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Megaprojects will weigh on Saudi utility capacity

2 November 2023

Commentary
Jennifer Aguinaldo
Energy & technology editor

An overall projects pipeline worth nearly a trillion dollars will require Saudi Arabia to boost its power generation and water production capacity.

The kingdom expects its population to reach 50 million by 2030, about 37 per cent higher than the current population of over 36 million.

Neom's The Line alone is envisaged to have a population of 9 million by 2030.

The kingdom also aims to attract up to 150 million tourists by 2030. The plan does not state how much of this will be international or domestic tourists, although its latest figure of 93.5 million last year comprised 82 per cent domestic tourists, with international tourists accounting for the rest.

Saudi Arabia started responding to the need to accelerate the deployment of additional power generation capacity this year. 

The contracts for four combined-cycle gas turbine (CCGT) independent power projects (IPPs) with a total combined capacity of 7,200MW are expected to be awarded imminently. These are the first thermal IPPs to be procured by the kingdom since 2016.

The contracts for renewable energy IPPs with a total combined capacity of 3,300MW under the fourth round of its National Renewable Energy Programme (NREP) are due for award.

The Saudi sovereign wealth fund also did its bit by awarding three major solar photovoltaic (PV) projects, which have a total combined capacity of 4,550MW, this year.

The procurement process for similarly-sized CCGT plants is expected to start early next year, along with the fifth found of NREP.

The state water offtaker, Saudi Water Partnership Company (SWPC), publishes an annual seven-year planning statement, which includes a capacity procurement plan for water desalination, treatment, reservoir and transmission projects.

This provides investors, developers and contractors with a clear view of the projects coming to the market over a specified period.

A source told MEED earlier this year that there are plans for the power offtaker, Saudi Power Procurement Company (SPPC), to issue a similar capacity planning document. However, it is unclear when the document will be made public.

There are also indications that the kingdom could update its renewable energy installed capacity target, which currently stands at 58,700MW by 2030. The kingdom's renewable energy installed capacity stands at roughly 842MW.

In parallel, the largest gigaproject, Neom, aims to be powered 100 per cent by renewable energy by 2030, with nearly every major development looking at energy-efficient alternatives for power and water supply.

No doubt Saudi Arabia is approaching a golden era in terms of power and water capacity building, not to mention a long-standing plan to introduce nuclear power to its electricity production mix as part of a plan to decarbonise its electricity sector. 

The tricky part will be developing a formula that can accurately forecast medium- to long-term demand, which will require clear and reliable input in terms of expected population growth, historical demand growth, and the production capacity and retirement schedule of its existing fleets.

The expansion of electricity exchange and trade with its GCC neighbours, Egypt and Iraq, among other jurisdictions, as well as the adoption of the so-called distributed energy resources such as electric vehicles, add a further layer of complication not seen in the past to the kingdom's future capacity procurement plans.  

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Jennifer Aguinaldo

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