The Business Year

HE Dr. Abdullah Al-Shehri

SAUDI ARABIA - Energy & Mining

On Steam

Governor, Electricity & Cogeneration Regulatory Authority

Bio

Abdullah Al-Shehri is the Governor of the Electricity & Cogeneration Regulatory Authority (ECRA) and an ex-member of the Shura Council. He is a professor of Electrical Engineering and ex-Dean of Graduate Studies and Scientific Research at King Fahd University of Petroleum & Minerals (KFUPM). He received his PhD from Oregon State University in Power Systems.

What challenges do you face in implementing a strong regulatory framework? Our mission is to make sure electricity and potable water supplies are adequate, of high quality, and at reasonable […]

What challenges do you face in implementing a strong regulatory framework?

Our mission is to make sure electricity and potable water supplies are adequate, of high quality, and at reasonable prices for consumers. We are trying to balance these requirements. The major challenge, of course, is the high growth rate of demand for both electricity and desalinated water. Over the past five years, the average growth rate in electricity peak demand has been about 8%. The average growth rate of energy sales was around 4%. Of course, the gap here is widening. Peak demand reflects the required amount of investment, while the sale of energy represents the revenue of the electricity sector. We have to make sure the gap is filled, one way or another. The other challenge is to raise efficiency. The rate of consumption per capita is high. Even if we correlate energy consumption with GDP, it remains high, and is increasing. We conducted a study a few years ago to identify various areas where efficiency could be achieved effectively. Our data indicated that 50% of our consumption went to households. Meanwhile, 80% of electricity goes to buildings, whether households, commercial, or government premises. Furthermore, 70% of that 80% is accounted for by air conditioning. In that respect, almost 56% of electricity is going to air-conditioning in buildings. The study showed that any efficiency programs to be implemented should target buildings first. A royal decree in 2012 mandated the insulation of all buildings. The Saudi Energy Efficiency Center was also established to monitor efficiency programs across various sectors, and not only in terms of electricity, but also buildings, industry, transportation, and so on. A decision was also made not to allow any air-conditioning units to enter the country unless they met a certain standard. The decision was implemented in October 2013. We expect these two mandates to reduce consumption in buildings, if implemented correctly, by about 50%, which is substantial. We are also considering energy efficiency from the supply side. Many existing power plants are of the open-cycle type and have low efficiency ratios of about 30%. We are requesting all power plants today to have a combined-cycle, which means higher efficiency in the range of 50%. The power plants located on the coast have been requested to provide a provision for future expansion to also produce water. This could raise efficiency to 80%. The other measures we are taking involve developing a restructuring plan for the Saudi Electricity Company (SEC), currently a vertically integrated monopoly. From service providing to the supply side, it is planned to separate its major activities into generation, transmission, distribution, and services providing in the future to enhance competition in supply and service-providing activities. Generation owned by SEC represents a dominant position in the generation industry and will be broken into four companies, again to promulgate competition. This step will ultimately encourage investment. The private sector is keen to invest, but needs clear rules and regulations and a level playing field.

What will be the role of private sector companies in electricity and desalination?

The private sector’s role is going to be essential, and we would like to see more participation in that respect. Currently, the private sector is participating in generation. There are several power plants owned by the private sector producing more than 10,000 MW, and we would like to see more coming online. We expect more activity on the transmission side, where transmission lines could be built by the private sector. We would also like to see more competition in the distribution sector. Companies will probably be established in various regions to provide such services, which is a low-risk venture. And once the distribution companies are established, we expect to separate distribution from service provision.

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