The 123 Agreement Saudi Arabia signed with the US last month as part of its transition to nuclear energy has emerged as a significant step. The agreement paves the way for cooperation between the two countries in the field of civilian nuclear energy.
The agreement was signed by US Energy Secretary Chris Wright and Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud. The US Department of Energy said the arrangement would give American companies access to Saudi Arabia's nuclear energy program and help the country meet its energy needs through non-oil sources.
Saudi Arabia seeks greater diversity in electricity generation
Electricity demand in Saudi Arabia increased by 3.8% annually last year. Nearly all electricity generation came from fossil fuels.
Electricity demand is expected to grow by an average of 3.1% annually between 2026 and 2030. Natural gas is expected to play a larger role in meeting this increase, accounting for 80% of electricity generation in 2030.
Oil's share of electricity generation is also projected to fall from 37% in 2025 to 6% in 2030. As renewable energy investments continue, Saudi Arabia aims to diversify its electricity generation mix by developing nuclear energy capacity.
A larger share of non-oil sources could reduce the country's dependence on oil to meet its electricity needs. This could allow more oil to be directed toward exports.
Nuclear energy could support economic growth
Justin Friedman, a former senior US State Department diplomat, said adding nuclear energy to Saudi Arabia's energy portfolio would increase the diversity of its energy sources. Friedman said the move could support domestic economic growth while allowing more hydrocarbons to be directed toward exports in the medium term.
Friedman said nuclear energy is a carbon-free baseload source that provides uninterrupted power and could help secure Saudi Arabia's energy supply. He added that nuclear energy could support the greater integration of variable sources such as wind and solar into the grid, while contributing to carbon-free hydrogen production in new hydrogen-related economic sectors.
Agreement will enable American companies to compete
Friedman said Saudi Arabia had repeatedly postponed its decision on selecting a nuclear power plant supplier. He said this could be interpreted as Riyadh preferring to work with US companies rather than accepting offers from competing suppliers.
The 123 Agreement, which is required for the US to export nuclear technology and materials to partner countries, clears the way for US companies to compete for projects in Saudi Arabia. The agreement still requires review by the US Congress.
After the US administration formally submits the agreement text, one of Congress's main areas of consideration will be how to ensure that nuclear cooperation is conducted for peaceful purposes and that commitments to preventing the proliferation of nuclear weapons are upheld.
