Industry at a glance
Saudi Electricity Company (SEC) aligns with Saudi Vision 2030 and UN SDGs, focusing on energy efficiency, reliability, and sustainability. It aims for Net Zero emissions by 2050, supporting renewable energy and grid interconnection.
SEC prioritizes ESG factors, implementing strategies and governance frameworks. It integrates renewables into the National Grid, promotes a circular economy, and invests in digital solutions for energy efficiency. SEC fosters diversity, inclusion, and community enrichment, exemplified by initiatives like Ihsan Care. In 2023, SEC committed to Net Zero emissions by 2050 and signed MoUs for sustainability, including a CoE with NZTC and Accenture at COP28.
Global Market Trends
Energy Transition and Energy Mix
In 2023, the global commitment to a sustainable future was underscored by a substantial investment of approximately USD 1,740 billion in clean energy deployment. This marked a pivotal moment in the transition towards renewable energy sources, emphasizing the crucial role of technologies such as battery storage and hydrogen. The SDG7 Global Roadmap provided a comprehensive guide on achieving net zero by 2050, outlining a roadmap for the world to transition to clean energy by 2030. The energy landscape, characterized by its dynamism, saw renewables emerge as the cornerstone for nations embarking on the challenging path of energy transition. Notably, at COP 28, 119 countries reached a consensus to triple renewable power generation and double energy efficiency by the end of the decade.
Electricity Sector Restructuring and Regulation
The global electricity sector is undergoing significant transformations shaped by evolving market trends, regulatory shifts, and restructuring initiatives. The resurgence of re-regulation and nationalization stands out as a notable trend, with certain nations reassessing the role of the state in shaping energy markets. Simultaneously, a pronounced shift from commodity-based to capital-based markets is underway, emphasizing investment and asset ownership over the mere trading of electricity as a commodity. The integration of carbon markets has become a pivotal mechanism for addressing environmental concerns and incentivizing emission reductions. These intricate dynamics highlight the complexity and fluidity of the global electricity sector, where regulatory frameworks and market structures are continually adapting to address sustainability goals, economic considerations, and geopolitical influences.
Environment, Social, and Governance
Decarbonization has become a paramount objective in the energy sector, driving a fundamental shift towards cleaner and sustainable practices. Recognizing the imperative to address environmental concerns, utilities are increasingly focusing on Environmental, Social, and Governance (ESG) factors as key metrics for decision-making. In a notable collaborative effort, 18 major European power companies have committed to reducing over 300 million tons of carbon dioxide emissions by the year 2030, showcasing a collective dedication to combating climate change. This commitment aligns with a broader trend seen in the financial sector, where ESG considerations have gained substantial traction. With more than USD 300 billion in assets under management dedicated to ESG funds, investors are actively supporting businesses that prioritize environmental responsibility, social impact, and strong governance. The convergence of these efforts signifies a pivotal moment in the energy industry, where both utilities and investors are steering towards a more sustainable, low-carbon future, acknowledging the interconnectedness of financial success and environmental stewardship.
Digital Transformation
The integration of advanced technologies plays a pivotal role in shaping the future of the energy sector, ensuring sustainability and efficiency. Smart grids and network automation, virtual power plants, and analytics-driven demand forecasting are key components of this technological revolution. The proliferation of connected devices has witnessed an astounding 23-fold increase from 2011 to 2021, emphasizing the growing reliance on interconnected systems. In line with this trajectory, IDC’s predictions for the coming years underscore the transformative impact of technology across various facets of the energy landscape.
Customer Experience
In the realm of customer experience within the utility sector, the focus is shifting towards enhancing consumer satisfaction through a multi-faceted approach. The demand for a streamlined, one-click experience, and flexible payment plans has driven utility companies to reimagine their service delivery. Beyond offering traditional commodities, utility providers are diversifying their product and service portfolios to meet evolving customer expectations. Notably, the concept of customers as prosumers is gaining prominence, reflecting a shift where consumers actively engage in energy production and consumption.
Electrification and Demand Management
Electric vehicles (EVs) currently represent approximately 15% of global car sales, a figure set to soar to 40% by 2030 according to the Stated Policies Scenario (STEPS). Over the past two years, the share of EVs in global car sales has more than tripled to reach 14%, with further record sales anticipated in 2023.
Simultaneously, the electricity sector faces escalating short-term flexibility needs, met through demand response and storage, while seasonal flexibility relies on hydropower and thermal sources facilitated by modernized grids. The growing adoption of electric heat pumps, air conditioners, and EVs introduces variability in demand, presenting opportunities for demand-side response. Realizing these opportunities hinges on a supportive regulatory environment, backed by robust price signals, digital tools, and smart controls, enabling effective demand-response policies to help consumers reduce electricity bills.
The Kingdom’s Trends
The Kingdom of Saudi Arabia is charting an ambitious course in the realm of renewable energy and storage, setting a target to double installed capacity annually. The private sector is taking on an increasingly significant role in KSA’s generation sector, a trend poised for substantial expansion under KSA’s ambitious Independent Power Producer (IPP) program.
By 2030, renewables are projected to contribute to approximately 50% of the total installed generation capacity.
The Kingdom is actively working towards minimizing its reliance on liquid fuels for power generation through a comprehensive liquid displacement program. The surge in power demand in KSA, propelled by population growth, economic expansion, and electrification initiatives, necessitates a modernization and expansion of the Saudi Electricity Company’s (SEC) transmission network. With the population expected to reach 50-60 million by 2030, including a significant influx into Riyadh, the liquid displacement program aligns with the goal of integrating industrial and agricultural applications into the grid.
Furthermore, the Kingdom is witnessing a notable rise in Electric Vehicle (EV) penetration, with the government targeting a 30% EV penetration rate in Riyadh city by 2030. This translates to a projected 25 million EVs in KSA by the same year. These initiatives collectively underscore Saudi Arabia’s commitment to a sustainable and diversified energy future.
Source: International Energy Agency (IEA), Ministry of Energy – Liquid Fuel Displacement & 2030 Energy Mix.
The most prominent stages of financial and regulatory reforms in the Saudi electricity sector
2017
-
The establishment of Saudi Power Procurement Company (Principal Buyer) as a wholly owned by Saudi Electricity Company
2020
-
Establishment of the Higher Committee for Energy Mix Affairs to oversee electricity production and promote the renewable energy sector.
Implementation of a sustainable mechanism for government dues payment.
Revision of the revenue formula based on the regulatory asset base.
Activation of the balancing account and corresponding revenue equation.
2000
-
The establishment of Saudi Electricity Company
2001
-
The establishment of Electricity and Cogeneration Regulatory Authority
2007
-
The establishment of the private sector contribution program in electric power generation projects
2012
-
The establishment of National Grid SA as a wholly owned by Saudi Electricity
2021
-
Issuance of the Council of Ministers’ decision approving the carve-out of Saudi Power Procurement Company (Principal Buyer) and transfer its ownership to the kingdom.
2022
-
The signing of a share and purchase agreement to transfer full ownership of Saudi Electricity Company in Saudi Power Procurement Company to the government.