TBY talks to Saleh H. Alawaji, Acting Deputy Minister for Electricity & Chairman of Saudi Electricity Company, on privatization plans and key objectives for the sector.

Saleh H. Alawaji
Saleh H. Alawaji was the Deputy Minister for Electricity from 2003 until 2017. Now, he is Acting Deputy Minister for Electricity and the Chairman of Saudi Electricity Company. He started his career in Saudi Arabian Standard Organization and subsequently moved to R&D in the area of energy. He was previously the Director of the Energy Research Institute in King Abdulaziz City for Science and Technology (KACST). He holds a PhD degree in electrical engineering from Strathclyde University, Glasgow.

What is your outlook for electricity prices?

In the past, due to the government's financial capabilities, subsidies were put in place for the prices of electricity to support consumers. However, due to the decline of oil prices in the last two years, the funding of power projects has become a serious issue again, and tariffs need to be revised and increased to prepare the sector for privatization. The government policy as a part of the Vision 2030 is to gradually remove subsidies to the sectors until 2020. In 2016, there was a reasonable increase in electricity prices, and that was the first review of the tariff during the last 15 years for the residential sector. Moving forward subsidies should only be given to the fraction of the population that truly need them. All these changes seek to improve the use of natural resources, increase power generation efficiency, and adjust the habits of consumers to be less wasteful, as well as make the sector more attractive to investors from the private sector.

You are also the Chairman of the Saudi Electricity Company, and the company seeks to move to privatize by the end of the year. What steps will you take in that direction?

Privatization of the power sector is not a decision of the Saudi Electricity Company; it is the decision of the government as per 2030 vision. Around 20 years ago, the first steps were taken in this direction; however, due to number of obstacles it could not be carried out. The serious intention of the government to privatize many utilities or services has reignited the process. It is now under evaluation; a final decision has not been made yet. However, the government's objectives have been laid out clearly. The first steps would be to sell the existing generation assets to investors. In the past our experiences with the private sector in power generation was good and successful. So far, we already have a significant contribution to power generation coming from the private sector. The ultimate objective for the future is to leave all power generation, either conventional or renewable, to the private sector. However, the final decision about that is not yet clear. The general intention is to proceed seriously, and to have first-phase power generation privatized and to sell up to 70% of generation assets within the next five years.

What are the key priorities for your ministry over the next 12 months?

We are focusing on the objectives of the national transformation program, in addition to our usual business plan. This includes expanding our operation to cover the whole country. We also focus on energy efficiency and improve the use of resources on both the supply and demand sides. We also proceed in localization of industries and services related to the power sector. On top of that, we want to propel the use of renewable energy. Developing the power market and improving connections to our neighboring countries is key as the long-term plan is to export electricity. The goal is to eventually improve electricity trading among the six GCC countries, which have one grid so far. In addition, we aim to link this group with other neighboring countries via a connection with Egypt, which will be in place in three years, and after that we can create a regional active power market. We also aim to eventually reach the European power market, which has a lot of potential. That way we can export our surplus, especially during wintertime in Europe. In addition, we could import from other markets during summer peak time. For renewable energy sources, it would also be encouraging to export energy to that market, because it is a priority of the European market to have a clean energy source. After Egypt, we plan to connect with the Turkish network, which will be our door to the European market, as it is already connected to the European grid.