Energy, Utilities & Mining Focus
Aurangzeb MaqsoodSenior Associate,Banking & Finance
The Kingdom of Saudi Arabia (KSA), in pursuit of achieving the 2030 Saudi Vision, has set for itself a target of generating 9.5 gigawatts of renewable energy. KSA also is the largest country in the world without running surface water with great dependence on water desalination projects. Both the energy and water sectors are thriving industry sectors in KSA, with robust growth and tremendous investment opportunities.This note explores a high-level regulatory framework of the water and energy sector in KSA, with a specific focus on the key players and relevant laws.
The Ministry of Energy ("MOE") is the ministry that supervises the energy industry in KSA; it monitors the allocation of local energy resources, electricity affairs, regulation of petroleum and gas, and sustainability and climate change.
Key Players Under the umbrella of the MOE, some of the other key players in the sector include:
Saudi Electricity Company (SEC): responsible for all generation, transmission and distribution of electric power in KSA through more than forty-five power generation plants.
Saline Water Conversion Corporation (SWCC): a government entity responsible for the operations of desalination plants and power stations in KSA and the second largest electricity provider in KSA.
Saudi Power Procurement Company (SPPC): initially a subsidiary of SEC, but now government-owned and licensed to be the single buyer of electricity and capacity from generators in KSA.
Water and Electricity Regulatory Authority (WERA), previously known as Electricity and Cogeneration Regulatory Authority (ECRA): established pursuant to Council of Ministers Resolution No. (236) dated 27/8/1422 AH to regulate the electricity and water desalination sector in KSA.
National Grid SA: a subsidiary wholly owned by SEC, established in 2012, responsible for the planning, designing, development, operations and maintenance of the transmission network in KSA.
Saudi Water Partnership Company (SWPC): a government-owned entity that performs the duties of an off-taker to facilitate private sector participation in independent water and power projects.
Saudi Aramco: a majority government-owned company that manages KSA’s oil and gas production and is the primary supplier of feedstock for the country’s power generation.
Key LegislationsThe key legislations that govern the energy framework in KSA include:
The Electricity Law: issued by virtue of the Saudi Arabia Royal Decree No.M56/1426 (Saudi Arabia Cabinet Decision No. M254/1426). As per the Electricity Law, the MOE, through WERA, is responsible for overseeing the performance of the electricity industry, which includes the services provided for the production, cogeneration, transfer, distribution and trading of electricity. Under the said law, an electrical activity may only be performed by a licensed entity.
The Implementing Regulations to the Electricity Law: issued by virtue of the Saudi Arabia Cabinet Decision No.M254/1426 by WERA, the regulations provide detailed rules relating to the Electricity Law, licensing procedures and other incidental matters. Most notably, these regulations distinguish between the different types of licensed activities and the differences between generation, distribution and transmission systems.
The Grid Code: approved by the WERA Board of Directors by Resolution No. (03/16/28) dated 01/06/1428 AH, the Grid Code is a technical regulatory document that defines the technical requirements necessary for the use of the transmission system, including, inter alia, the metering code and the scheduling and dispatch code.
Energy Market Overview and TrendsWith a specific focus on the Saudi Green Initiative and the ambitious restructuring of the energy mix under the 2030 Saudi Vision, KSA plans to upgrade its entire power generation, distribution and transmission sector by adding clean energy to the mix and phasing out all power stations using petroleum or diesel. KSA also plans to upgrade the transmission and distribution infrastructure with smart grid technology and international grid connectivity. The relevant ministries in KSA aim to keep rolling out new initiatives with the hopes of privatizing all energy generation by 2025 to relieve pressure from the SEC and encourage private sector investment through public-private partnerships.
With a specific focus on the development of solar and wind energy, KSA plans to develop over 30 solar and wind projects in the span of nine years. The Saudi Press Agency has reported that five new projects have been launched by the SPPC as part of the fourth stage of the National Renewable Energy Program ("NREP"). With such initiatives and several more in the pipeline, it would be apt to say that the industry is and will continue to experience robust growth in the immediate future.
The Ministry of Environment, Water and Agriculture (MEWA) is the ministry responsible for the regulation and implementation of KSA’s policies for the environmental, water and agricultural sectors. MEWA has developed KSA’s Saudi National Water Strategy 2030, which aims to achieve a sustainable water sector ensuring continuous access to adequate quantities of safe water and delivery of high-quality waste-water services.
Key PlayersSome of the key players in the water sector include:
MEWA: the ministry was established in 2016 to abolish the Ministry of Water and Electricity, whose duties include monitoring water and agricultural resources. MEWA is also responsible for producing water from groundwater wells, managing water distribution and treatment of sewage in all regions, except for the areas managed by the National Water Company.
Water and Electricity Regulatory Authority (WERA): established pursuant to Council of Ministers Resolution No. (236) dated 27/8/1422H to regulate the electricity and water desalination sector in KSA. Its duties include the production, trade and transportation of desalinated water, monitoring licensees, coordination of infrastructure, assessing tariffs, and devising regulations for expanding the water infrastructure.
National Water Company (NWC): a joint stock company fully owned by Public Investment Fund to provide waste-water treatment services.
Water Transmission and Technologies Company (WTTCO): established by MEWA and responsible for operating and maintaining transmission, dispatch, distribution and storage systems and transmission of desalinated water.
Saudi Water Partnership Company (SWPC): fully owned by the Ministry of Finance and established to purchase water and electricity from private sector projects and sell water to SWCC.
Saline Water Conversion Corporation (SWCC): the second largest electricity provider in KSA and responsible for the operations of desalination plants and power stations.
Key LegislationsThe key legislations that make up the water laws and regulations in KSA include:
Law of Saline Water Conversion Corporation: issued via Royal Decree 24/01/1974 establishing the SWCC and its role in saline water conversion in KSA. The law aims to provide the necessary regulation of water resources and related activities.
Organizational Arrangement of Water Plants/Factories: issued via Cabinet Decision 14/03/2011, which defines the tasks of MEWA and their responsibilities.
Water Law: issued via Cabinet Decision 02/07/2020, which provides for the regulation of water resources.
Regulating the Water and Electricity Regulatory Authority: issued via Cabinet Decision 29/12/2020 relating to the approval of regulating WERA’s responsibilities and mandates.
Water Market Overview and TrendsAt the MENA Desalination Projects Forum held in March 2022, SWPC announced that KSA will develop approximately 60 more water projects worth SAR 35 billion making KSA the world’s largest desalination market and tripling the country’s desalination capacity by 2027. There has already been an investment of USD 5.5 billion in water projects in KSA, and the country has adopted public-private partnerships as a strategy to encourage investments. The country aims to meet its goals through a careful mix of privatization, technological advancements, infrastructure construction, and regulatory reforms in the future.
For further information, please contact Aurangzeb Maqsood or Rafiq Jaffer.
Published in November 2022
References:
Project Structure for Renewable Energy Projects (Lexis Nexis, 8 April 2022)
Shahid Hasan, Turki Al-Aqeel and Nawaz Peerbocus Saudi Arabia’s Unfolding Power Sector Reform
Saudi Arabia launches five projects to produce electricity using renewable energy (Al Arabiya English, September 2022)
Saudi Arabia - Country Commercial Guide (International Trade Administration, US Department of Commerce, July 2022)
Ministry of Environment, Water and Agriculture website.
National Water Strategy 2030 (Ministry of Environment, Water and Agriculture, 2018)
Saudi Water Partnership Company website.
Water Management in KSA (Fanack Water, June 2021)
Saudi Arabia announces 60 water projects worth US$9.33 billion (Smart Water Magazine, March 2022)
Water in Saudi Arabia: Desalination, waste-water and privatization (US-Saudi Business Council, 2021)
