Mohamed H. Zakaria, published Sunday 4 December 2005 (03 Dhul Qa`dah 1426)

Power Position

Saudi officials have stated often the need to increase the country’s power-generation capacity to 50,000MW or even 80,000MW from its present level of 30,000MW. This, according to them, needs an investment of SR200 billion. Instead of increasing production, the government should rationalize consumption, by reducing subsidies and increasing tariffs. Saudi Arabia’s rapidly growing population and artificially low power prices — as a result of government-mandated low tariffs and consumer subsidies — are increasing demand on electric utilities, as power demand grows by 4.5 percent or more each year. The Industry and Electricity Ministry estimates that the country will require up to 20 gigawatts of additional power-generating capacity by 2019 — nearly the same amount as today’s 26.6 gigawatts —- at a cost of more than $30 billion. Most of this money is slated to come from the private sector, possibly including foreign investors.

Meanwhile, new industrial projects have been delayed and brownouts have occurred due to inadequate power supply, especially during the summer. Taking this into account, the Saudi Electric Company announced plans last year for building seven new electric power stations with total capacity of 14.5 gigawatts, and ten new power-transmission projects. Reportedly, current power projects being implemented are worth $45 billion.

The four SCECO companies were operating at a loss until the last count because they are required to sell power below cost to domestic consumers, as well as due to inefficiency and difficulties with nonpayment of bills. The power tariff to industries is the cheapest in the world.

This is the area where changes are needed, not in production.