Electricity tariff deficit. Dynamics of developing renewables in Saudi Arabia

In all power sectors around the world the issue of balancing revenues with costs is one of the key elements for the markets´ efficiency management and success. When an imbalance of these two parameters occur a financial gap will emerge as a tariff deficit and can generate deep revision of the sector regulation together with impacts on the financial performance of energy companies. AF Mercados is advising the Saudi Electricity Company (SEC) to implement within the company the Single Buyer role together with the development of a tool called “Balancing Fund”. The object of this paper is to describe how this tool deal with imbalances between costs and revenues. Then the paper reports the results of some analysis that have been conducted to assess costs and benefits of a potential electricity production by Renewable Source of Energy (RES-E) in the Kingdom of Saudi Arabia. Skimming through the RES-E costs and potentials in the country and the effect on the “Balancing Fund”. The final section discuss the economic benefits of RES-E penetration.