• Initiative Electricity Sector Transitions Electricity Sector Transitions
  • Type Press article
  • Date 31 October 2017

Increased power prices to lessen inefficient use of energy



Article published by Saudi Gazette, October 31, 2017

The King Abdullah Petroleum Studies and Research Center (KAPSARC) has published a research paper titled “Reforming Industrial Fuel and Residential Electricity Prices” and found that the energy system could benefit by $12 billion per year, largely due to households using less electricity in response to increased prices – for example, from 144 TWh (2015 electricity pricing) to 120.6 TWh (lifeline pricing), 88.3 TWh (dynamic pricing) and 82.6 TWh (average cost pricing).

The paper aimed to support the policymakers’ objective of minimizing inefficient use of energy while maintaining a safety net for low-income households (such as the Citizen’s Account), the paper examines the effects of four electricity pricing schemes for households: 2015 pricing, dynamic pricing, average cost pricing and lifeline pricing.

Another positive nationwide impact of raising the prices of both industrial fuels and residential electricity is a fall in CO2 emissions from 160 million tons per year to as low as 70 million tons per year. Additionally, as a result of investments in renewable power technologies such as photovoltaic (PV), up to 11.47 billion cubic meters of unused natural gas annually could be redirected from power utilities for use in other sectors, adding value to the economy

The study was in collaboration with the Saudi Elextricity Company uses the KAPSARC Energy Model (KEM) for Saudi Arabia, which is the first publicly-available economic model specifically for KSA’s energy system. It aims to provide a better understanding of the economic effects of energy price reform options and has been used in research exploring fuel price reforms, residential energy efficiency improvements, household electricity tariffs, and power generation technologies.

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