Towards the end of 1998, the Saudi Arabian electricity sector embarked upon a major restructuring program. One of the aims of the program is to achieve sustainable performance. Although progress has been made, a number of challenges remain, including high demand growth, low generation capacity reserve margins, inefficient energy use, absence of time-of-use tariffs, and the need for large capital investments to meet current and future expansion. Electrical energy consumption in Saudi Arabia increased sharply during the last two decades due to rapid economic development and the absence of energy conservation measures. Peak loads reached nearly 24GW in 2001-25 times their 1975 level-and are expected to approach 60 GW by 2023. The total investment needed to meet this demand may exceed $90 billion.(1) Consequently, there is an urgent need to develop energy conservation policies for sustainable development. Current sustainable policies, particularly those pertaining to energy conservation, led to peak load savings of more than 871 MW in 2001, mainly as a result of collaborations between the Ministry of Water and Electricity and the Saudi Electricity Company. In the long term, however, unless sustainable energy policies are developed at a national level, such efforts will be largely ineffective. To address this, policies and programs are being developed for public awareness, energy regulation and legislation, and energy information and programming. If energy conservation is taken into account, the forecast demand can be reduced by 5-10%. This is equivalent to 3-6 GW of additional capacity, which represents a possible $1.5-3.0 billion saving over the next 20 years. Typically, investment in energy efficiency is 1%, of utility sales revenues, which for a country like Saudi Arabia could be $15-60 million p.a. If only savings on air conditioning are considered, the return on investment is equivalent to 400-500 MW p.a. of generating capacity-a saving of up to $0.25 billion p.a. In this paper, the major challenges facing the Saudi electrical power sector in implementing sustainable development are discussed and analyzed. The paper also looks at a number of developed countries and examines their experiences with energy conservation programs. The paper highlights current Saudi programs and experience for promoting awareness and participation in energy conservation. Strategies and major policy measures for energy conservation in Saudi Arabia are proposed. (c) 2004 Elsevier Ltd. All rights reserved.