Saudi Arabia Power EPC Market - Growth, Trends, and Forecasts (2020 - 2025)

The Saudi Arabia power EPC market is witnessing significant growth with CAGR greater than 7.5% over the period of 2020-2025. Factors such as huge investment and government policies are likely to drive the Saudi Arabia power EPC market during the forecast period. Moreover, to meet the electricity demand, the Kingdom is estimated to increase its power generation capacity from 77 GW in 2014 to 156 GW by 2040. It includes installing 5 GW capacity and distribution infrastructure every year through 2020. For achieving the goal, the government is planning to invest USD 5 billion in electricity generation and USD 4 billion in distribution. However, geopolitical tensions and the high fiscal deficit with a high inflation rate are expected to negatively impact the Saudi Arabian power EPC market in the short term.

• Renewable energy is expected to dominate the Saudi Arabia Power EPC Market.
• The government of Saudi Arabia is encouraging private companies and foreign investment to lower down its fiscal deficits. If the government takes steps to liberalize the power industry, domestic as well as international private investors can provide the country necessary investments and take the burden of the government-owned power companies. This, in turn, privatization of the power industry is likely to offer better opportunities to the Saudi Arabia power EPC market in the coming future.
• Rapid rise in domestic demand led to increased electricity generation targets, which is likely to drive the Saudi Arabia power EPC market during the forecast period.

Key Market Trends

The Renewable Energy is Expected to Dominate Market

• Saudi Arabia maintains 16% of the world’s proven oil reserves. However, it is also the 12th largest consumer of generated electricity. Electricity demand in the Kingdom of Saudi Arabia (KSA) has been increasing, with an average peak demand growth rate of 7% - 9% over the past decade.
• To meet these demands, the country Under the National Renewable Energy Program (NREP), targets to achieve 9.5 GW of renewable energy by 2023, with an interim target of 3.45 GW by 2020 end.
• According to the Minister of Energy, Industry and Mineral Resources, the renewable energy program in Saudi Arabia is estimated to cost USD 30 to 50 billion by 2023. The Ministry of Energy has announced that the first NREP request for qualification (RFQ), with the first project, was awarded to ACWA in Feb 2018.
• In 2019, Saudi Energy Minister kicked off the massive renewable program in Riyadh by announcing the beginning of the 300 MW solar power project, which is expected to connected to the country grid in 2020. Similarly, the kingdom plans to launch second bidding round for 400 MW of wind power at a project in Domat al-Jandal in Al-Jouf Province in 2018, which will be followed by 620 MW of solar energy.
• Furthermore, the renewable program is expected to witness the development of 30 solar and wind projects by 2023 to boost its electricity generation and reduce crude oil burning.
• Hence, investments and policies for new projects for renewable energy are expected to be the biggest and the most dominating driver for the Saudi Arabia power EPC market during the forecast period.

Rapid Rise in Domestic Demand Likely to Drive the Market

• Energy demand in Saudi Arabia is growing by 8-10% per year, and peak demand is expected to be 70 GW by 2020 and 120 GW by 2032, driven partly by desalination increase. The power sector in Saudi Arabia is on the trajectory of growth with electricity generation registering an annual growth rate of approximately 6% between 2001 and 2018.
• The demand for electricity is currently growing at around 7% annually. Natural gas and renewable sources are expected to play a significant role in meeting the increasing demand for power in the kingdom.
• The growing population drives the market, high need for air conditioning during summer, expanding industrial sector led by development in the petrochemical sector.
• Air conditioning and cooling account for around 70% of electricity consumption. Approximately 60% of the household water consumption is provided from desalinated seawater. Desalination consumes about 20% of the total energy consumption of Saudi. The use of desalinated water is increasing at approximately 14% per year.
• Population growth rate of the kingdom was 2.25% above the global average in 2018 and is expected to be around 2% in the forecast period. As a result, the demand for air conditioning and cooling and desalination is expected to increase and hence electricity demand.
• Hence, as demand is rising, the country needs more power plants, which is likely to increase in the EPC services in the power sector. This, in turn, Saudi Arabia's power EPC market, is likely to propel during the forecast period.

Competitive Landscape

The Saudi Arabia power EPC market is moderately fragmented due to many companies operating in the industry. The key players in this market include Doosan Heavy Industries Construction Co Ltd, Power Construction Corporation of Chn Ltd, National Contracting Company Limited, Larsen & Toubro Limited, Electrical & Power Contracting Co. Ltd., I and others.

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