A KAPSARC-UNESCWA report titled ‘Growth through Diversification and Energy Efficiency: Energy Productivity in Saudi Arabia’ was presented today during the 4th Arab Forum for Renewable Energy and Energy Efficiency, organized by the League of Arab States in Kuwait.
The report finds that over 1 million barrels of oil equivalent of domestic energy consumption in Saudi Arabia can be avoided through policies geared towards improving energy productivity, lifting gross domestic product (GDP) growth by over half a percent per year by 2030.
One of the consequences of the Kingdom’s strategy of building downstream value chains to extract value from its gas resources as well as its oil was that the industries created were energy intensive. This led to strong economic growth but, when considered through the energy input to these industries, a decline in the amount of GDP produced for each unit of energy consumed. However, since 2010 this trend has been reversed and growth in energy productivity of 1 percent each year has increased the amount of economic value created to around US$6,000 per ton of oil equivalent in recent years. Current economic diversification and energy efficiency initiatives provide scope for Saudi Arabia’s energy productivity improvement to accelerate to match that of its G20 peers, at around 2.5 percent a year.
This transition is also helping achieve the Kingdom’s Sustainable Development Goals such as its intention to reduce its greenhouse gas emissions by 130 million tons of CO2-equivalent by 2030 versus a business as usual path.
The efforts of the Saudi Energy Efficiency Center combined with recent energy price reforms and the economic diversification plans of Vision 2030 are driving a structural shift towards getting more value from the Kingdom’s energy consumption.
Energy productivity targets are increasingly being used in leading G20 countries as a way to track aggregate progress towards a range of energy and economic objectives. For example, by 2030 the United States and Australia aim to double and increase their energy productivity by 40 percent, respectively. Similarly, China’s Five Year Plans have also used energy intensity targets as a key indicator for energy, environmental and economic reforms.
The report shows that the industrial sector is the largest and fastest growing source of energy demand in the Kingdom comprising around 54 percent of total final consumption. Transport and energy consumption in buildings follow at 30 percent and 16 percent respectively. The report describes the main policies and economic trends that are shaping changes in the value society gets from this energy consumption.
The researchers are discussing the findings with stakeholders over the coming months as part of a consultation process into how more value can be achieved from energy consumption in the Kingdom – economically, socially and environmentally.