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Saudi Arabia's Smart Grid Road Map: Market size to increase twofold by 2019 [free access]

December 9, 2016

Saudi Arabia’s electricity market is estimated to be the largest in the Arab world with the installed capacity estimated at 78,558 MW in 2015. Electricity demand is growing at an average growth rate of up to 7 per cent, prompted by a growing population and expanding industrial sector. With the growing rate of industrialisation and increasing renewable energy penetration, Saudi Arabia is witnessing grid challenges that can best be tackled by smart grid technologies. Such challenges relate to the impressive consumption and peak demand growth, the consequent need for additional power capacity (beyond 70 GW by 2032), and the need to reduce network losses (now equal to 10 per cent) and improve quality of supply. To overcome these, it has become necessary to utilise generated power efficiently by reducing transmission and distribution (T&D) losses. Thus, smart grid projects have a crucial role to play in the implementation of advanced technologies and innovations for sustainable and cost-efficient energy consumption in the kingdom.


Several stakeholders within Saudi Arabia’s electricity sector have already begun trials of smart meters and smart grid solutions in the country. Some of the needed smart grid solutions that have been identified in Saudi Arabia include system monitoring, outage management, substation automation, synchrophasor technology, wide area network (WAN) management and distribution automation.


The Saudi Electric Company (SEC), the country’s largest integrated electricity company, initiated the adoption of smart meters in 2010 in an attempt to minimise T&D losses. It deployed around 50,000 smart meters across the country under a smart pilot project. The installed devices enabled the utility to map power demand and supply requirements, and read the digital meters by using wireless technologies such as general packet radio service (GPRS), 3G, Wi-Fi and radio frequency (RF).  Further in 2013, a memorandum of understanding (MoU) for the development of smart grids in Saudi Arabia and in the Gulf Cooperation Countries (GCC) was signed between Advanced Electronics Company (AEC), Greece-based ICT Europe and Italy’s power company Enel.


SEC plans to accelerate its investments in the smart grid, including a significant smart meter roll out across the country. As a result, it is estimated that Saudi Arabia’s market for electric smart meters will grow at a compound annual growth rate (CAGR) of around 10.12 per cent in value terms during 2014-19. Smart meter sales in Saudi Arabia are expected to see a twofold increase by the end of 2019.


Smart grid strategy

In June 2013, Saudi Arabia’s energy regulator, Electricity & Co-generation Regulatory Authority, published a report on Smart Metering and Smart Grids Strategy for the country. As per the report, the cost at net present value (NPV) for smart grid solutions for the T&D network over a period of 15 years is estimated at SAR6.8 billion (based on specific assumptions related to peak demand, consumption, number of customers, energy mix, performances and size of T&D network, etc.) On the other hand, deploying smart grids offers major benefits for the T&D network. These include reduced operating costs due to remote and automated operations; and improved quality of service, driven by reduction of technical losses along with considerable reduction in the duration of the outages.  In Saudi Arabia, the NPV of total benefits that can be derived from smart grids over a period of 15 years is estimated at SAR9 billion.


With respect to smart meters, the total cost at NPV for implementing smart meter solutions over a 15 years period is estimated to be SAR7.6 billion, whereas the total benefit at NPV is SAR9.2 billion for the same period.


Smart grid technologies will enable the country to achieve its renewable energy target, improve network reliability and enable energy efficiency, among other benefits. The Smart Grid strategy aims to achieve the following objectives:


Renewable Energy: At present, Saudi Arabia’s energy mix is exclusively based on oil and natural gas. The Saudi government has sought to reduce its dependence on fossil fuels, not out of a need to address climate change, but so that it can export more fossil fuels. In 2012, the King Abdullah City for Atomic and Renewable Energy (KACARE) released Saudi Arabia’s National Energy Plan, which noted that the Kingdom would meet its 54 GW goal by developing 16 GW of solar photovoltaic, 25 GW of solar thermal and 9 GW of new wind power by 2032. This is expected to increase the share of renewable generation in the energy mix to 30 per cent. In order to facilitate the planned integration of renewable sources into the national grid, SEC is seeking the support of smart grid technologies to ensure the quality of operations, efficiency and smooth transition.


Network: The Saudi government has set several goals for the wider energy sector that will likely act as key drivers for investment in the country’s electricity infrastructure and services. One of the important goals for the government is to increase reliability and efficiency of electricity transmission and distribution. To achieve significant energy efficiency gains among residential, commercial, industrial and government consumers, it is seeking to roll out numerous smart grid projects across the country.


Customers: Smart grid solutions are also used to achieve energy efficiency targets and to provide additional services to customers by ensuring effective demand side management. 


Further, according to the International Monetary Fund (IMF), fossil fuel revenues account for 55 per cent of the Saudi government budget. The continuing decline in oil exports has pushed the government to reduce its subsidies for the power sector. These recent developments in the Saudi electricity market have caused a substantial rise in power tariffs. Thus, in order to implement the new tariff system in the private consumer sector, SEC sees smart meters as a necessary tool for its customers.


Smart grid roll out

A strong implementation plan by the Saudi government is substantially driving the market for electric smart meters in the country. With several pilot projects completed in Riyadh, SEC is now looking to roll out smart meters to the rest of the country. It is likely to invest over SAR12 billion to implement smart grid projects to increase renewable energy integration and provide a means to meet the growing electricity demand.


The planned investment is part of the country’s plan to reduce demand growth, which has presently reached 62 GW and is expected to cross 120 GW by 2030 due to the increasing population growth and economic development. In view of the continuously rising number of metering points, the utility aims to install around 12 million smart meters across the country by 2025.


The installation of smart meters is expected to be completed in four phases. Under the first phase (uptill 2013), SEC focused on the industrial and construction segment and in the second phase (uptill 2015) it targeted the commercial and government sectors.  The utility now plans to focus on the residential sector in the two subsequent phases, to be completed by 2021.


In March 2015, SEC selected Newtec, a Europe-based developer of satellite communication equipment, to provide connectivity to remote substations in the Kingdom’s energy distribution network through its two-way satellite. The company plans to use Newtec’s very small aperture terminal (VSAT) platform to provide automatic meter reading (AMR), supervisory control and data acquisition (SCADA), as well as voice and video satellite connectivity between remote substations to enable new applications.


In the same month, SEC awarded a EUR3.4 million contract to CG, part of Indian business conglomerate the Avantha Group Company, for the supply of three phase smart meters.  Earlier, in the fourth quarter of 2015, Slovenia-based smart metering company Iskraemeco, d.d began the supply of 55,000 smart meters to SEC. This has allowed the company to improve power supply by providing better energy conservation and management, improve meter reading accuracy, report tampering and theft, and provide accurate consumption data to consumers. It also facilitates the identification of real-time energy consumption patterns for all the users in the network.


 In July 2016, SEC invited public bids from prequalified companies or their consortia for the installation of over 2.5 million smart power reading meters all over the kingdom on a design-build basis. The scope of the contract entails deployment of meters, telecommunications infrastructure, testing equipment and head end system, detailed engineering design, architecture, integration and training, along with the operation and maintenance of the smart grid for the kingdom’s meter-reading infrastructure. The project is in line with the key socio-economic attributes of Saudi Vision 2030.


Summing up

Accelerated economic and infrastructure growth calls for a stable and reliable energy supply and its proper management. In line, the plan for large-scale smart metering implementation, supporting SEC’s goal of attaining enhanced energy efficiency, has already been set in motion. A timely and well-managed deployment of smart grid technologies will also enable SEC to reduce network operational costs due to improved meter reading and management.  


Figure 1: Objectives of Saudi Arabia’s smart grids and smart meters strategysmart_grid_848

Source: Electricity & Co-generation Regulatory Authority