Among the Gulf Cooperation Council (GCC) economies, Saudi Arabia can be seen as the most aggressive with respect to investments in the power sector, according to a study by Kuwait Financial Centre (Markaz).
In this research note, titled Markaz tackles Saudi Arabian Power sector in terms of highlighting demand-supply trends, growth drivers, and future investment areas.
The report reveals that Kingdom of Saudi Arabia is struggling to keep pace with the increasing demand for electricity. Factors that are driving demand are population growth and high level of urbanisation. According to International Monetary Fund (IMF) estimates Saudi population is expected to increase from the current 28 million to reach 31 million by 2015 and 37 million by 2020.
Urban conglomerates contribute around 83.6 per cent of the total population in the Kingdom which is growing at 2.2 per cent annually. High economic development has also accelerated energy consumption in the Kingdom Power consumption in the Kingdom has grown at a compounded annual growth rate (CAGR) of 6.0 per cent over the last five years and Markaz expects consumption to grow at a similar pace over the next few years as well. Saudi Arabia is one of the top ranked nations with respect to residential consumption of electricity.
Almost half of its power consumption is accounted for by its residents. With diversification of the economy, the study expects a shift towards the industrial sector. Currently, 49 per cent of the power generation is sourced through natural gas and the remaining through liquid fuels with renewables accounting for a negligible share. This situation is changing as nuclear and solar power is increasingly seen as an option to satisfy the demand, the study said.
In 2000, Saudi Electricity Company (SEC) became operational with all the electricity companies included in it. As of now SEC is the leading power producer in the state with about 50 operating units across the nation with a capacity of over 40,000MW.
From the period of its inception the generation capacity has grown by 2.5 times. SEC is estimating a 46 per cent increase in sold energy by 2016 compared to 2010 figures. In 10 years of its inception, total power transmission has increased by almost 50-60 per cent and total transmission lines have increased by almost 75 per cent. Number of customers under the SEC's operation has also increased by over 70 per cent during this period.
Recent developments indicate that SEC is planning fresh investments of close to $100 billion in order to meet the forecasted demand. By 2020, the Saudi Government is planning to create an additional 30,000MW of generation capacity. This is as part of its plan to ramp up power generation capacity by two fold by 2030.
Many projects are implemented through private participation as well. This is a huge invitation to foreign players to invest in the Kingdom and be a partner, leveraging the opportunities of GCC power grid and Pan Arab power grid.
Markaz study also foresees huge investments in the alternative energy space. Saudi Government has announced plans to establish nuclear power plants.
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