The largest electricity market in the GCC, Saudi Arabia is experiencing an unprecedented growth in its demand for power as a result of sustained economic and population growth. Reflecting high GDP growth and a predominantly urban society, power consumption in the kingdom has increased at a compound annual growth rate of 6 per cent over the last five years and 8 per cent at peak loads. Industry estimates place the power demand at 77,000MW by 2020 and 120,000MW by 2030, up from the current 53,000MW.
Such high growth in demand is putting pressure on the kingdom’s energy sector, as the exclusive sources of electricity generation at the moment are natural gas and liquid fuels in a proportion of 49 per cent and 51 per cent respectively. As a result, the kingdom consumes slightly over a quarter of its energy resources for domestic purposes, primarily for power generation and desalination. A September 2012 Citigroup report projected that, if the demand for power continues to grow at an annual rate of 8 per cent, the country could become a net importer of energy by 2030.
But such a bleak scenario will not take place as the administration of King Abdullah has set in place a multi-pronged strategy to diversify the country’s energy mix in order to free up Saudi Arabia’s energy resources for exports and to promote more sustainable energy sources internally.
While fossil fuels will continue to account for half of the power supply, renewable sources of energy, particularly solar and wind, will be the pillars of this diversification drive.
Renewable energy’s bright future
At a time when renewable energy is suffering at the hand of the global economic crisis, with total investments in clean energy projects globally falling by 11 per cent in 2012 down to $268.7 billion, Saudi Arabia is dedicating no less than $100 billion to developing its own renewable energy capacity.
According to an ambitious government plan, by 2032, the kingdom will generate a total of 54GW from renewable sources. Of this, 25GW will be in concentrated solar power and 16GW in photovoltaic power. Another 9GW is to be derived from wind, geothermal and waste-to-energy (WTE) projects. The remaining 4GW of the total will come from hybrid projects that will be developed in later stages.
In February 2013 the entity commissioned by the government to supervise the diversification of the country’s energy mix, the King Abdullah City for Renewable and Atomic Energy (K•A•CARE), released a much-anticipated white paper titled “Proposed Competitive Procurement Process for the Renewable Energy Programme” outlining the roadmap for the delivery of the first phase, the goal of which is to produce 23,900MW from renewable energy sources by 2020.
The competitive procurement process (CPP) begins this year with an introductory bidding round targeting 500-800MW of contracted capacity, followed by a second round in 2014 which will tender 2,000-3,000MW of capacity and a third round to create an additional 3,000-4,000MW. The eligible technologies for these rounds are solar thermal, solar photovoltaic, wind, geothermal and waste-to-energy.
|K•A•CARE has identified solar thermal, solar photovoltaic, wind, geothermal and waste to energy as likely renewable sources for the kingdom|
In addition to this long-term strategy, which will unravel over the next two decades, the kingdom is poised to cope with the increased demand for power in the medium term thanks to a comprehensive plan to overhaul its power sector, modernise its existing power plants and increase the use of gas as feedstock.
Connecting the dots
Supporting the development of the large-scale infrastructure projects of Saudi Arabia, the cables manufacturing industry is poised to experience sustained growth in the coming years. The youngest of the eight cable manufacturing companies in Saudi Arabia, Bahra Cables
, is also the most dynamic company in the sector. It was founded in Bahra on the outskirts of the Red Sea port city of Jeddah in 2008 as a subsidiary of the Construction Products Holding Company (CPC), one of the largest construction holdings in the country, and as a joint venture between CPC and Electric House.
Bahra Cables is the supplier of choice for a variety of sectors and businesses in Saudi Arabia, including energy, electric utilities, petrochemicals, marine transportation, real estate, shipbuilding, telecommunications and automotive industries, among others.
Between December 2012 and April 2013, the firm signed two contracts totalling $136 million to provide cables for the Saudi Electricity Company’s projects. Furthermore, Bahra Cables recently announced the inauguration of its new plant for PVC conduits, fittings and couplings with a production capacity of 18,000 tons per year. The new plant supplements production at the first such facility Bahra Cables operates and for which the Saudi Arabian Basic Industries Corporation (SABIC), one of the largest industrial conglomerates in the world, provides the raw material.
When discussing these developments, Bahra Cables’ CEO Talal Idriss says that it all boils down to an efficient management style: “This is a business that we know very well. We just started the cables manufacturing business five years ago, but we have been in the power sector for many years through Electric House. In 2008, we identified a gap in the market and we established Bahra Cables. So we were born out of an economic crisis and as a result have optimised the management of our operations to stay competitive.”
Looking ahead, Mr Idriss foresees a buoyant cable manufacturing sector, which will be driven by the demand from large-scale infrastructure and residential projects in the kingdom.
Consequently, the company is contemplating various plans to expand its activities both horizontally, by incorporating new business lines, and vertically, by integrating its operations. Transformers, further PVC development projects and busbar projects are all options that are being considered at the moment.
In addition to its operations in Saudi Arabia, Bahra Cables exports its products to neighbouring countries in the Gulf Cooperation Council (GCC) region and to Senegal, South Africa, Nigeria, Angola, Libya and Iraq. The company’s exports started in 2010, when it won the contract to supply cables for the airport in Dakar, Senegal, and have escalated in recent years.
According to Mr Idriss: “The production capacity for cables in the country exceeds the demand, so all companies are looking to export as the way forward. And having access to competitively priced electricity and labour, and good access to funding through the Saudi Industrial Development Fund (SIDF), Saudi companies have all the prerequisites to be competitive in the global economy.
“In time, Saudi products have gained a reputation as good quality products, in part thanks to the institutions like SIDF, which ensure compliance with international standards.”