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Saudi power projects hit record high

21 February 2025

 

Saudi Arabia has entered what could be the busiest period for power generation capacity buildout in its history.

According to data from regional projects tracker MEED Projects and MEED, power generation projects with a total capacity of 53GW are under construction, or are about to start construction following the formal award of contracts or the selection of bidders.

Generation and cogeneration plants powered by natural gas account for two-thirds, or 66.7%, of the total capacity under construction, with renewable energy plants – mainly solar – accounting for the rest.

Solar and wind power plants dominate the pre-execution pipeline, however, accounting for about 94% of the capacity that is currently under bid or prequalification.

The total thermal and renewable generation capacity being planned and tendered in Saudi Arabia, inclusive of projects in the study and design phases, stood at about 80GW as of February 2025.

The major capacity buildout is in line with the kingdom's liquid displacement programme, as well as its target for renewable energy sources to account for half its electricity production by 2030.

According to the Energy Institute, Saudi Arabia's total electricity generation in 2023 reached 422.9 terawatt-hours (TWh). Oil accounted for 152.1TWh, or about 36% of the total, while natural gas accounted for 265TWh, or 63%, and renewables made up 5.8TWh or 1%.

CCGT plants

The urgency of displacing the kingdom's oil-fired fleet underpins the successive contract awards for combined-cycle gas turbine (CCGT) power generation plants, which are being developed as independent power projects (IPPs) or via engineering, procurement and construction (EPC) contracts.

About 47% of the 35.8GW of gas-fired capacity that is under construction is being built via an EPC or design-and-build model, mainly by Saudi Electricity Company (SEC). The rest is being constructed using an IPP model.

Of the total thermal capacity under construction, about 45% will be generated by greenfield power plants that are being built as an expansion to existing power generation facilities in the kingdom.

Chinese contractors such as Sepco 3 and China Energy Engineering Corporation are among the firms constructing 10 of the 19 gas-fired power generation and cogeneration plants that are under execution in Saudi Arabia. An 11th plant is being constructed by Sepco 3 in partnership with Doosan Enerbility of South Korea. The 11 plants equate to a capacity of about 21GW.

South Korean contractors – primarily Doosan and Samsung C&T – are involved in four of the 19 projects.

"I think the Chinese EPC contractors are already at capacity, so SEC has started tapping Egyptian and Spanish EPC contractors," an industry source tells MEED, in reference to Tecnicas Reunidas, Orascom and Elsewedy, which were selected last year to undertake the EPC contracts for several CCGT plants.

The peak for new gas-fired contract awards may have passed, however.

Data from MEED Projects indicates that four cogeneration plants with a combined capacity of about 1.5GW are in the pre-execution stage. Meanwhile, at least two gas-fired IPP schemes – Shoaiba and Al-Shuqaiq – are currently under study, each with a planned capacity of 2.6GW.

However, the possibility of an unexpected new project, like the 3GW expansion of the Qurayyah IPP, which was announced on 20 February, cannot be ruled out. 

Renewables  

A reverse trend could be seen for renewable solar power generation capacity.

As of February 2025, nearly all renewable energy capacity under construction in Saudi Arabia is being developed as IPPs.

About 43% of these IPPs are publicly tendered by the principal buyer, Saudi Power Procurement Company (SPPC). The rest are directly negotiated by Saudi sovereign wealth vehicle the Public Investment Fund (PIF) and the dominant local utility developer, Acwa Power.

The pre-execution pipeline for solar and wind energy projects that will be procured by SEC and gigaproject developer Neom is extensive, especially given that the Energy Ministry has issued a directive that up to 20GW of renewable energy capacity be procured annually until 2030, subject to demand growth.

"It is a massive pipeline," notes a Dubai-based senior transaction adviser.

However, he also notes that a re-scoping process is under way, especially for renewable energy projects that are designed to cater to Neom, the $500bn development in northwestern Saudi Arabia, which aims to be powered 100% by renewables by 2030.

Issues related to land allocation may also arise, if they haven't already, notes another industry expert.

The deployment of additional renewable energy capacity also requires a major battery energy storage system buildout. Efforts towards this got under way last year to ensure the flexibility of the electricity grid. 

"The question is how many batteries they will need and how many batteries will be available to support that ambition," the source said.    

Data centres

In addition to the liquid displacement programme and the 50% renewable energy production target by 2030, Saudi Arabia has been seeing a major uptick in data centre construction projects, in line with a plan to become a major artificial intelligence (AI) hub.

Hyperscalers such as Amazon Web Services, Google and Microsoft plan to expand their digital or cloud infrastructure in Saudi Arabia in line with this strategy. These and other AI players, as well as local firms such as DataVolt, Ezditek, Alfanar and the UAE-based Gulf Data Hub, pledged about $15bn of investments in this type of infrastructure during the Leap technology conference, which took place in Riyadh on 9-12 February. More investments are expected to be announced in the coming months and years.

These projects, assuming they all come to fruition, will significantly increase computing, cooling and overall electricity demand. The need to make these advanced data centres as sustainable as possible will also further incentivise the kingdom's national renewable energy programme.

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Jennifer Aguinaldo

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    > ECONOMY: Conflict bolsters case for Saudi economic diversification
    > BANKING: Saudi lenders readjust to lower lending and deposit climate
    > UPSTREAM: Aramco upstream spending gathers pace
    > DOWNSTREAM: Sabic steps up Saudi petchems investment
    > POWER: Saudi Arabia’s power award activity slows
    > WATER: Saudi water sector hits sharp slowdown
    > CONSTRUCTION: Saudi construction defies the headwinds
    > TRANSPORT: Saudi infrastructure pushes forward amid conflict
    > DATABANK: Saudi data indicates project spending shift

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