind

Gas Infrastructure

Expansion

Investing in new gas ﬁelds and plants

and expanding gas infrastructure

Advanced

Energy Storage

Invest in batteries to support grid

stability and integrate higher share

of renewables

Energy Efﬁciency

Implementing a range of policies that

cover all sectors with periodic revisions

Water Desalination

Invest in fuel conversion and wider adoption

of reverse osmosis

Not Simply Retiring Oil

The scale and pace of domestic plans, orchestrated by the

Ministry of Energy, are not always fully or accurately captured

by external observers. Collectively, the comprehensive and

concrete steps highlighted above within the liquid displacement

program will ensure that only minimal amounts of oil will

be used for contingencies, if at all. The liquid displacement

program is more than just a technical transition – it is a

structural and transformative change. By combing large-scale

investments in gas, renewables, and efficiency, the Kingdom is

not only reducing reliance on liquid fuels but also setting new

benchmarks for an integrated energy strategy and effective

execution. As these initiatives materialize, the benefits will

extend beyond the power sector.

While some external projections may underestimate the pace

of realization of the Kingdom’s ambition, tangible evidence on

the ground points toward rapid progress and commitment that

are contributing to the process of delivering a cleaner and more

resilient energy future.

6A Commentary on the 2025 IEA

Future of Electricity in the Middle East and North Africa

Report

References

International Energy Agency (IEA). 2025.

The Future of Electricity in the Middle East and North Africa

. https://iea.blob.core.

windows.net/assets/a205959d-3d98-4abb-ac0e-fb97b3b05a8d/TheFutureofElectricityintheMiddleEastandNorthAfrica.pdf.

7A Commentary on the 2025 IEA

Future of Electricity in the Middle East and North Africa

Report

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