Policy framework for the Saudi Arabia smart grid (Challenges: increase in population, residential consumption is the main driver, saving fuels for exporting, subsidized electricity rates)
Why is Smart Grid needed in Saudi Arabia?
Today the Saudi Arabia is a country with a population of 29.38 million people. In terms of energy it is characterized by a diverse scheme. On the one hand, the oil natural resource is widely available providing the country with safety in terms of fuel reserves burnt for power generation. An astonishing increase in population and a rapid expansion of the industrial sector along with the overall growth of the economy are challenging the existing energy infrastructure in terms of electricity. More specifically, there is electricity demand has been rising due to not only the reasons mentioned above but also to the high usage of air conditioning during summer and the quite heavily subsidized electricity prices (EIA,2013, Riyadh, 2013). It should be noted here that the residential sector is the main driver of the electricity consumption.
For the time being, KSA had announced the largest electricity generation plan among the developing countries in the Middle East. The country is planning to increase the capacity from 55 GW to 120 GW by 2020, while further increases are planned for 2032 in order to follow the increase in peak demand (a steady growth of 5% is expected).
Electricity market structure
The biggest company providing electricity is the Saudi Electric Company (SEC). However, there is a second largest generator of electricity called Saline Water Conversion Corporation (SWCC). This is a state-owned company and produces most of KSA desalinated water. There are also some private-owned water plants providing electricity to the grid. In the years coming, another state-owned company called Saudi Aramco will be selling electricity to SEC. With respect to the regulations KSA is aiming to have a more competitive power market and thus promotes a series of regulatory changes. ECRA is issuing new rules that for instance will allow to companies, like Saudi Aramco, to firstly sell electricity to SEC and later directly to the end users. SEC is going to be divided into three national companies responsible for the generation, the transmission, and the distribution, while the generation company will be further divided into four smaller companies that will be able to sell electricity to the transmission company. The rules for using the transmission grid will be set by ECRA (ECRA, 2013, EIA, 2013, ECRA, 2007).
In developing the Smart Grid, beside the subsidized electricity rates and the low energy efficiency other challenges are the lack for incentives, especially for private renewable producers, and the finance by the SEC (Karavias, 2012).
Saudi Arabia has realized that the explosion of the demand will challenge the overall efficiency of the power system, the quality of supply as well as the electricity rates. The...