Saudi needs US$140bn investment in power sector

Saudi Arabia's power generation and T&D infrastructure need investment, says the ECRA.

Saudi Arabia, the GCC’s largest economy, needs to invest US$140 billion into its power generation and transmission and distribution (T&D) infrastructure over the next decade, the Kingdom’s Electricity and Co-Generation Regulatory Authority (ECRA) said on Sunday.

About two-thirds of that amount needs to be invested in power generation, while the rest is needed to upgrade the T&D infrastructure, ECRA writes in its annual report, posted on its website.

Demand for power grew last year in the kingdom by more than 8 percent and is expected to grow to more than 60,000 megawatt by 2020.

The Gulf state, which is struggling to supply uninterrupted electricity amid a population boom and industrial expansion, expects the Saudi Electricity Co. (SEC) to invest $80 billion over the next 10 years to add 20,000 megawatts of power generation capacity.

In spite of the huge amount of funding necessary to meet power requirements, experts do not foresee any difficulties in raising the capital.

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The county has a good track record of securing funding through a mix of loans and private participation, as it successfully made use of public private partnerships, says Abhay Bhargava, industry manager at consultancy Frost & Sullivan.

“Banks are evidently looking at booking newer assets, and given government backing on most projects, power is a relatively safe option for them. Independent participants like Suez and ACWA are also involved, reducing the reliance on SEC alone.”

Bhargava also stresses the importance of expanding the T&D network, given the efforts of the Kingdom to connect its grid with the rest of the GCC, and its neighbour Egypt. “Investment in T&D infrastructure in Saudi Arabia is an absolute must, for both upgradation and greenfield purposes. Given the interconnectivity taking place, the planned investment needs to ensure that future interconnectivity needs are taken care of, and that distributed sources of generation can be incorporated with ease.”

Saudi Arabia is connected to the GCC Interconnection Grid, which will by 2011 link the entire GCC, enabling participating counties to shift power between them, so decreasing the risk of power outages. The grid also opens the door to a regional power market.

In addition, Saudi Arabia and Egypt are planning to connect their grids, looking to mitigate the effects of peak load times by shifting electricity between the two countries, so taking advantage of different consumption peaks hours. The tender for the $1.5 billion project is to be launched in January 2011, according to Reuters.
 

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