Ziyad Al Shiha, President and CEO, Saudi Electricity Company (SEC): Interview

Interview: Ziyad Al Shiha

How will the gradual phase-out of electricity subsidies affect electricity consumption patterns?

ZIYAD AL SHIHA: For a long time electricity tariffs in Saudi Arabia have been subsidised by the government. SEC is working with policymakers and the Electricity and Cogeneration Regulatory Authority (ECRA) on the gradual phase-out of these subsidies. We strongly believe that cost-reflective tariffs will contribute to greater awareness of the true value of electricity and encourage energy efficiency. In addition, it will generate long-lasting benefits for the Kingdom’s economy. We are already working with ECRA to educate our customers on how to save electricity. At the end of 2017 the Council of Ministers approved an increase of electricity tariffs starting from January 1, 2018.

What efficiency targets are set out by Vision 2030 in terms of fuel utilisation?

AL SHIHA: Vision 2030 aims to raise the efficiency of fuel utilisation for power generation purposes from 33% to 40% by 2020. SEC is already taking steps with the existing power generation fleet to increase efficiency. We are proud to have already achieved the target of 40% in 2017, well in advance of our 2020 target. Our generation team is constantly exploring new ways to further increase efficiency. We have insisted in the adoption of the latest technology by independent power producers and will continue to do so in regard to new power plants being established.

To what extent can renewable and nuclear energies replace fuel sources in the short to medium term?

AL SHIHA: By late 2017 Saudi Arabia had developed a plan to generate electricity using renewable sources, including the implementation of small-scale solar power systems starting in July 2018. We have already started receiving applications for system installation by eligible consumers, and have registered the interest of vendors and contractors for photovoltaic systems. Nevertheless, we’re aware that fully replacing fuel sources with renewable energies in the short and medium term is unrealistic. We are working with policymakers on the energy landscape of the Kingdom, and we’ll be progressively adding renewables into the mix. Nuclear generation is also under evaluation.

How will the regulatory and policy framework move power generation assets to the private sector?

AL SHIHA: Currently, in line with Vision 2030 focus on the private sector, the privatisation of the generation assets is under evaluation by policymakers. It is important to stress that any electricity tariff changes are not related to possible privatisation plans. This is because, under the current system, the principal buyer of electricity from power plants will compensate the power plants as per the power purchase agreements. If there is a difference between the amount collected from customers through the tariffs, and the cost for generating electricity, the government will cover the difference through a specific balancing fund.

To what extent can Saudi Arabia capitalise on linking its electricity grid with neighbouring countries?

AL SHIHA: SEC is seeking to exploit several opportunities to connect its network to neighbouring countries, on top of the already existing interconnection with Gulf countries. We are working to establish an interconnection with Egypt, in addition to commissioning a number of feasibility studies for interconnections with Jordan and Turkey. The establishment of interconnections with international partners allows for the trading of cheaper surplus generation from one system to another with higher generation costs; the two systems require less overall capacity since they can now rely on each other’s electricity supply. These opportunities will enhance efficiency in the capital expenditure for our company, and open new sources of revenue through power trading with other countries.