RENEWABLES MAKE HEADWAY IN SAUDI’S ENERGY MIX

In the space of a few years, Saudi Arabia has managed to jump-start its renewable energy sector with 89 megawatts (MW) of photovoltaic installed capacity, 50 MW of concentrated solar power (CSP) systems, and 3 MW of wind capacity, taking its overall inventory to 142 MW, the second highest in the region.

But the pace of installed capacity will have to be accelerated if the kingdom is able to meet growing demand, which is expected to grow to 135GW by 2030.

“Peak electricity load in Saudi Arabia in 2015, for instance, was 10% higher than in 2014; the 2020 level is expected to be nearly a third greater than that of 2014,” said International Renewable Energy Agency in a new report. “By 2032, it will have doubled. As demand rises, the need for new power sector infrastructure grows apace.”

According to IRENA’s estimates, Saudi Arabia is projected to require additional investment in the power sector of at least SAR500 billion until the mid-2020s in order to ensure security of supply.

According to the King Abdullah Petroleum Studies and Research Centre Saudi Arabia has over 82 GW of power-only capacity installed, with gas turbines accounting for nearly half, and steam turbines and combined cycle units making up the remainder. In addition, a significant amount of thermal desalination capacity (9.4 GW) exists in the country’s three regions adjacent to the Red Sea and the Arabian Gulf, with combined capacity to desalinate over 6.2 million cubic metres per day.

The Saudi Electricity Company will be called upon to play a crucial role as Saudi Arabia unveils its ambitious policy of adding 3.45 gigawatts of primarily renewable electricity by 2020, a figure that will rise to 9.5GW by 2023. The kingdom aims to source 30% of its electricity generation from renewables.

The SEC is currently working on implementing an integrated plan to separate its main activities into independent companies and to develop internal selling prices, according to the company’s first-quarter earnings report.

The company invested SAR5.2 billion in capital projects during the first three months of 2019, which has boosted its assets, SEC said.

During the first quarter of the year, SEC's asset base had grown 0.4% to SAR466.6 billion, compared to SAR464.6 billion during the same period last year, with shareholders’ equity declining 2.2% to SAR 72.1 billion (2018 end: SAR 73.7 billion).

Electricity sales reached SAR9.8 billion during the quarter, a 3.7% drop from the same period last year, although revenues from electricity connection tariffs rose 16.4% and transmission system revenues jumped 12.9%

Other operating revenues also rose 539.4% year-on-year, driven by higher revenues for reconnecting customers, higher fibre optic lease revenues, and revenues from project supervision services and a one-off penalty charge related to a violation for surpassing agreed consumption limits by an industrial consumer.

Part of reforming the power industry also means rationalizing consumption and conserving precious resources to cut costs and create value.

To that end, The Saudi Energy Efficiency Centre was set up as a national program to rationalize energy and enhance energy efficiency and develop policies, regulations and rules and support implementation, is also playing a key role in conserving energy.

SEEC has focused on the industrial sector, which consumes 44% of energy consumed in the country, buildings segment that consume 29%, and transportation sector that accounts for 21% of all consumption in the kingdom. Together these three segments consume 4.5 million barrels of oil equivalent per day, and the government is hoping to rein in the costly expenditure through a mix of energy efficiency, and adding more energy sources such as wind and solar into the mix.

The SEEC has already notched up successes such as pushing the use of highly-efficient air-conditioners that has improved energy efficiency by 57% over the past six years, according to a presentation by the SEEC. Other achievements include launching building codes to ensure energy efficiency, and developing the next phase of the Saudi Corporate Average Fuel Economy (CAFÉ) standard for light duty vehicle.

The government has also managed to curb surging power demand by cutting energy subsidies that had also been a drag on finances. The International Monetary Fund estimates that fiscal revenues from the 2018 electricity and gasoline price increases are estimated at about SAR30 billion.

“Going forward, fiscal revenues from increasing domestic energy prices to their reference prices are estimated to reach SAR112 billion by 2023 (these revenues are additional to the revenues already being received from the domestic sale of energy products),” the IMF said. “Households contribute the most at the beginning of the reform period, while non-households are expected to bear most of the reform’s cost starting in 2020 and contribute two thirds of the fiscal savings by 2023.”