Boston, MA -- (SBWIRE) -- 04/30/2014 -- Saudi Arabia's power sector is set to register significant growth over our ten-year forecast period to 2023 as the kingdom moves to realise some of the Middle East's most ambitious power generation capacity expansion plans. Our optimistic outlook is not only underpinned by the sheer scale of Saudi Arabia's ambitions for its power sector, but also relatively robust macroeconomic fundamentals and the fact the country is attempting to meet surging demand for electricity from a young and rapidly growing population. Further, with Saudi Arabia holding one-fifth of global oil reserves, it is also endeavouring to alter its oil-heavy power generation mix to preserve its outsized role in global oil markets. This aim is perhaps the biggest driver of Saudi energy policy and underpins efforts to diversify the energy mix to utilise greater volumes of gas, as well as nuclear, renewables and the implementation of energy efficiency measures.

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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 emerging energy efficiency masterplan - 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 one-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 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.

As the country looks to preserve oil for lucrative export, we see the fuel progressively losing its primacy in the kingdom's power generation mix, with oil-fired generation set to decrease from a forecast 50.3% in 2014, to 42.6% in 2023. Conversely, gas-fired generation will continue to rise, reaching 230.35 terawatt hours (TWh) (or 52.7% of total generation) in 2023. This is, however, subject to the country's ability to source economical domestic gas.

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.

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