Decarburization of the power sector is a critical element of the global energy transition. This effectively translates into increased use of renewables and more use of gas instead of coal for power generation. The increased use of intermittent renewables, however, creates demand for more flexible generation, which today is mostly gas-fired generation. Increased use of natural gas places upward pressure on global gas prices, which in turn affects the underlying economics of the other fuels used in the power sector.
In the future, batteries, given technological advancements and its downward cost trajectories, could also provide flexibility to mitigate large fluctuations in supply on the grid. The energy transition therefore could have ripple effects on the economics of the power sector. In Saudi Arabia electricity supply consists mainly of crude oil, heavy fuel oil, diesel and natural gas. In 2017the share of electricity produced by natural gas was 59%, and oil at 41%.
A strategy to reduce carbon emissions needs to reduce both liquid fuel consumption and increase natural gas and renewables’ generation. The energy transition will impact global fuel economics, which in turn will influence the energy mix in the Saudi power sector. This project is therefore timely and relevant for several key energy stakeholders in the kingdom including SEC, ECRA, MEIM, and MOF.