Curbing excessive electricity consumption is just one of the challenges facing the Saudi government, which is increasing budgets to generate more power supply, deputy electricity minister Dr Saleh al Awaji tells The Gulf
Who would want to take on the challenge of running Saudi Arabia's electricity sector right now?
The kingdom's energy demands are growing at an estimated eight per cent year-on-year on the back of its burgeoning economy, industrial growth and housing sector boom.
State utility Saudi Electricity Company (SEC) is faced with increasing capacity and servicing its existing transmission and distribution network. And, conscious of public sensitivity to utility rates, it must do so despite being unable to increase consumer electricity tariffs.
Dr Saleh al Awaji, the kingdom's deputy electricity minister, actually holds two jobs; his second is SEC chairman. As deputy minister his responsibilities include introducing new legislation to reduce energy consumption, exploring new technologies for energy production, and overseeing a budget for the energy grid that runs into several hundred billion riyals.
"The power sector in Saudi Arabia faces several challenges," he tells The Gulf.
"One is the high power demand growth rate. We have experienced eight per cent growth in power demand over the last 10 years and we are expecting this percentage to remain unchanged in the coming decade," he explains.
The pressures on the power network are indeed immense. Over the next decade Saudi Arabia will require an estimated 35,000-40,000 megawatts (MW) of additional capacity, the equivalent of adding one power station to the grid every year, at substantial cost.
"We initially expected to spend three hundred billion riyals over the next ten years on power projects. We are now expecting [to increase the electricity budget] based on the government's decision to add half a million housing units for Saudi citizens. We will add one hundred billion riyals to our initial estimates," Dr Al Awaji adds.
The kingdom's annual population growth of two to three per cent places unique stress on the grid, most notably in summer when air conditioners work around the clock as outside temperatures hit 50 degrees Celsius.
The Saudi summer is renowned for power cuts. In 2009 SEC was forced to withhold electricity supplies for three-hour periods to industrial users south of Jeddah. Demand for 24-hour air conditioning, estimated to consume up to 70 per cent of national electricity output, often used to tip the energy supply balance into the red.
"The variation between summer and winter peak loads is significant," says Dr Al Awaji. "During summer peak load the power system is critical and the margin for error is very slim. During the summer [of 2011] we recorded a peak load of 47,000 MW. The winter peak load can be more than 50 per cent lower. Last winter the minimum peak load was 22,000 MW," he notes.
He explains that irrational electricity use is a constant challenge, due partly to low tariffs but also due to a lack of legislation related to selling inefficient electrical devices in Saudi Arabia.
"Our market is open and everybody can import electrical devices without considering efficiency. There are a lot of inefficient air conditioning units in the market and we need to work with relevant government and non-government parties to control equipment imports based on efficiency ratings," he says.
In 2010, the electricity and water ministry launched a public awareness campaign called 'Tarsheed'. While the campaign achieved its aims in terms of media coverage, Dr Al Awaji is determined to push through legislation in partnership with electrical products manufacturers.
"With a [media] campaign you have the possibility to educate people but will the message reach everybody?" he asks.
"People may not always fully understand the message. The most effective action is to put in place the right legislation and the right tools to properly enforce legislation. If the public have the choice to buy cheaper but less efficient electricity units, especially air conditioning, they will opt for low-cost devices regardless of the long-term cost in terms of energy consumed."
Tariff hikes are another option for utilities to promote energy conservation. On 1 July last year, SEC raised electricity prices from 0.125 riyals (about three US cents) per kilowatt hour to 0.137 riyals. The Electricity and Co-generation Regulatory Authority governor told the media at the time that the new price was still less than the cost of producing electricity. The tariff hike, which was expected to increase SEC's annual revenues by over three billion riyals, only applied to the government, commercial and industrial sectors. For the residential sector, electricity pricing is a different matter.
"Low rates encourage people to use electricity irrationally," says the deputy minister. "The tariff is an effective tool to encourage people to use electricity more rationally. But people cannot live without air conditioning and electricity is the only energy source for air conditioning. People here have no choice but to use large amounts of electricity and not everyone can afford higher tariffs."
Dr Al Awaji suggests there should be ways to make tariffs more effective in encouraging more rational consumption, referring to a government decision to enforce thermal insulation in buildings, which could result in savings of up to 50 per cent on air conditioning electricity consumption.
The deputy minister is passionate about using new technologies to curb energy wastage, particularly in greenfield government sites such as princess Noura bint Abulrahman University in the Riyadh region, which has implemented building management systems aimed at reducing consumption. Saudi Arabia's national energy conversation plan, developed in partnership with Japan and which will oversee legislation and implementation of new technologies, is a breakthrough for energy innovation, claims Dr Al Awaji.
It is not just consumers that are being asked to change their energy use patterns. The Saudi government recently made headlines for its decision to investigate the potential of nuclear power, and has also run a number of renewable energy pilot programmes. Dr Al Awaji insists the diversification of its energy mix makes sense.
"The government has started to seriously work towards the right energy mix based on the reality that unless we diversify from fossil fuels, future energy demands will require us to burn huge amounts of oil and gas for electricity production and water desalination," he says. Nuclear and renewable energy are, he adds, the most promising energy sources, regardless of what has happened to the nuclear industry during the last year. He also thinks renewable energies are very promising: "We are blessed with tremendous resources, especially with regards to solar energy. I think solar and nuclear energy are two of the most promising options for Saudi Arabia in the long run."
The kingdom is also, along with its Gulf Co-operation Council (GCC) neighbours, planning to export electricity. In 2009 the GCC Interconnection Grid was established, which has already linked the utility networks of five GCC states, with Oman set to join soon. It is hoped that this regional grid will one day be linked to the Egyptian network, thereby connecting a major part of the Arab world's electricity through one grid.
"The Interconnection Grid has provided huge benefits to those states connected," says the deputy minister. "To date more than 300 cases of energy exchange have taken place and it has been vital in several emergency cases where there has been an urgent demand for power," he observes. Longer term, the GCC harbours ambitions to export electricity further afield, including to Europe.
"We face the challenge of winter and summer load variations and to improve our efficiency and Saudi Arabia's electricity system we need to promote a regional market for exchanging electricity with the global market," he says. The kingdom, he points out, has excess capacity in winter which is not utilised. This seasonal variation has pushed the kingdom's power sector and the government to seriously consider a regional power market. "Europe is the most interesting energy market to us as when we have surplus capacity in winter the demand in Europe is at its peak," he explains.
With tendering for the Egypt-Saudi Interconnector set to begin in the coming year, the vision of selling electricity to Europe will certainly move closer to becoming a reality. Dr Al Awaji says the final phase of preparing tender documents is under way, and agreements on the methodology of operating the link are being worked on between the governments and utilities.
"We hope by the end of this year all of the requirements will be completed and by next year the project will be ready for bidders," he says.
He says the Saudi authorities are currently carrying out a feasibility study with the World Bank, and the parties now need to identify the technical and financial requirements to have this grid or connection in place.
Dr Al Awaji says much depends on the political and economic ties between the GCC and Europe.
"More important than that is Europe's willingness to be linked to the GCC. I think the intention is there. I would say within the next 10 years we are dreaming of having this kind of link in place," he concludes.
© The Gulf 2011
