Similar to the situation in the natural gas sector, the combination of Saudi Arabia's rapidly expanding population and industrial base (representing 60 percent of demand), paired with artificially low power tariffs, has increased the demand on electric utilities (averaging 5 to 7 percent annual growth). At times, the increased load has lead to shortages, blackouts and power rations in various parts of the country. Saudi Arabia's Water and Electricity Ministry (WEC) estimates that the country will require at least 35 Gigawatts (GW) of additional power generating capacity by 2023-25 – more than double the 2005 estimate of installed capacity of 30.5 GW - at a cost of an estimated $120 billion. (According to the Saudi Electricity Company (SEC), capacity reached 35.9 MW in 2007). In addition, Saudi Arabia's state-owned Saline Water Conversion Corp. (SWCC) has estimated that through 2020, the country will need to spend at least $50 billion on water projects, many integrated with new power generation capacity, in order to meet the Kingdom's equally rapidly growing water demand. Most of this money is slated to come from the private sector, including foreign investors.

Feedstock for planned power capacity increases was originally expected to be natural gas and/or combined cycle. However, many new facilities may be crude-oil fired due to constraints on domestic natural gas supplies. A royal decree issued in the spring of 2006, requires that all future coastal power plants utilize crude feedstock at a set price of $0.46 per million BTU. According to a June 2008 report by Facts Global Energy, some 200,000 to 250,000 bbl/d of crude is being burned directly for power generation. All of Saudi Arabia’s electric power generation is thermal.

According to the 2007 SEC annual report, Saudi Arabia added more than 2.3 GW last year, including expansions at the Shuaibah Power Plant and nearly 900 MW of gas fired turbines in Riyadh (9), Tehama and Jizan. Some of the newest and largest facilities include the $1.7-billion, 2400-MW Ghazlan II plant north of Dammam, the first power project to be debt-financed; its sister plant, the1600-MW Ghazlan I; and the 2500-MW Qurayya I and II.

Saudi Arabia’s power sector, including generation, transmission and distribution, has traditionally been dominated by the partly state-owned Saudi Electricity Company. However, In July 2002, the Supreme Economic Council passed a resolution setting out a framework for private sector involvement in developing mega-scale integrated Independent Water and Power Projects (IWPPs), and since that time the sector has become increasingly liberalized. Saudi Arabia aims to attract private sector investment for up to 60 percent equity in IWPP projects, with the remainder split between Public Investment Fund (PIF) and the SEC. In March 2004, Saudi Arabia announced their plan to launch ten IWPPs by 2016, at a total cost of around $16 billion (although this is said to be increasing). The SEC has already approved six such mega-projects. The majority of the facilities will be in the Western parts of the country, drawing from the Red Sea.

The combined production capacity of the original four projects, which are under construction or in the bidding phase, will produce more than 7000 MW (at final capacity) of power and 600 million gallons of water daily. They will boost the total desalination capacity of the kingdom by 80 per cent when the come online between 2009 and 2010. Also proposed is a 60-MW, 23-MMg/d Shuqaiq (III) extension.

Throughout the kingdom, independent power projects (IPPs), which are not integrated with desalinization facilities, are also being tendered by the SEC, primarily to local contractors. According to the SEC, about 8000 MW of new capacity is currently under construction, 5200 MW of which are IPPs. The SEC is calling for ten percent of power generation to come from IPPs in the next decade. Three SEC-led IPPs are currently being planned include Rabigh (1200 MW, online 2012 or 2013), Riyadh-P11 (2000 MW, 2013 or 2014) and Al-Qurayyah (2000 MW, 2014 or 2015). The facilities will be built on a Build-Own-Operate (BOO) basis, and the SEC will be a partner.

In addition, several large-scale electricity IPPs are still in the planning phases, including 1,725-MW expansions at Muzahimiyah, and Shubuk, and Riyadh-PP10.

Separately, Saudi Aramco is building a series of co-generation plants at oil and gas installations throughout the country in order to reduce drain of the energy sector on the national grid. For example, as part of the Khursaniya and Shaybah mega-projects, two cogeneration units with a combined capacity of 300 MW were installed. Also, a 380-MW plant is being constructed at Rabigh that will power the adjacent Sumitomo/Aramco petrochemical complex.

Besides generation, Saudi Arabia also requires additional investment in power transmission. At present, around 10 percent of the Kingdom’s population lacks access to the national power grid. Aramco estimates that creating a unified national grid may require laying more than 20,000 miles of additional power transmission and distribution lines on top of the existing 150,000 miles of lines.

Saudi Arabia is also taking steps to interconnect their power grids with other Arab countries to benefit from differences in peak demand. The grids of the six Gulf Cooperation Council (GCC) countries are scheduled to be fully integrated by 2010. Saudi Arabia will take part in a linkup with Kuwait, Bahrain and Qatar by 2009. The US$1.2-billion first phase will include an overhead linkup to Kuwait and marine transmission infrastructure to Bahrain.

In July 2006, the U.S.-based International Power Group, Ltd. (IPWG) was granted a three-year renewable license to conduct a feasibility study for a waste-to-energy (WTE) facility in the southwestern city of Jizan. Following the study, a US$300-million plant was commissioned, and is expected to come online in December 2008, although formal plans have not been publicized. According to IPWG, the WTE modules combust up to 180 tons of solid and hazardous waste, while generating 6 MW of electricity and up to 250,000 gallons of distilled water per day.