New Energy market report from Business Monitor International: "Saudi Arabia Power Report Q4 2013"

Boston, MA -- (SBWire) -- 11/18/2013 --Our buoyant outlook for Saudi Arabia's power sector is underpinned by the kingdom's relatively strong macroeconomic trajectory, supportive demographics and ambitious power sector capacity expansion plans. With Saudi holding a fifth of the world's oil reserves, the country is not only attempting to raise its electricity generating capacity in order to meet rapidly growing demand, but it is also attempting to diversify its power generation mix so as to guarantee that oil is prioritised for use in the country's refining sector and, more importantly, for export - guaranteeing lucrative revenues. To this end, ensuring that the kingdom maintains its grip on the world's spare oil production capacity is fundamental to Saudi Arabia's energy policy and has resulted in a greater focus on gas-fired generation, as well as nuclear, renewables and improved energy efficiency.

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Underscoring the need for a transition to a more sustainable energy mix, a reliance on energy-intensive extractive industries and poor levels of energy efficiency, as well as increased reliance on gas- and oil-fired desalination, have spurred Saudi Arabia to begin developing an energy efficiency masterplan (due to be released by end-2013) - with the Kingdom aiming to make energy efficiency savings that are equivalent to bringing 37GW of capacity online. In conjunction with the kingdom's ambitious plans to raise capacity and ensure renewables accounts for a third of electricity generation by 2032, we expect efforts to secure hydrocarbons for export to continue to determine the future composition of the domestic energy mix to the end of our forecast period. Furthermore, we note that if the integration of diversified generation capacity can be achieved, it will enhance the kingdom's ability to absorb economic shocks to its oil-dependent economy and maintain spare capacity over a much longer timeframe.

While are forecasts are more restrained than the Saudi government's targets for the electricity sector, we remain of the opinion that these dynamics will underpin the government's attempts to enhance and enlarge existing power infrastructure, creating upside risks to our outlook for renewables (particularly solar) and nuclear capacity. Key developments this quarter include:

- Saudi Arabia has the largest electricity generation expansion plans in the Middle East. It aims to increase generating capacity from the current level of around 55GW to 120GW by 2020. Furthermore, Saudi Arabia aims to replace 50% of its dependence on traditional fossil fuel with atomic and renewable energy by 2032.
- Supporting such ambitious plans, we note that under its Ninth Five-Year Development Plan (2010-2014), Saudi Arabia pledged to spend a huge US$80bn on new capacity. The country aims to raise capacity by over 20GW over the five-year period - a target that we expect it to meet.

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