Similar to the situation faced by the natural gas sector, the combination of Saudi Arabia's rapidly expanding population and industrial base, paired with artificially low power tariffs, has increased the demand on electric utilities (averaging 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 estimates that the country will require up at least 30 Gigawatts (GW) of additional power generating capacity by 2023-25 -- doubling the current installed capacity of 29.1 GW -- at a cost of an estimated $90-100 billion. In addition, Saudi Arabia's state-owned Saline Water Conversion Corp. (SWCC) has estimated that through 2020, the country will need to spend $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, originally to be natural gas and/or combined cycle, 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. Approximately 65 percent of power plants are gas-fed, while 27 percent are steam and 8 percent are oil-powered. 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.

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). 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 Saudi Electricity Company (SEC). In March 2004, Saudi Arabia announced a plan to launch ten IWPPs by 2016, at a total cost of $16 billion. The SEC has already approved four such mega-projects, worth more than $8 billion. The combined production capacity of the four projects will produce more than 7000 MW 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 2008 and 2010. The four projects are:

Other proposed IWPPs include a light crude-fired 2,400-MW, 150-MMg/d facility (Yanbu-2), first announced in November 2006. Reportedly a second phase IWPP, with up to 2,000-MW and 22 MMg/d of capacity is reportedly being planned by Marafiq in the same region. Also proposed are a 2,400-MW and 150-MMg/d facility at Rabigh(2), and 60-MW, 23-MMg/d Shuqaiq(3) 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. In 2006, an estimated 2500 MW of new generation capacity was tendered via IPPs. The upgrades/construction include Al-Qurayyah-I (850 MW, Phase II - 1900 MW) and the Faras facilities (509 MW); Riyadh Power Plant 8 (PP8, 500 MW, increased to 1000 MW); and the crude-powered al-Jauf (60 MW, online in 2008). Also in the first half of 2006 contracts were awarded to upgrade the 250-MW Tihama facility and to construct a 300-MW facility at Jizan (as well as upgrade existing facility by 60 MW), all of which will come online in 2008, except for Jizan, which will be commissioned in November 2009. A $960-million, 1200-MW (to 3000-MW total) expansion of PP9 in Riyadh expansion is expected to be partially productive in June 2007, and fully online by August 2008. Several larger scale IPPs are still in the planning phases, include 1,725-MW expansions at Muzahimiyah, 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 nation grid. Tihama Power Generation Group, one of the largest independent power producers (IPP) in the country, and 60/40 joint venture comprising the UK-based International Power, and SaudiOger (an affiliate of Aramco), recently completed expansion at four natural gas-fired facilities at Aramco facilities on a BOOT basis. Aramco has installed 1063 MW capacity at a total cost of $612 million, including 305-MW facilities at Uthmaniyah, Shedgum and Ju'aymah NGL plants, and a 148-MW facility at the RasTanura refinery. The power conversion projects came online between March 2006, and September 2006. As part of the Khursaniya and Shaybah mega-project, two cogeneration units with a combined capacity of 300 MW were installed. Finally, an estimated $1-billion expansion of the Rabigh (I) complex will involve the installation of 16, 16-MW oil-fired units to increase total capacity to nearly 1,000 MW. Rabigh will supply 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 has no 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 lines on top of the existing 150,000 miles of lines. As of September 2006, Power Engineering International listed 65 separate transmission projects planned or in execution in Saudi Arabia.

Saudi Arabia is also taking steps to interconnect their power grids with other Arab countries to benefit from differences in peak demand. In September 2006, the Saudi Electricity Company and the Egyptian Electricity Holding Company signed anMoU commissioning a $2.6-million feasibility study of the proposed linkup of the two largest power generators in the Middle East. The project is part of planned interconnection of the power grids throughout the region. The grids of the six Gulf Cooperation Council (GCC) countries are scheduled to be integrated by 2010. Saudi Arabia will take part in a linkup with Kuwait, Bahrain and Qatar by 2008. The US$1.2-billion first phase will include a marine linkup to Kuwait and overhead transmission infrastructure to Bahrain.

In July 2006, the U.S.-based International Power Group (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 Dec ember 2008. 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.