This paper utilizes a structural time series approach to model Saudi Arabia’s regional electricity demand, capturing undetected forces of variability in the data-generating process that include improvements in technology, energy-saving behavior, and other underlying trends that are excluded under conventional estimation methods. National models of aggregate electricity consumption might not be representative, as electricity prices are administered regionally and Saudi Arabia’s regions have unique social and economic characteristics. We find evidence that the regions have unique responses to prices and income levels with regard to electricity demand.
Additionally, we use our estimated model to project the regional baseline demand for electricity for Saudi Arabia and create a scenario to demonstrate how a price increase would impact these regions differently. This information is valuable for policymakers in Saudi Arabia, as the fuel mix to generate electricity differs between regions. Our baseline electricity demand projections indicate that under the assumptions of moderate economic growth and no price changes, total electricity demand in Saudi Arabia will reach 366 TWh by 2030.
