Riyadh must meet power needs first

Riyadh knows it needs to reform its state-centric power sector, if its growing power needs are to be met at a reasonable cost.

The kingdom’s electricity restructuring plan is meant to lead to a fully liberalised, competitive market by 2015.

The steps to achieving this goal include breaking up the Saudi Electricity Company (SEC), currently responsible for the majority of the country’s generation, transmission and distribution, into four generation companies.

Alongside this, an independent transmission company and principal buyer will be set up, and producers and consumers will also be able to enter into bilateral agreements to buy and sell power. But it will be difficult to achieve all this as planned.

SEC is currently focusing on the challenge of installing 35,000MW of new-generation capacity over the next nine years, leaving little time to think about implementing the reforms.

Adding to the difficulties, Saudi Arabia also lacks sufficient reserves of spare capacity.

The fact that there is demand for all of the current output makes for a tight market, effectively wiping out the possibility of competition between power producers, even if new ones are set up.

As a result, the restructuring plans look more like an academic exercise than an achievable reality for now.

Only once SEC gets to grips with the kingdom’s power needs will the kingdom’s power sector be able to move a step closer to liberalisation.