Saudi Arabia
With a cumulative score of 1.47, Saudi Arabia ranks number 54 among emerging markets and number 83 in the global ranking.
- Emerging markets
- Middle East & Africa
1.76 / 5
Power score
0.80 / 5
Transport score
Buildings score
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Low-carbon strategy
Net-zero goal and strategy
Saudi Arabia pledged to reach net-zero emissions by 2060 in October 2021. However, this target has yet to be written into law, and is not backed by a clear roadmap to achieve the required emission cuts. Plans for tackling hard-to-abate sectors are fuzzy beyond planting trees and relying on carbon capture.
Nationally Determined Contributions (NDC)
Saudi Arabia combined its announcement of a net-zero target with an updated NDC. Where the previous document lacked a baseline against which to measure emission reductions, the new plan provides a quantifiable objective.
Fossil fuel phase-out policy
Saudi Arabia has been active in opposing pledges to phase out fossil fuel subsidies during international climate talks. Fossil fuel producers have access to both subsidized natural gas and oil. This will remain the case over the coming years - 2025 is set as the date for many of these subsidies to be removed, but whether they will affect fuel used by the power sector (and not be delayed) remains to be seen.
Power
Power policy
Saudi Arabia upped its renewables targets in early 2019 – the kingdom is now targeting 58.7GW of renewables capacity by 2030. The target is broken down into technology-specific chunks, the largest of which is 40GW of PV. It is unlikely that the government will meet an interim target of 27.3GW of renewables by 2023 – the objective no longer features in official announcements. The country’s renewables sector has had a few false starts, but recent activity signals progress. As of October 2020, some 3.4GW of solar and wind capacity had been auctioned through the country’s main auction program, REPDO. The national sovereign wealth fund is also playing a central role in procuring clean capacity, albeit through a framework that is somewhat opaque than REPDO. For its part, small-scale solar is likely to be buoyed by the publication of a new net-metering framework in July 2020, and additional measures to train installers and facilitate installations announced in February 2021.
Power policies
Power prices and costs
As with other countries in the region, Saudi Arabia has seen record low bids over recent years. These include a $21.30/MWh levelized bid in January 2019 for Dumat al-Jandal, the country’s first auctioned wind farm. Meanwhile, falling equipment costs, free land, zero connection costs and cheap labor have made PV the most competitive source of new bulk generation. Saudi Arabia is moreover committing to an ambitious subsidy-removal program, stripping away measures keeping down the price of natural gas and oil. Although it looks like subsidies for generation fuel will remain in place for now, retail power prices are being increased for all customer types. Such efforts are aligned with Saudi Vision 2030, which aims to diversify the economy away from oil while increasing the role of the private sector.
Power market
Gas generation plays an important role in the country’s east, while western regions rely on burning oil for power. Plans exist to convert western oil plants to gas, although progress in this area is lagging. Renewables additions have increased substantially in recent years from a low base – capacity awarded through Rounds 2 and 3 of the REPDO auction program suggest that this will continue. However, investors may be deterred by a lack of visibility on future procurement schemes. The country’s partially unbundled power sector remains dominated by the state utility, and private-to-private power purchase agreements are not yet explicitly allowed. Contracts signed with renewables developers are take-or-pay, guaranteeing that power be purchased regardless of demand.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Peak electricity demand has grown steadily, rising from 46GW to 61GW over 2010-20. Growth is likely to resume despite the economic impact of the pandemic. Besides the conversion of western oil plants to gas, policymakers are mulling the relative benefits of using domestic gas resources versus liquefied natural gas, terminals for which have yet to be built. In the long run, world-beating renewables resources are likely to undercut such investments. Moreover, the amount of power used by desalination processes is likely to reduce as the country switches from existing thermal plants to installations employing reverse osmosis.
Currency of PPAs
Are PPAs signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Transport
EV market
The government had in fact banned EVs from being imported into Saudi Arabia for commercial use (personal use was allowed) in 2017; this was only lifted in August 2021. However, the government is one of the only oil producers in the region to implement corporate average fuel economy standards, although these are not ambitious enough to stimulate EV uptake. Low fuel prices hurt the competitiveness of EVs against fossil fuel cars, but these are being gradually raised in line with the government’s reform program.
EV policy
The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
A Saudi Energy Efficiency Program was kicked off in 2012, and oversees the implementation of standards and other measures. Saudi Arabia already introduced stronger efficiency requirements for new builds in 2010. Initiatives to decarbonize the building sector include the High Efficiency Air Conditioning initiative, which provides a 900 riyal ($240) rebate for up to six high-efficiency unit purchases per household.
Energy performance standards
Are there minimum energy performance standards for buildings?
Energy efficiency plan
Does the country have a national energy efficiency plan?
Buildings policy
The government has yet to implement any substantive policy support in this sector and the low-carbon heating market remains at an early stage.
