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Study Finds ‘Unprecedented Change’ in Demand for Electricity in Saudi Arabia

Saudi Arabia’s electricity demand is stagnating for the first time in decades. (Asharq Al-Awsat)
Saudi Arabia’s electricity demand is stagnating for the first time in decades. (Asharq Al-Awsat)
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Study Finds ‘Unprecedented Change’ in Demand for Electricity in Saudi Arabia

Saudi Arabia’s electricity demand is stagnating for the first time in decades. (Asharq Al-Awsat)
Saudi Arabia’s electricity demand is stagnating for the first time in decades. (Asharq Al-Awsat)

Electricity demand in Saudi Arabia is undergoing unprecedented changes following the implementation of efficiency measures and energy price reforms, according to a study by the King Abdullah Petroleum Studies and Research Center (KAPSARC).

The Kingdom’s electricity demand is stagnating for the first time in decades, suggesting that consumer behavior has structurally shifted, raising uncertainties about the potential trajectory of long-term electricity demand.

KAPSARC projected the growth in total Saudi electricity demand to significantly decelerate over the coming decade compared with historical trends, to reach 365.4 terawatthours (TWh) by 2030.

The study predicted demand to grow more rapidly in the industrial and services segments than in the residential sector, accounting for the largest share of total consumption in 2030.

“We also simulate four additional scenarios for domestic electricity price reforms and efficiency policies,” said the study.

Aligning Saudi electricity prices with the average electricity price among G20 countries can reduce total electricity demand by 71.6 TWh in 2030, which could enforce efficiency policies that can reduce total electricity demand by up to 118.7 TWh.

“Moreover, alternative policy scenarios suggest that the macroeconomic gains from energy savings can alleviate some of the Saudi energy system’s burden on public finance,” said the study.

Projecting future demand for electricity is central to power sector planning, as these projections inform capacity investment requirements and related infrastructure expansions, it continued.

“Electricity is not currently economically storable in large volumes. Thus, the underlying drivers of electricity demand and potential market shifts must be carefully considered to minimize power system costs,” it explained.

Demand for electricity in Saudi Arabia has multiplied since the development of the electricity sector in the early 1970s, driven by a rapidly increasing population, dynamic economic growth, and low regulated energy prices.

In 2018, total Saudi electricity demand reached 299.2 TWh.

The Kingdom is the 14-largest electricity consumer globally. Its consumption is similar to that of more populated countries like Mexico and to more advanced economies like Italy, whose 2019 GDP was $2,151.4 billion, compared to $704.0 billion for Saudi Arabia, according to The World Bank.

In recent years, the Saudi government has addressed the rapidly increasing fuel consumption of its power sector by expanding efficient gas plants. This step has reduced the country’s reliance on oil and refined products for power generation. Moreover, Saudi policymakers have also enacted some demand-side measures.

In 2010, the Kingdom began promoting several efficiency initiatives to rationalize energy consumption by establishing the Saudi Energy Efficiency Center (SEEC 2018). Additionally, the Saudi government implemented the first round of national energy price reforms (EPR) in 2016, with the second round in 2018.

The scale of these recently implemented EPR and efficiency measures are unprecedented in Saudi Arabia. Thus, these policies’ potential effects on future demand cannot be assessed based on past experiences.

The study emphasized the importance of enhancing the methodological aspects of energy demand projections.

“Using advanced analytical tools to capture market transformations, behavioral adjustments, and interdependencies across economic agents, we can better project electricity demand pathways,” it stressed.

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Business

Türkiye, Syria Step Up Banking Ties as Lenders Eye Expansion

Türkiye’s Ziraat Bank tower is seen in Sarajevo, Bosnia and Herzegovina, May 16, 2018. (Reuters)
Türkiye’s Ziraat Bank tower is seen in Sarajevo, Bosnia and Herzegovina, May 16, 2018. (Reuters)
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Türkiye, Syria Step Up Banking Ties as Lenders Eye Expansion

Türkiye’s Ziraat Bank tower is seen in Sarajevo, Bosnia and Herzegovina, May 16, 2018. (Reuters)
Türkiye’s Ziraat Bank tower is seen in Sarajevo, Bosnia and Herzegovina, May 16, 2018. (Reuters)

Türkiye and Syria are accelerating cooperation between their central banks, Trade Minister Omer Bolat said on Tuesday, adding that Syria’s central bank governor will meet Turkish banking ‌regulators.

Speaking at ‌a business ‌forum, ⁠Bolat said closer ⁠banking ties and the entry of Turkish lenders into Syria could help boost trade and industrial ⁠investment.

State lender Ziraat ‌Bank ‌and private lender Aktifbank ‌are both working to ‌establish a presence in Syria, company officials said separately, with applications submitted ‌and operations expected to begin in the near ⁠term.

Business ⁠leaders at the forum said restoring banking services and resolving customs and logistics issues would be key to increasing bilateral trade.

Business

Türkiye Not Facing Energy Security Problem Amid War but Situation ‘Volatile’

Travelers cross from Iran into Türkiye at the Kapikoy border crossing in eastern Van province, Türkiye, Saturday, April 4, 2026. (AP)
Travelers cross from Iran into Türkiye at the Kapikoy border crossing in eastern Van province, Türkiye, Saturday, April 4, 2026. (AP)
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Türkiye Not Facing Energy Security Problem Amid War but Situation ‘Volatile’

Travelers cross from Iran into Türkiye at the Kapikoy border crossing in eastern Van province, Türkiye, Saturday, April 4, 2026. (AP)
Travelers cross from Iran into Türkiye at the Kapikoy border crossing in eastern Van province, Türkiye, Saturday, April 4, 2026. (AP)

Türkiye is not ‌facing any problems regarding energy supply security due to the Iran war, but the situation is "volatile", Energy Minister Alparslan Bayraktar was quoted as saying by Turkish media on Tuesday.

"We hope the war will not last any longer. But the process is currently under our control," Bayraktar told reporters on Monday evening after a cabinet meeting, broadcaster Haberturk reported.

"There is no problem or difficulty in energy ‌supply security."

Türkiye ‌is a big energy importer which ‌neighbors ⁠Iran and is among ⁠the most exposed emerging market economies to the global energy price jump.

Bayraktar said in late March that Türkiye’s dependence on Middle East oil was at a "manageable" 10% of total supplies and that the country had taken protective diversification steps.

At the ⁠time he said every $1 increase in ‌oil prices adds about $400 million ‌to Türkiye’s energy bill, while there had not been ‌any natural gas supply cuts so far from ‌Iran, Türkiye’s fourth largest supplier last year.

On Monday, Bayraktar told reporters that he had spoken with the Hungarian foreign minister and discussed the issue of protecting the security ‌of the TurkStream pipeline, which carries Russian natural gas to southern Europe through ⁠the ⁠Black Sea and Türkiye.

Explosives were found near the TurkStream pipeline in Serbia at the weekend, prompting Hungarian Prime Minister Viktor Orban to convene an emergency defense council.

Russia and Türkiye formally launched the TurkStream pipeline, which has a capacity of 31.5 billion cubic meters per year, in January 2020. The pipeline allows Moscow to bypass Ukraine as a transit route to Europe.

"The security of the pipeline in the Black Sea and on our side is important," Bayraktar said.

Business

SME Financing Moves to the Core of Saudi Arabia’s Non-Oil Economy

A night view of Riyadh, Saudi Arabia (SPA file)
A night view of Riyadh, Saudi Arabia (SPA file)
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SME Financing Moves to the Core of Saudi Arabia’s Non-Oil Economy

A night view of Riyadh, Saudi Arabia (SPA file)
A night view of Riyadh, Saudi Arabia (SPA file)

In a sign of a deep shift in the structure of financing within Saudi Arabia’s economy, and reflecting the goals of Vision 2030 to diversify the production base, credit facilities extended to micro, small and medium-sized enterprises reached a record high at the end of 2025.

Banks and finance companies injected around SAR 467.7 billion ($124.5 billion) into the sector last year, marking a 33 percent annual increase. The surge highlights the transition of these enterprises from the margins of economic activity to the center, positioning them as a key driver of non-oil growth and job creation.

On a yearly basis, total facilities rose 33 percent from about SAR 351.7 billion ($93.6 billion) in 2024, according to monthly bulletin data from the Saudi Central Bank (SAMA).

The banking sector accounted for the largest share, with facilities provided by banks reaching approximately SAR 446.6 billion, up 34 percent year on year. Finance companies contributed around SAR 21.1 billion, an annual increase of 15.4 percent.

By enterprise size, growth rates varied. Lending to medium-sized firms rose 18 percent year on year to SAR 220.9 billion. Small enterprises recorded stronger growth of 34 percent, reaching SAR 163.5 billion. Micro-enterprises saw the sharpest increase, with facilities surging 97 percent to SAR 83.3 billion, underscoring a notable expansion in financing to this segment.

Structural shift

The strong growth has been driven by several factors, most notably the clear strategic direction under Vision 2030, which places SMEs at the heart of economic diversification, along with the expanding role of institutions supporting the sector.

Among these is Monsha’at, which has helped improve the business environment and connect enterprises with funding sources, according to economist Hussein Al-Attas.

“This level of facilities is not just a record figure. It reflects a structural shift in the philosophy of financing within the Saudi economy,” Al-Attas told Asharq Al-Awsat.

He identified four main drivers behind the growth: a clear economic vision, a stronger regulatory environment, the expansion of credit guarantee programs, and a shift in how banks view the SME sector.

The Kafalah program has been particularly important, helping reduce lending risks and enabling banks to increase exposure to SMEs. This has coincided with improvements in financial data quality and governance practices, which have strengthened lenders’ confidence in the sector.

Sustainable growth

Al-Attas said the current trend reflects not a temporary expansion in credit but a redefinition of the role of SMEs in the economy, with growth expected to continue over the medium term.

However, he pointed to several challenges that could affect the pace of expansion. These include limited managerial expertise in some firms, the risk of defaults if financing is poorly managed, concentration of lending in specific sectors, and the potential impact of future interest rate increases.

Authorities are aware of these risks. This is reflected in a growing focus on improving governance, strengthening management efficiency, and linking financing more closely to actual operating performance to ensure funds are directed toward sustainable and productive activities.

The importance of this expansion extends beyond the headline figures. It supports a higher contribution of SMEs to non-oil GDP and plays a central role in job creation, given the sector’s labor-intensive nature.

According to Al-Attas, the growth also strengthens economic diversification by supporting the entry of new firms into promising sectors such as technology, industry, and services. It also increases local value added and reduces reliance on imports and large corporations.

Looking ahead, he expects financing growth to continue at a healthy pace over the next three to five years. This outlook is supported by the expansion of digital financing solutions, continued integration between government and banking sectors, and improving market maturity and enterprise quality. Large-scale projects and non-oil expansion are also expected to create new financing opportunities, gradually shifting the focus from the volume of funding to the quality of its economic impact.

Digital transformation

Mohammed Al-Farraj, senior head of asset management at Arbah Capital, said the development reflects alignment between ambitious government policies aimed at raising SMEs’ contribution to GDP to 35 percent and a responsive banking sector that has led the growth and captured the largest share of financing.

He noted that guarantee and incentive programs, as well as the SME Bank, have played a key role in reducing credit risks and boosting banks’ willingness to lend.

Digital transformation and the rise of fintech companies have also marked a turning point by improving access to financing and lowering operating costs. This has created a more flexible and attractive environment for business growth beyond traditional constraints.

Despite these positive indicators, Al-Farraj cautioned that rapid expansion requires strategic vigilance, particularly regarding credit risks and potential defaults amid interest rate volatility and increased competition in sectors such as retail.

He continued that the next phase will require a shift from quantitative growth, focused on expanding financing volumes, to qualitative growth that emphasizes credit quality, project sustainability, and resilience to economic changes.

Alternative financing tools such as venture capital are expected to play a growing role. These tools can ease pressure on bank balance sheets while directing funding toward strategic sectors including technology, tourism, and industry to ensure meaningful value creation in the national economy.

Developments seen in 2026 suggest early returns from this expansion. These include the emergence of a new generation of high-growth firms, increased SME contribution to non-oil exports, and greater use of instruments such as sukuk tailored for SMEs as a cost-effective long-term financing option.

Al-Faraj said SMEs are no longer a peripheral segment but a central driver of innovation and growth in Saudi Arabia’s economy. Sustaining this momentum will require continued regulatory development and more flexible repayment mechanisms to ensure durable growth aligned with long-term economic development goals.