Saudi KAPSARC study analyzes regional electricity demand after energy price reform

KAPSARC’s paper mentioned that the impact of the 2018 price reforms led to a decline in the total residential electricity consumption of 9.1% nationwide

  
KAPSARC modern mosque. Image used for illustrative purpose

KAPSARC modern mosque. Image used for illustrative purpose

Getty Images/Abdullah Al-Eisa

RIYADH — The King Abdullah Petroleum Studies and Research Center (KAPSARC) has published the first study of its kind that analyzes regional electricity demand in the Kingdom after energy price reform, after the two waves of energy price reforms in 2016 and 2018.

The paper, published by the center’s researchers Jeyhun I. Mikayilov, Abdulelah Darandary, Ryan Alyamani, Fakhri J. Hasanov and Hatem Alatawi, showed that residential electricity demand is determined by a variety of aggregate and disaggregate drivers, which can vary from one region to another. These drivers include, among other things, market concentration, regional wealth, population and income.

The “Regional Heterogeneous Drivers of Electricity Demand in Saudi Arabia: Modeling Regional Residential Electricity Demand” shows that a better understanding of regional electricity demand and its drivers may allow for tailored price reform and regional household assistance programs.

This is in addition to better anticipating demand responses and estimating the revenues they would get from future price reforms more accurately.

KAPSARC’s paper mentioned that the impact of the 2018 price reforms led to a decline in the total residential electricity consumption of 9.1% nationwide.

Meanwhile, the central region ranks as the most affected region in the reduction of residential electricity consumption, which decreased to -10.7% followed by the eastern region with -8.8%, then the western and southern regions with -8.1%.

The researchers found that the price, income, weather, and population were considered the drivers of residential electricity consumption in each region. Moreover, the short-run impacts of price changes on demand were found to be significant for all regions, at around -0.1, except for the eastern region, for which they were insignificant.

This is due to the region’s specific features, that it has the highest income compared with the other regions, and that the changing consumption habits and decisions to buy new, more efficient appliances also needs more time to consider.

The paper recommended utilization of smart meters and deploying strategies to promote the use of efficient appliances, as these meters offer consumers the ability to adjust their habits by monitoring their energy use and supplying them with the data.

Suppliers can also use smart meters to allow consumers to compare their energy use with that of other consumers. In addition, the research suggests planning optimal housing types considering region-specific features, increasing the insulation capacities of the existing houses/buildings, setting centralized AC's in apartments. Furthermore, the population densities should be considered in future city expansion plans to ensure sustainable energy consumption.

The study comes under the KAPSARC Global Energy Macroeconometric Model (KGEMM), aiming to analyze the effects of different policy choices, such as energy price and fiscal policy changes, on the economy, assess the effects of the Saudi Vision 2030 initiatives and its targets and link Saudi Arabia’s macroeconomic-energy environment with the global economy/energy markets.

KAPSARC made progress in the list of the best research centers regionally and globally, as it jumped 14 ranks in the Middle East and North Africa (MENA) research centers. It ranked 15th out of 103 research centers regionally, and 13th out of 60 research centers globally specializing in energy policy.

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