Saudi Arabia Regulation for Small-Scale Solar

Saudi Arabia has launched a long-awaited regulatory framework for addressing small-scale solar distribution systems connected to the utility grid. The new framework is an evolution from the previously issued white paper (published in 2017), and is now set to provide a clear path to growing the Kingdom’s solar commercial and industrial (C&I) sector.

With the regulatory announcement comes the formal introduction of Net Billing: a mechanism where the exported electricity is credited at a fixed and pre-determined tariff rate (typically lower than imported electricity price). The 2017 white paper alternatively proposed a net-metering scheme, where the exported electricity is de-facto compensated by crediting the electricity at the same tariff rate of the imported electricity.

Additionally, a cap has been introduced to each solar system’s capacity per facility ranging from 1 kW to 2 MW, with a clearly defined country-wide maximum cap that can be calculated today as 1.8 GW on a national level.

The current framework was issued by the Electricity & Cogeneration Regulatory Authority (ECRA) on February 28, 2020 through Um Al-Qura, the official gazette of the Kingdom of Saudi Arabia.

The framework defines the regulatory background and tasks the relevant distributed service provider (Saudi Electricity Company, or SEC) to set the processes and procedures for the proper implementation and management of the initiative. ECRA will remain as the designated authority for dispute resolution, fee and price determination among other responsibilities under the initiative.

The regulation is issued with immediate effect, however some time is needed for the announcement of an implementation roadmap by SEC before formally rolling out any solar systems in the Kingdom relevant to the framework.


Below are the major takeaways from framework ERD-TA-012:

Solar System Capacities & Sizes

The scope of the regulation refers to the small-scale solar systems connected to the utility grid with an installed capacity between 1 kW to 2 MW in each facility. Maximum solar system size is capped by the contracted Total Connected Load (TCL) per consumer.

ECRA also introduced a maximum aggregated capacity of 5 MW per offtaker in each distribution region. There are 6 designated distribution regions in Saudi Arabia: Southern region, Eastern region, Northeastern region, North Western region, Western region and Central region.

ECRA explicitly removed off-grid systems and solar systems with an installed capacity above 2 MW from the initiative’s scope, adding however, that further regulation is expected for large solar systems ( > 2MW).

Net-Billing Scheme

Any exported electricity will be credited to the offtaker’s monthly electricity bill at a predetermined price per kWh. The regulatory body has set a rate of 7 halalas/kWh (0.07 SAR/KWh  or 1.87 cUSD/kWh) for any surplus electricity exported to the utility grid by residential offtakers. The rate for all non-residential offtakers (commercial, industrial, agriculture, governmental, etc.) is not defined, and will be announced by the authority at a later stage.

The framework additionally enables surplus credit to be rolled-over into subsequent months, with no mention of a timeframe limit.

The Kingdom’s net-billing program is aligned with international practices for similar frameworks across the globe, in markets like Italy, Portugal, Mexico and Indonesia.

Total Program Cap

ECRA defines two main country-wide limits for aggregate small-scale solar system capacity. The first is on the utility grid’s substation level: total connected systems shall not surpass 15% of the substation’s transformer nameplate capacity. ECRA will require the distribution service provider to publish the available connection capacity of each respective substation/transformer via its website.

A country-wide limit for the total allowed connected system capacity under this program is also introduced at 3% of the previous year peak load in each distribution region. The latest available peak load data (2018) is 61.7 GW, effectively translating to a total cap of 1.8 GW of aggregate small-scale solar system capacity connected under this program. This figure is expected to rise as the Kingdom pursues various aggressive growth strategies in the coming decade.

Grid Connection Agreement

A Grid Connection Agreement should be signed between the distribution service provider and the offtaker, and it is valid for a maximum period of 20 years. Upon completing the agreement’s term, the offtaker is expected to disconnect the system from the utility grid. It is unclear if the system is expected to be entirely removed, or if a simple disconnection is sufficient.

Solar Leasing Opportunities

The regulation explicitly mentions the possibility for offtakers to source the solar through Solar Leasing Agreements (Corporate PPAs), or any similar agreements. Nevertheless, the offtaker will maintain the position of being counterparty to the distribution service provider under the Grid Connection Agreement. The clarity over this subject will help spur the adoption of solar energy throughout the Kingdom in alignment with Saudi Vision 2030.

Interconnection to Utility Grid

The offtaker (or solar developer) is expected to appoint an approved solar contractor or consultant to apply for the grid interconnection license, and to liaise with the distribution service provider on their behalf. The distribution service provider is requested to create all the processes and procedures for the application processes, and is expected to regulate the activity of such approved solar contractors and consultants.


Although questions remain regarding the framework’s details and the timeframe of its implementation, this is a major step towards enabling the largest solar C&I market in the Middle East. Its adoption rate, and ultimately its success, will be deeply influenced by the pace of SEC’s implementation and the exported electricity tariff rate for larger consumers. The initiative is a very welcoming beginning to unlocking the Kingdom’s true sustainable potential.


Article written by Daniel Domingues and Tariq Said, co-founders of Sirius Energy.