• Initiative -
  • Type KAPSARC journal article
  • Date 1 November 2017
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Abstract

In 2016, the Kingdom of Saudi Arabia (KSA) announced its Vision 2030 strategic plan incorporating major changes to the economic structure of the country, including an intention to deploy 9.5 GW of renewable energy in an effort to reduce the penetration of oil in the electricity generation system. This paper assesses the macroeconomic impact of such changes in the KSA, coupled with reductions in implicit energy subsidies. Based on a dynamic general equilibrium model, our analysis suggests that if the KSA government were to deploy a relatively small quantity of renewable technology, consistent with the country’s Vision 2030 plans, there would be a positive impact on the KSA’s long run GDP and on households’ welfare. However, we demonstrate that if the integration costs of renewable technology were high, then households’ welfare would be maximized at around 30-40% renewables penetration. In addition, we show that a policy favoring renewable energy would increase the dependence of the KSA on oil, given that a larger share of GDP would be linked to oil exports and so, potentially, to oil price shocks. Finally, it is shown that exporting significantly more oil onto the international market could have a negative impact on the international oil price and thus could offset the potential gains from the renewable energy policy. © 2017 by the IAEE. All rights reserved.

https://www.iaee.org/en/publications/ejarticle.aspx?id=2902

Energy Journal

Authors

Jorge Blazquez

Jorge Blazquez

Former Research Fellow Jorge is a former research fellow specializing in energy and economics, with research interests in energy and macroeconomics, energy policies… Jorge is a former research fellow specializing in energy and economics, with research interests in energy and macroeconomics, energy policies and transitions.

Lester C. Hunt

Visiting Researcher Lester C. Hunt is a part-time Professor of Economics at the University of Portsmouth and a KAPSARC Visiting Researcher. Lester… Lester C. Hunt is a part-time Professor of Economics at the University of Portsmouth and a KAPSARC Visiting Researcher. Lester previously worked at the Universities of Essex (1979-1980), Swansea (1980-1985 and 1987-1989), Surrey (1989-1991 and 1999-2017), and Portsmouth (1994-1998, and 2017 onwards). At Surrey he was Head of Economics (1999-2003) and Director of SEEC (2003-2015). At Portsmouth he was Head of Economics (1996 -1998) and Head of Economics and Finance (2017-2021). In addition to working in higher education, Lester was an Economic Adviser in the forecasting division of HM Treasury (1985-1987), an Energy Analyst/Economist at Midlands Electricity (1991-1994) and a Senior Research Fellow at KAPSARC (2015-2017). Lester holds a B.Sc. (Hons) in Economics with Econometrics from Loughborough University, an MA in Economics from the University of Essex, and a Ph.D. in Economics from the University of Surrey. He has been an Editor of The Energy Journal since 2006.

Expertise

  • Energy Economics and Policy

Publications See all Lester C. Hunt’s publications

Baltasar Manzano

Visiting Researcher Baltasar is an associate professor of economics at the University of Vigo and has been a visiting researcher at KAPSARC… Baltasar is an associate professor of economics at the University of Vigo and has been a visiting researcher at KAPSARC since 2014. From 2005 to 2009, he served as an economic advisor to the president of Galicia. Baltasar has a Ph.D. in economics from the Universidad Complutense, Madrid  and has published extensively in academic journals, mainly focusing on the intersection of macroeconomics and energy.

Expertise

  • Energy and the Macroeconomy
  • Energy and the Environment
  • Dynamic Stochastic General Equilibrium Models
  • Public Economics and Optimal Policy

Publications See all Baltasar Manzano’s publications

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