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Almost all of Saudi Arabia's electric power generation is fueled by oil and gas. Plans for future capacity envisage nuclear and renewables supplementing this mix and thereby freeing up oil for other revenue-generating opportunities. Coal-fired generation has been promoted in some Gulf Cooperation Council (GCC) countries but not, so far, in the Kingdom. Our analysis finds that:
• Imported coal would provide lower cost generation than either solar or nuclear power in the near-term.
• At current administered prices of oil and gas, other resources of energy such as solar, nuclear, or imported coal are not competitive for power generation.
• If decisions were made based on deregulated oil and gas prices:
○ At the reference coal price, only moderate levels of coal-fired capacity would be introduced. Having remaining capacity comprised of nuclear and solar would result in lower Saudi CO2 emissions from power generation than under a ‘business-as-usual’ scenario.
○ At the low coal price, CO2 emissions in 2030 cannot be maintained at their current level since coal, rather than solar and nuclear, is used to displace oil and gas from the generation fuel mix.
Some forecasts of coal markets anticipate significant increases in real export prices, which would make coal-fired power generation unattractive compared to nuclear power.
To read the full-text of this research, you can request a copy directly from the authors.
... Under continued energy-pricing regulation, KEM projects the power mix to remain based on fossil fuels, although forecasting a gradual shift toward natural gas. Under reformed energy prices, it projects the power mix to shift to solar photovoltaic (PV) and nuclear sources (Matar et al., 2016 ...
... We additionally assume that the hikes of energy tariffs combined with efficiency measures decrease the high energy intensity of the rest of the economy, reflecting wasteful and excessive energy consumptions (Fattouh and El-Katiri, 2013 It is important to stress that our assumptions on the energy consumptions of non-energy sectors take the form of intensities, i.e., consumptions per unit output rather than absolute consumptions. Thus, we take into account any discrepancy in sectoral activity between IMACLIM-SAU and that of KEM (see Matar et al., 2016 for the activity assumptions backing KEM). The volume of energy input into production is _ , with sector codes those of Table 1. ...
... Similarly to imports, exports of GAS and ELE are consistently equal to zero in statistics or KEM outlooks (see Matar et al., 2016). Regarding GAS, although the Kingdom is a major gas producer, all the production is directed to the domestic market. ...
... Paper A Matar, Walid. 2016. "Beyond the end-consumer: How would improvements in residential energy efficiency affect the power sector in Saudi Arabia?" Energy Efficiency 9(3): 771-790. . "A look at the response of households to time-of-use electricity pricing in Saudi Arabia and its impact on the wider economy." Energy Strategy Reviews 16: 13-23. ...
... An equilibrium state is found between them using a mixedcomplementarity formulation. KEM or its sectoral components have been previously peerreviewed as shown by Paper A, Paper B, Paper C, Matar et al. (2015Matar et al. ( , 2016, Matar andElshurafa (2017, 2018), Matar and Shabaneh (2020). A past version of it is described in KAPSARC (2016). ...
... For the case in which fuel prices are liberalized, 2017 electricity pricing and RTP are analysed. Directionally, the difference between the fuel use results of the administered and liberalized fuel prices is consistent with Matar et al. (2016, Paper C, and Matar and Shabaneh (2020). The use of natural gas is similar in both liberalized fuel price scenarios. ...
The aim of this thesis is two-fold: First, it presents the refereed work on the idea of embedding households, or more broadly economic agents, in building energy models. Second, it discusses the insights that are gained by applying this method and through its linkage with a partial equilibrium model of the greater energy system.
In response to electricity price changes, households make explicit behavioural adjustments or energy efficiency purchase decisions to maximize their welfare. Those decisions entail a combination of thermostat set-point adjustments, turning off lights, re-arranging the appliance loads, and the ability to purchase from a given slate of energy efficiency measures. I have included improved air conditioner performance, upgrades to the thermal insulation of the dwelling, more-efficient lighting, and efficient window panels. Using Saudi Arabia as a case study, two key insights are derived from performing a modelling analysis for archetypical villas:
• Energy efficiency investment lowers the need for energy conservation. Raising energy efficiency subsidies causes households to reduce their energy conservation.
• As energy efficiency subsidies and electricity prices rise, the difference in household spending on other goods and services widens between the highest efficiency case and no added efficiency. This indirect rebound effect causes a situation where firms may increase their production to meet the additional demand from households for their goods, which will require more energy.
Furthermore, the households’ electric power load profiles change during the year due to those behavioural and energy efficiency decisions. The Saudi power system experiences these two benefits in the long-run from charging real-time prices (RTP) for electricity:
• RTP reduces the variability of the marginal costs to Saudi power utilities throughout the day.
• The lowered investment in power plants brought upon by introducing RTP would more than cover the costs of residential smart meter replacements.
... Subsequently, electricity scarcities are severe throughout the summer season, when utilization is at its maximum. Nevertheless, it is predicted that a decrease of 40% is likely in Saudi domestic electricity consumption from energy-saving application and preservation (Matar, 2017;Matar et al., 2016;Matar and Elshurafa, 2018). Desalinated water has also expended approximately 5% of the total energy in the KSA (Ouda et al., 2018). ...
... In general, the KSA plans to increase the use of RnSE in water desalination all over the country due to its cleanliness and affordability as a power source. Table 2 Production and consumption of electricity in KSA (Matar et al., 2016;Qader, 2009 ...
... S. Energy Information Administration, 2014a). A statement by Citigroup's analyst (Matar et al., 2016) to Saudi government sponsorships indicated that the loss of oil and natural gas revenues of the KSA in 2011 is more than $80 billion at most. At the domestic level, the loss of fossil fuels relied on the ways to justify energy consumption that would reduce funding levels (Bilgen, 2014). ...
Renewable and sustainable energy (RnSE) resources have recently been marked as a major key for a stable economy worldwide, particularly in developed countries, such as the Kingdom of Saudi Arabia (KSA). RnSE has been used in diverse technological applications and is shown to be an auspicious and reliable substitute for common hydrocarbon as an energy source. The KSA is a dynamic state that faces a rapid growth in population rate, which has caused large electricity consumption. Thus, the KSA has invested billions of dollars in installing huge RnSE projects in many locations around the country with robust financing capabilities. However, this study aims to review the current status, growth, potential, resources, the sustainability performance and future prospects of RnSE technologies in KSA according to Saudi Vision 2030. The resources of RnSE such as wind, solar, geothermal, hydro, and biomass have been reviewed. It is found that the solar power, as an example, has been proven to be one of the sufficient RnSE source with abundant technological advancement in electricity generation for more than 50 years. The usage of RnSE resources reduces the reliance on oil and natural gas and introduces RnSE from clean and maintainable resources for the Saudi national economy. The shortages of electricity and the challenges to conquer the increment in the demands of electrical in the nearest future have been also deliberated. The studies found that some of RnSE technologies have not been used adequately at present and might play a significant role in the upcoming of KSA’s RnSE. Besides, it is found that there is a need to inspect the potential of offshore-wind, biomass, and thermal energy. Further, this review attempts to provide a comprehensive insight into the potential applications of RnSE technologies for developing a sound energy policy to attain energy security and reduce cost, thereby ensuring the efficiency of RnSE applications toward the long-term prosperity and energy reservation in the KSA. This paper has been concluded with several recommendations for the use of these RnSE resources.
... 1 First, the main source of primary energy used to produce electricity in the KSA is oil (Electricity and Cogeneration Regulatory Authority, 2015), something which is less common in other parts of the world. Second, according to Matar et al. (2015Matar et al. ( , 2016 the oil used in the electricity sector is highly subsidized. Third, the KSA is an oil producer, which implies that the subsidized oil used domestically could instead be exported at international prices. ...
... Other studies have focused specifically on the KSA without using a general equilibrium approach, such as Alyousef and Stevens (2011) who discussed the costs of administered energy prices in the KSA. Matar et al. (2015) consider different policy scenarios for reducing energy consumption in the KSA without increasing administered energy prices using a multi-sector equilibrium model with a mixed-complementarity formulation and Matar et al. (2016) use a similar approach to consider the prospects for coal-fired power generation in the KSA. Two further studies took an econometric approach: Gately et al. (2012) considered the future evolution of oil consumption and its impact on oil exports in the KSA and Pierru and Matar (2014) explored the impact of volatile oil revenues on public investment. ...
... Using a calibrated dynamic general equilibrium model, we find that if the KSA government were to deploy a relatively small quantity of renewable technology, consistent with the country's recent Vision 2030 (2016) plans, there would be a positive impact on both the KSA's long-run GDP and on consumers' welfare. The reason is that solar technology, regardless of the cost of integration, is cheaper than oil for producing electricity, something that has been addressed in other studies (such as IRENA, 2016 and indirectly Matar et al., 2016). However, we show that integration costs of renewable technology into the grid do play a critical role. ...
... Some investigators have studied the effect of controlling CO 2 emission from conventional and renewable PPs in Saudi Arabia. However, no specific studies have been conducted to evaluate the effect of CO 2 taxation on the relative competency of candidate technologies, including nuclear power in the Saudi Arabia energy system . e objective of this study was to determine optimal long-term strategic options for introducing new technologies in Saudi Arabia. ese should consider the available options (i.e., traditional fuel, renewables, nuclear). ...
... WT-PP is also assumed to be adopted in the West region due to the availability of waste fuel either from industrial regions or from agricultural bio-waste materials in the West region . CL-PP is assumed to be in the East region due to coal fuel will be imported through the Persian Gulf seaport, and it is better to reduce the coal transportation cost ; A-CC-PP is to be in East and West regions to energize the local industrial sector , whereas A-GT-PP being assumed to be in South region as shown in Table 3 [85,87]. ...
An optimal long-term electric power strategy for Saudi Arabia to adopt nuclear power was evaluated using the MESSAGE tool. Saudi Arabia is predicted to experience an electricity shortage by 2025 with the present energy system. This electricity shortage could be postponed until 2035 by rehabilitating the existing power plants. The MESSAGE model predicts that adopting a combination of renewable (i.e., solar and wind), advanced traditional power (i.e., gas turbine, steam, and combined cycle), and nuclear technologies is the most competitive future strategy to supply 43.7%, 41.6%, and 3.8%, respectively, of Saudi Arabia’s electricity needs by 2050. This paper proposes an optimal strategy for adopting nuclear power. The nuclear capacity of three scenarios was evaluated: a single APR-1400 nuclear reactor, a single SMART-100 nuclear reactor, and a combination of these two reactors. The results of this study indicate that the highest nuclear capacity was achieved by the combination of the APR-1400 and SMART-100 reactors followed by the single APR-1400 reactor and then the single SMART-100 reactor. However, the single G4ECONS nuclear reactor shows a higher capacity than the single APR-1400 reactor in other evaluated scenarios. The combined reactor strategy may be the most feasible option if the capital cost of a first-of-a-kind SMART-100 reactor is reduced by 62.3%. The cost reductions result from including factors like the time required to build the nuclear power plants in the MESSAGE tool calculation. Also, CO2 taxation will increase nuclear power’s feasibility in the Saudi Arabian energy system. However, the share of renewable energy is predicted to be more affected by the taxation of CO2. In this study, the proposed approach can provide more flexible strategic options for countries embarking on nuclear energy. These flexible strategic options can optimize their national energy mix for long-term planning.
... Egypt plans to deploy 12.5 GW of coal-fired generation into its energy mix by 2022 (MEED Insight, 2015) and Jordan is planning for 5% of its power to be generated by coal by 2025. In the GCC, Dubai (UAE) is investing in 2.4 GW of coal-fired generation that will start to come online by 2020 (MEES, 2016c) and coal is increasingly used in the UAE's cement plants, replacing gas (Matar et al., 2015a). The use of coal for power generation in Saudi Arabia has been modeled and was found to be economically viable in the Kingdom's overall future energy mix if coal prices remain near current levels out to 2030 and sufficient increases in competing gas and oil prices occur (Matar et al., 2015a). ...
... In the GCC, Dubai (UAE) is investing in 2.4 GW of coal-fired generation that will start to come online by 2020 (MEES, 2016c) and coal is increasingly used in the UAE's cement plants, replacing gas (Matar et al., 2015a). The use of coal for power generation in Saudi Arabia has been modeled and was found to be economically viable in the Kingdom's overall future energy mix if coal prices remain near current levels out to 2030 and sufficient increases in competing gas and oil prices occur (Matar et al., 2015a). To date, however, Saudi Arabia has made no commitments to coal. ...
The energy landscape of the Middle East and North Africa (MENA) region has undergone a significant transformation in recent years as a result of intersecting technological, economic and political trends, both regional and international. The evolving dynamics of international energy markets, increased diversification of energy sources, global concerns for climate change, and regional conflict are among the leading factors impacting the evolution of MENA energy policy. This paper provides an assessment and outlook for energy policy in the MENA region within the context of the myriad factors impacting policy design and implementation. A review and analysis of the social, political and economic factors that are impacting regional energy policy is provided and followed by analysis of regional energy policy with consideration of hydrocarbon exploration and production, regional energy trade, demand management and clean energy production. The findings show that the MENA region is in the midst of an energy transition that has uncertain outcomes but will undoubtedly have long lasting impacts on the global energy system.
... For the case in which fuel prices are liberalized, 2017 electricity pricing and RTP are analyzed. Principally, the difference between the fuel use results of the administered and liberalized fuel prices is consistent with Matar et al. (2016, Matar and Anwer (2017), and Matar and Shabaneh (2020). ...
This paper shows the effects of real-time electricity pricing (RTP) on the long-run marginal costs of power generation in Saudi Arabia. To do this, it links a multi-sector energy system model with a residential electricity use model. The energy system model contains an economic power dispatch optimization component. The residential framework embeds households, whose decisions are governed by microeconomic principles, in a physical building energy model. The analysis entails liberalizing fuel prices for the power utilities and setting the dynamic prices of electricity equal to the long-run marginal electricity supply costs. The electricity prices are solely offered to households. The key takeaways from this analysis are:
• RTP, a form of dynamic electricity pricing, reduces the variability of the marginal costs for Saudi power utilities throughout the day.
• Lowered capital spending by the Saudi power sector results from RTP and consequently lower power loads. Moreover, the curtailed investment in power plants would more than cover the costs of residential smart meter replacements.
... Related to the previous point, past versions of KEM have applied natural gas use limits annually [15,16]. We have added a constraint in the electricity sector sub-model to account for the average daily use of natural gas by electricity generators, to adhere to the daily transport capacity. ...
We assess the geological and economic viability of underground natural gas storage in Saudi Arabia under different scenarios: with and without LNG imports allowed, and under low and high domestic gas production. Depleted oil fields or aquifers are best suited for gas storage in the Kingdom. Using a model of the country's energy system, we show that in the case of high gas production, storage capacity would be built to bypass the gas transport limit for use in electricity generation in the summer. In the low production case, gas storage would facilitate optimal gas use among sectors throughout the year. The net present gain – defined as the discounted sum of the annual differences in benefits and costs – is used to determine the economic viability of gas storage.
Overall, gas storage in the high gas supply case would deliver a positive gain of nearly 900 million dollars throughout the energy system. With low gas supply, the cost of gas storage for the upstream sector would exceed the benefit of lower costs realized in other sectors. The results indicate that gas storage installations are only favorable in the case of high domestic gas production. If production turns out to be low, LNG imports would instead be more sensible.
... Unfortunately, diesel engine generators exhibit moderate performance with an average efficiency of 30% . In addition, diesel based power generator places the second largest emission factor after coal-based power generators . Therefore, development of diesel based CLC technology is exceptionally important for building the Sustainable Energy System, particularly for oil producing countries. ...
An integrated process for gasification of diesel and chemical looping combustion of the gasified syngas for inherent power generation and CO2 capture is developed using Aspen Plus. This system consists of four main units, including (1) gasification of diesel into syngas to ensure complete fuel conversion, (2) chemical looping combustion using an alumina supported nickel-based oxygen carrier, (3) gas turbine-based power generation and (4) steam turbine-based power generation. The model shows a high accuracy (relative error: 2.98%) which is indicated by good agreement of operating temperature, product composition and net power generation between the simulation results and data from the literature. The performance of the integrated system is evaluated based on both energy and exergy analysis approaches. In order to improve the system performance, various split ratio of (diesel) syngas to the CLC unit and to the combustion are investigated. The analysis shows that both the flow rate of oxidation air and the split ratio of syngas to the combustion unit have considerable influences on system performance while the minor effect is found in the pressure ratio. For the overall efficiency, the highest electrical efficiency is 42% and the highest exergy efficiency is 65%.
... The second is called 2015 fuels deregulation in which crude oil and refined oil product prices will be set to their 2015 international market prices, and natural gas will be set to its domestic market-clearing price. For more information on Saudi industrial fuel prices, see Matar et al (2016). Results for three cases will be discussed: ...
... KEM-SA is a tool to help estimate the consequences of alternative energy policies that affect energy production and use within Saudi Arabia. Matar et al. (2015aMatar et al. ( , 2015bMatar et al. ( , 2015c and Matar (2016) previously employed the model for exploring the effects of some alternative scenarios. ...
... The Saudi government increased domestic energy prices in 2016 to compensate for the lost revenue from international oil prices tumbling in recent years; an added benefit of raising these prices is the induced demand response for the various energy goods. Matar et al. (2016Matar et al. ( , 2017 have identified the economic benefits of reforming industrial fuel prices in Saudi Arabia without altering electricity prices. As the local government is currently exploring additional price reforms, this analysis aims to better understand the effects of reform by further incorporating end-use electricity prices. ...
The Saudi electricity sector currently buys fuel and sells electricity at prices administered by the government. In this analysis, we illustratively explore combining the reform of the fuel prices used in power plants with the implementation of alternative electricity pricing schemes for the households. Compared to the scenario replicating the year 2015, we find: ● The aggregate gain to the energy system could reach nearly $12 billion per year by raising both electricity prices to households and industrial fuels to reflect the cost of supply or international markets.● Households would pay an additional $3 billion in electricity costs without any mitigation for the low-income households. However, Lifeline prices would halve this burden, while maintaining greater gains than deregulating fuel prices alone.● The average electricity price paid under the lifeline scenario would be a more manageable 4.0 cents/kWh, versus an average marginal-cost price of 7.1 cents/kWh.In the alternative electricity pricing scenarios we study, natural gas usage by the power utilities falls, allowing gas to flow to other industries, which would consume it to reduce their costs. We find the marginal values of natural gas falling at higher electricity prices, indicating that the supply of gas is becoming less constraining.
... The electricity model has a set of existing and prospective power generation technologies in which it can choose to invest or operate throughout the day. The version of KEM we use is calibrated to 2011 [6,7]. The electricity model was calibrated for Saudi Arabia using data from the local power regulator, the Electricity & Cogeneration Regulatory Authority, and SEC . ...
Households in Saudi Arabia account for about half of domestic electricity demand. This high level of consumption is partly due to historically low prices. These prices have also been flat throughout the day. Policymakers are exploring different pricing policies to help reduce this share. Time-of-use (TOU) pricing is one such option. This paper assesses the potential effects TOU pricing will have on households and the wider economy. We quantify how households may react to a price change by focusing on two of the biggest electricity-consuming household items: appliances and air-conditioners. Price response features that deal with the usage of these items are incorporated in a modeling framework that we have developed. Based on an assumed TOU price that the power utility may charge during peak summer hours, the main findings of our analysis for the year 2011 are:
1.) Households would pay 42% to 57% more in the summer months
as a result of a TOU price that is three times the average summer
price under the current flat tariff.
2.) Total electricity load is reduced in all TOU scenarios during the
afternoon peak hours, and households that are not inconvenienced
by shifting appliance use move some of their consumption
to the hours before the peak rates.
3.) The power utilities would realize additional profit mostly from
higher revenue from households. Reduced operating costs to the
utilities play a minor role, if any.
4.) Oil consumption for electricity generation is generally reduced,
while the average operating efficiency marginally increases due
to lower dependence on inefficient gas turbines.
Coal has strategic importance for the global generation of electricity. However, the environmental impacts of its intense use are a concern, especially about greenhouse gases emissions. High Efficiency and Low Emissions coal-fired power plants are part of the approach known as Clean Coal Technologies, including supercritical (SC) and ultra-supercritical (USC) plants, since they allow cleaner and more efficient coal usage. This study analyzes how the usage of different coal compositions impacts the economic and environmental feasibility of operating units with higher efficiency when compared to conventional subcritical power plants. The analysis identified that the application of supercritical and ultra-supercritical technologies provided significant savings in fuel consumption, and consequently in CO2 emissions. The economic feasibility analysis identified that the annual savings change significantly among the analyzed coal compositions, in such manner that it determines whether the supercritical and ultra-supercritical technological alternatives can be economically viable in the long term or not. In general, these technologies are viable both as an alternative to mitigate CO2 emissions and to obtain better profitability through energy generation.
We quantify the impacts of renewable deployment on carbon emissions and natural gas supply in the Saudi power sector. A capacity expansion model, which simultaneously considers generation and transmission builds covering a planning horizon up to 2040, was created. The simulated scenarios, which entailed retiring liquid fuels from the Saudi power sector and accounted for different gas prices, consider the following candidate build technologies: nuclear, gas, solar photovoltaics, wind, concentrated solar power with storage, and battery storage. Renewables can reduce carbon emissions by 66 million tons to 114 million tons (25–41 %) by 2040 depending on the gas price. The abatement costs were estimated to range between 20 $/ton and 50 $/ton of carbon dioxide. Within Saudi Arabia, renewable deployment can also defer national gas supply expansion plans but not investments in expanding domestic gas transport capacities. Finally, under certain conditions when deploying significant renewable capacity, better transmission interconnection between regions manages renewable intermittency more cost-effectively than storage deployment.
We analyse the mid-term macroeconomic challenge to Saudi Arabia of a global low-carbon transition reducing oil revenues, versus the opportunity of national energy reforms. We calibrate a compact, dynamic recursive model of Saudi Arabia on original energy-economy data to explore scenarios. We first assess the consequences of oil prices declining from their levels in the New Policies Scenario (NPS) of the IEA, to their levels in its Sustainable Development Scenario (SDS). By 2030, the Saudi economy loses 1.4 GDP points, 1.6 employment points and USD 504 billion trade surplus accumulation. Its cumulated public deficit rises to 92.8% of GDP. National reforms gradually aligning Saudi energy prices on international prices and inducing structural change of Saudi activity away from energy-intensive industries mitigate these costs if a share of the public income from energy-price deregulation is directed to investment. However, they reduce the cumulated trade surplus and fail to control public deficit accumulation. Sensitivity analysis confirms the capacity of national energy reforms to mitigate the activity cost of global mitigation action, but aggravates the threat of an escalating public deficit. These results underline the importance of broader economic and fiscal reforms as part of the ambitious Vision 2030 Saudi initiative.
In Saudi Arabia, industrial fuel prices are administered below international prices and firms make decisions based on low energy prices, increasing domestic energy demand. This analysis explores alternative policies designed to induce a transition to a more efficient energy system by immediately deregulating industrial fuel prices, gradually deregulating fuel prices, and introducing investment credits or feed-in tariffs. It uses a dynamic multi-sector, mixed-complementarity model. Continuing existing policies results in a power system still fueled completely by hydrocarbons. The alternative policies result in a transition to a more efficient energy system where nuclear and renewable technologies become cost-effective and produce 70% of the electricity in 2032. Introducing the alternative policies can reduce the consumption of oil and natural gas by up to 2 million barrels of oil equivalent per day in 2032, with cumulative savings between 6.3 and 9.6 billion barrels of oil equivalent. The energy system sees a net economic gain up to half a trillion 2014 USD from increased oil exports, even with investments in nuclear and renewables. The results are robust to alternative assumptions regarding the value of oil saved and the growth in end-use energy demand.
Energy efficiency in buildings has garnered significant attention in Saudi Arabia. This paper outlines the potential effects of higher residential efficiency on electricity load profiles in the Kingdom. It further presents the associated benefits that could have been realized by the local utilities in 2011. To perform the analysis, we designed an integrated methodology in which an engineering-based residential electricity demand model is used within an economic equilibrium framework. The modeling approach allows us to capture the physical interactions arising from higher efficiency and the structural changes that could occur in the economy beyond the end-consumers. Raising the average air-conditioner energy efficiency ratio (EER) to 11 British thermal unit (BTU)/(Wh) from its 2011 average would have saved 225,000 barrels/day of crude oil in electricity generation. Alternatively, increasing the share of insulated homes from 27 to 64 % would have allowed the power sector to lower its use of the fuel by 158,000 barrels/day. Combining both measures in a single simulation yields incremental yet not additive reductions. All alternative scenarios reduce costs to the utilities and improve the average thermal efficiency for the electricity generated. The studied efficiency options shift the load curve downward during the peak load segment when the least efficient turbines would be used. We additionally show how efficiency improvements in end-uses can affect the decisions of other sectors in the economy.
This paper describes the KAPSARC energy model, which we developed to take an integrated view of the energy issues faced by Saudi Arabia. These issues result from growing internal energy demand that is cutting into the country’s ability to export oil, constrained supplies of natural gas that affect the ability of the country to use gas as an economic development tool, and a domestic energy economy that largely operates with prices set by the government and not markets. The model is formulated as a mixed complementarity problem (MCP) that allows us to capture the non-market features resulting in prices that are different from marginal costs. The model is novel in two ways: (i) it is the first integrated, equilibrium, energy model of Saudi Arabia and it captures government interventions that permeate economies outside the OECD; (ii) its design and component organization solve critical model management issues. In addition to the detailed description of the model, the paper provides an overview of the Saudi energy economy, discusses issues in designing a multi-sector energy model, and covers how the model is organized from a model management perspective.
The increasing consumption of oil-refined products on OPEC countries will have its impact on the availability of oil exports. The goal of this paper is to examine the determinants of oil refined products' consumption for a panel consisting of 7 OPEC countries, namely, Algeria, Kuwait, Libya, Qatar, Saudi Arabia, United Emirates and Iran for the period of 1980-2010, by employing the recently developed panel data unit root tests and panel data cointegration techniques. Furthermore, conditional on finding cointegration, the paper extends the literature by employing the Pedroni Panel Fully Modified Ordinary Least Squares (FMOLS) Dynamic OLS (DOLS) procedure to generate. The study estimates the demand for Gasoline, Kerosene and Diesel. An attempt is also made to assess the impact of this demand on the future availability of OPEC oil exports.
Saudi Arabia aims to reduce the growth of its energy demand. This paper shows how to substantially reduce the current fuel consumption and economic inefficiencies in the Saudi energy system, without altering consumer prices. We use the newly-developed KAPSARC Energy Model, a multi-sector equilibrium model of the Saudi energy economy that handles administered prices in a mixed-complementarity formulation. We present results from a set of scenarios that illustrate some of the possible policy options available to the Kingdom. Some of these scenarios are the solutions to Mathematical Programs subject to Equilibrium Constraints (MPEC’s) that maximize the net economic gain for the Saudi economy. The policies examined would have potentially generated economic benefits exceeding 23 billion USD in 2011, or about 4% of Saudi Arabia’s GDP. This economic benefit comes mainly from inter-sectoral fuel pricing policies that incent shifting the mix in technologies that generate electricity and produce water. We show that when complemented by credits for investments in solar and nuclear power generation capacities, a modest increase in the transfer prices of fuels among sectors would produce economic benefits close to those achieved by deregulating transfer prices. An implication of the results is that through its domestic energy policies, Saudi Arabia can disconnect its energy-consumption growth from GDP growth.
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