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Market structure in Saudi ArabiaERRA Tariff / Pricing Committee meeting 19 October 2016, Bratislava, Slovakia
Engr. Zaid Rajeh Al-Zaid
Economic & Tariff Affairs, ECRA
2
Outline
Introduction
2015 Facts
Current Market Structure
Main Players
Challenges
Overview: Proposed development path
3
Outline
Introduction
2015 Facts
Current Market Structure
Main Players
Challenges
Overview: Proposed development path
4
Introduction
Starts as 100% private ownership and operation as Small commercial companies
Started as department of Electricity Services. Then, Electricity Corporation
Late 70`S consolidated into four major power co (SCECO), the government involved as
major shareholder .
Mid 2000 All operating entities merged in one company, Saudi Electricity Company (SEC).
2002, ECRA assigned to be the Regulator
1930to
1972
Private
1972to
2000
Government Agencies
2000to
Present
Sector Restructuring
5
Introduction
+ 286 GwhEnergy Sales
2015 Facts
+ 8 MNumber of Customers
+ 80 MWInstalled Capacity
+ 68 Transmission Networks (km Circular)
62 MWPeak Load
+ 535Distribution Networks (km Circular)
Oil57%
Gas43%
Fuel used
2015 Facts
6
Outline
Introduction
2015 Facts
Current Market Structure
Main Players
Challenges
Overview: Proposed development path
7
Current Market Structure
Saudi Electricity Company (SEC) owns:
About 70% of generation,
Transmission
Distribution
SEC is the Largest electric entity in the region in terms of capacity and
market capital (Total assets over 95 billion US$), 74% directly owned by
the Government.
Private sector participation under long-term (20 year) PPAs, procured
through competitive tender.
Saudi Aramco is the only fuel provider in the market.
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Current Market Structure
SEC
Dis
trib
uti
on
TO
Large
Consumers
ConsumersOthers
PB SO
Ge
ne
rati
on
IPPs/IWPPS
Regulator
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Main
Players
Current Market Structure Main Players
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Current Market Structure
The Impact of Subsidies Today
The very low fuel price distorts the incentive for generators to
produce efficiently.
The very low consumer prices result in high levels of consumption.
The Impact of High Growth rate
The high capital outlay.
Reduce the project period affecting choice of technology.
Need to operate in commercial basis
Cost-based Tariff and Tariff structures
Challenges
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Outline
Introduction
2015 Facts
Current Market Structure
Main Players
Challenges
Overview: Proposed development path
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Desired Final Market Structure
Bilateral contracting
Transmission
Large
Consumers
Consumers
Retail
Retail
Retail
Retail
Regulator
Gen
Gen
Gen
Gen
Gen
Market
Operator
System
Operator
CEM
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Overview: Proposed development path
Multiple retailers, large customers in wholesale market
Gradual removal of transition features SO operates capacity
market No new PB PPAs PB reduced with
generation and retail separated
Default retailer supplies non-contestable customers
Initial “shadow” spot market
Then full spot market for energy and ancillary services
Bilateral contracting between generators and large customers
Fuel price reforms Generators procure
own fuel Tariff reforms for
large customers SEC restructuring; PB
and TSO Government financing
mechanism Competitive
generation investment
1 Unbundling
2 New fuel arrangements
3 Wholesale energy market
4 Capacity market
5 Ongoing CEM
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Stage 1:Unbundling
SEC’s restructuring plans progressing
Establish business unit for PB
Establish subsidiary companies for 4 SEC Gencos, Distribution and
TSO
Ring-fencing regulation for the PB inside SEC
Government explicit financing mechanism for the PB
Competitive tenders for new generation investment
Components
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Stage 1:Unbundling
Establish the structural foundations for subsequent steps, addressing
conflicts of interest
More transparency of costs within the sector
Establish Government financing mechanism
Introduce competitive pressures to generation investment
Purpose
16
Thank you
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