Matar, Walid

The Economics of Renewable Energy in the Gulf

The Cooperation Council for the Arab States of the Gulf (GCC) has been at the epicenter of global energy markets because of its substantial endowment of hydrocarbons. Yet countries in the region have also stated their intent to be global leaders in renewable energy. This collection explores the drivers for the widespread adoption of renewable energy around the GCC, the need for renewable energy and the policy-economic factors that can create success. https://www.routledge.com/The-Economics-of-Renewable-Energy-in-the-Gulf-1st-Edition/Akhonbay/p/book/9781138351905 Contributors: Ghada Abdulla, Hisham Akhonbay, Abdullah Al-Badi, Walid Ali, Odeh Al-Jayyousi, Imtenan Al-Mubarak, Maha Alsabbagh, Omar Al-Ubaydli, Moiz Bohra, Sylvain Cote, Nasreddine El-Dehaibi, Amro Elshurafa, Bassam Fattouh, Stephen Gitonga, Steve Griffiths, Marwan Khraisheh, Walid Matar, Daniah Orkoubi, Rahmatallah Poudineh, Shreekar Pradhan, Antonio Sanfilippo, Anupama Sen, Marilyn Smith, David Wogan, Lama Yaseen, Karen Young.

17th October 2018

Using Satellite Technology to Measure Greenhouse Gas Emissions in Saudi Arabia

Measuring and monitoring greenhouse gas (GHG) emissions are crucial to address climate change and fulfill Paris Agreement objectives. This paper explores the potential of satellite technology in measuring and tracking CH4, CO2, and N2O emissions in Saudi Arabia, collaborating with environmental intelligence company Kayrros. The satellite estimates reveal significant disparities with other data providers, particularly in the oil and gas sector. The paper advocates for a combination of bottom-up and satellite methods to enhance comprehensiveness, transparency, accuracy, and timeliness in emission measurements. The study provides policy recommendations for Saudi Arabia, demonstrating how satellite technology can detect super-emitting events and offering solutions for regulatory action. Finally, it discusses limitations and calls for further investment in satellite technology to refine GHG emission estimates for better global climate action.

7th December 2023

Energy Policy Pathways to Inform Climate Policy in Saudi Arabia

Saudi Arabia has announced plans to cut greenhouse gas (GHG) emissions by 278 million tons of CO2 equivalent (CO2e). In this regard, this paper contributes a modeling view of the climate-related effects of various energy policies on the Saudi energy system. The baseline entails the continued progression of current domestic policies without energy price reform. We examine two main alternative scenarios: The announced policies scenario (APS) incorporates some of the plans that the Saudi government has announced. In the other scenario, we run the baseline scenario with a cap on total CO2 emissions equal to those displayed in the announced policies.

13th November 2023

Alternative Fuels for Saudi Cement Manufacturing with Time-varying Carbon Pricing

After cement production in Saudi Arabia surged in the first half of the 2010s due to the country’s rapid economic development, it has slowed measurably in recent years as economic growth has declined. This is shown in Figure 1, along with the evolution of the Kingdom’s real gross domestic income (RGDI). Still, it ranks among the top 10 countries for existing cement kiln capacity. The Saudi cement industry has relied on Arab Heavy crude oil, heavy fuel oil (HFO), and natural gas to produce clinker, a key cement ingredient.

17th January 2023

Long-run Effects of Real-time Electricity Pricing in the Saudi Power Sector

This study explores the potential effects of real-time electricity pricing on the operations of Saudi Arabia’s power generation sector. The Kingdom currently sets fuel prices for power utilities at levels that suppress the costs of power generation. However, this analysis provides insights into the effects of a real-time electricity pricing scheme in the context of liberalized fuel prices.

22nd March 2021

Can Oil Refiners Adjust to a Greater Supply of Shale Oil?

The advent of American shale oil and its prospects for continued production growth have raised concerns about whether oil refineries can handle the increasingly lighter crude oil supply. To provide a perspective on this issue, we run a global oil refining model for the years from 2017 to 2030. The model’s objective is to maximize refining industry profits in eight global regions, taking into account around 100 grades of crude oil.

6th January 2021

On the Incremental Investment in Residential Energy Efficiency: A Saudi Perspective

It has been shown in the literature that, in aggregate, actual household energy efficiency adoption is less than would be expected economically. Energy economists and policy analysts have described this phenomenon as the ‘energy efficiency gap.’ There could be myriad reasons for this gap, such as a lack of information about energy efficiency measures, or household decisions to invest in one energy efficiency measure rendering subsequent measures less attractive. The latter is especially the case when faced with discrete efficiency measures.

14th September 2020

Residential Energy Efficiency Investment and Demand Response Under Different Electricity Pricing Schemes: A Physical- Microeconomic Approach

This paper expands on a previously-presented methodology that merges the physical properties of energy with microeconomic principles: The physical side of the model informs how much electricity is used to satisfy services that people desire, while the microeconomic side imposes a utility function to represent household satisfaction. This paper adds energy efficiency investment to the price-based behavioral demand response and presents results representative of the long-run steady-state. It examines several electricity pricing schemes and energy efficiency options, with the costs and benefits of each option explicitly modeled in the physical representation.

24th March 2020

Viability of Seasonal Natural Gas Storage in the Saudi Energy System

Saudi Arabia expects to double its natural gas production within the next decade. This increased domestic supply is expected to meet the demand for gas from Saudi Arabia’s industrial development and, most importantly, to displace liquid fuels in its electricity sector. Given the strong seasonal variability of the latter, underground gas storage (UGS) can help ensure the availability of gas to meet peak power load.

8th December 2019

Households’ Demand Response to Changes in Electricity Prices: A Microeconomic-Physical Approach

Energy economists are interested in how a change in electricity prices prompts a response by way of end-user power demand. It is difficult to estimate price elasticities statistically if historical prices are low and change infrequently, especially in the short run. This paper extends a previous analysis by Matar (2018) that explored the merger of a residential building energy model and a utility maximization component by incorporating more demand-reducing measures within a utility-maximization framework for households. The framework is informed by the physical equations that govern how electricity is consumed. The measures considered are: Independently adjusting the thermostat set-point in the spring and fall, and during the peak and off-peak hours in the summer. Turning off lights. Switching off consumer electronics. The study calibrates the physical component for a dwelling in Saudi Arabia. Domestic electricity tariffs in the – tiered – progressive pricing structure were partially raised in 2018. In addition to those increases, the response to other electricity pricing schemes is analyzed: time-of-use and real-time prices. The paper shows that for a household with a low preference for electricity, the 2018 price increases do warrant an adjustment in indoor temperature in the hot summer months and lower electricity use for consumer electronics. For a typical dwelling in Saudi Arabia, the response measure that is most exercised is thermostat set-point adjustments. A subdued response is found for households that have adopted higher energy efficiency or have a high preference for electricity.

14th February 2019

Reforming Industrial Fuel and Residential Electricity Prices in Saudi Arabia

The Saudi electricity sector buys fuel and sells electricity at prices administered by the government. In this analysis, we assume that fuel prices are deregulated — priced at their marginal values or international equivalents — and use a long-term static version of the KAPSARC Energy Model (KEM) for Saudi Arabia. This allows a better understanding of the economic effects of energy price reform packages by providing illustrative estimates of their impacts. We do not propose a specific package of reforms, but seek to show the different channels by which the Saudi economy can benefit. We expand on previous KAPSARC analyses by combining the price reform of fuels used in power plants with the implementation of alternative electricity pricing schemes for households. In particular, we examine the differences between ‘lifeline’, average-cost and marginal-cost electricity pricing policies for residential customers.

29th July 2017

Adding Photovoltaics to the Saudi Power System: What are the Costs of Intermittency?

Intermittent generation from wind or photovoltaics (PV) imposes a cost on the power systems in which they are deployed. These costs vary regionally due to different fuel costs and ramping flexibility of existing grid capacities. With 2015 as a reference year, we examine the costs of PV intermittency and costs of integration to power utilities in Saudi Arabia, using a least-cost approach for the power utilities. The operational facets of PV integration to grid operators will be more pronounced with higher PV penetration, so, to focus on system operation, we exclude the capital costs. The excess of the price paid to new PV generators over the current average consumer tariff would also have to be covered by the utility, and will depend on the details of the power purchase contracts.

28th November 2016

The Responsiveness of Fuel Demand to Gasoline Price in Passenger Transport

Empirical estimates of fuel demand changes to price variation are based on historical consumption and prices, and can be applied as a single point estimate to a wide range of price movements. However, if fuel prices are set outside the boundaries of historical changes, policymakers may be concerned as to the validity of the empirically assessed price elasticity. We have developed a transport model to provide a techno-economic estimate of the price elasticity of fuel demand. It incorporates consumers’ choices as a result of several factors, including fuel substitutes, available transport modes, income, value of time and magnitude of price change.

26th July 2016

The Prospects for Coal-fired Power Generation in Saudi Arabia

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 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.

24th December 2015

Efficient Industrial Energy Use: The First Step in Transitioning Saudi Arabia’s Energy Mix

External observers worry about whether Saudi domestic consumption of oil will crowd out exports. This is based on simple extrapolations which suggest that in a little more than 20 years Saudi Arabia may become a net importer of hydrocarbon fuels. However, our research does not support this. Based on the “baseline scenario” macroeconomic assumptions in Oxford Economics’ global economic and industry models, we project Saudi Arabia’s energy balances until 2032 using the KAPSARC Energy Model (KEM).

7th June 2015

Modeling residential electricity consumption and efficiency within an economic framework

Many countries have promoted energy efficiency and conservation in the residential sector due to its significant contribution to total demand. This paper discusses some of the wider implications of more efficient households on the overall energy system. Various efficiency options, such as thermal insulation or weather stripping, have unique effects on the power load demand throughout the day. The load-shifting potential of these measures is highly dependent on regional climate and residence characteristics. Moreover, the operational decisions made by the power sector to meet demand are contingent on the path by which load evolves during the day. Quantifying the intra-day effects of higher efficiency on total load is therefore useful in assessing the changes in equipment and fuel use decisions made by the utilities.

6th March 2015

Lowering Saudi Arabia’s fuel consumption and energy system costs without increasing end consumer prices

Saudi Arabia aims to reduce the growth of its energy demand. This paper outlines an approach that could help the country to reduce substantively its current fuel consumption and could result in a net economic gain without increasing current end consumer prices and while maintaining positive utility sector net cash flows. Using a new multi-sector equilibrium model developed by KAPSARC (the KAPSARC Energy Model or KEM), we estimate the magnitudes of the potential economic gains that different policies would generate. Our long term static version of the model reveals that an annual economic gain exceeding 23 billion USD in 2011, or almost 5% of that year’s GDP, could have been achieved while the water and power sectors continue to live within their cash flows. Our approach—which introduces investment credits for solar and nuclear and allows more natural gas consumption in the power sector—achieves almost all the benefit of raising inter-sector transfer prices for fuels to world market equivalences, but only moderately increases current transfer prices. Importantly, this gain does not require an increase in consumer prices of electricity or water.

7th March 2014

Web-Based User Interfaces for Mathematical Models to Support Decisions: The Fuel Distribution Network Optimizer

Mathematical models provide quantitative analyses that can inform policy decisions. We argue that two attributes can support models’ adoption by policymakers: an intuitive graphical interface and active engagement between modelers and policymakers.

30th September 2024

Modeling the Distribution and Transshipment of Refined Oil Products

KAPSARC has developed an optimization model to characterize the distribution of oil products after the refining stage. The model ensures that the demand for any group of refined oil products is simultaneously met while minimizing the social costs associated with the distribution system. The distribution system moves products from oil refineries or import terminals to petroleum bulk plants using multiple modes of transport. Then, the products are moved from bulk plants to customers via trucking or pipeline transport.

11th May 2023

Electricity Transmission Formulations in Multi-Sector National Planning Models: An illustration using the KAPSARC Energy Model

The purpose of this study is to assess policy-relevant effects of incorporating a more proper representation of electricity transmission in multi-sector national policy models. This goal is achieved by employing the KAPSARC Energy Model (KEM), which is the first publicly available large-scale energy policy model for Saudi Arabia. Past studies using KEM have examined industrial pricing policy, residential energy efficiency, the prospects of power generation technologies and residential electricity pricing. These studies have shown that under certain fuel pricing scenarios, significant renewable energy capacity is deployed.

5th November 2017

Real Gross Domestic Income for Saudi Arabia From 1986 to 2021

A country’s national income is defined as the total market value of its output. The most used measure for national income is gross domestic product (GDP). One way to estimate GDP for a country is to sum its government consumption, private consumption, investment, and exports minus its imports. The components of GDP are deflated using a base year to control for inflation (or deflation) over time. While this adjustment effectively controls for changing prices, it may not properly reflect the purchasing power availed or taken away by volatile oil prices for oil-dependent economies.

4th April 2023

Real Gross Domestic Income for Saudi Arabia: A Measure of National Income

“A country’s national income is defined as the total market value of its output. The most used measure for national income is gross domestic product (GDP). One way to estimate GDP for a country is to sum its government consumption, private consumption, investment, and exports minus its imports. The components of GDP are deflated using a base year to control for inflation (or deflation) over time. While this adjustment effectively controls for changing prices, it may not properly reflect the purchasing power availed or taken away by volatile oil prices for oil-dependent economies.”

27th December 2020

Satellite-Assisted Methane Emissions Intensity from Saudi Oil and Gas Production in 2023

In its latest release of the Global Methane Tracker, the International Energy Agency (IEA) imputes methane intensity for each oil and gas producer for 2023.

28th April 2024

A Look Back on Saudi Fossil Fuel Incentives in the Last Decade

The Joint Organisations Data Initiative (JODI) and the Saudi Electricity Company (SEC) have just released energy use data for 2019. This insight provides an up-to-date estimation of how fossil fuel incentives have changed in 2019 compared with 2009.

19th April 2020

An Exposition of Bilinear “Implicit” Subsidy Equations

The price-gap method is popularly applied to estimate energy subsidies, and it simply involves calculating the difference between the market and domestic prices of a good multiplied by the quantity consumed. In the case where subsidies impose foregone revenue rather than direct costs, however, the estimation of these subsidies requires further scrutiny.

10th September 2024

A Decomposition Approach to Energy Policy Analysis

Index decomposition analysis (IDA) has been used to study energy use movements since the 1980s. Methods at that time consisted primarily of multiplying factors that ultimately yielded the aggregate quantity, such as energy use. IDA is a straightforward way for researchers to examine the individual impacts of economic intensity, economic structure, and other factors on energy consumption or greenhouse gas emissions. Other methods could take more complex approaches, such as analyzing the outputs of energy system models, to decompose aggregate quantities.

18th September 2023

Natural Gas Strategies for the Saudi Energy System

Fuel prices in the Kingdom of Saudi Arabia have historically been below international market values. This has stimulated rapid growth in primary energy demand. The Kingdom’s natural gas demand has now outstripped its domestic production, forcing the government to impose rations on consuming sectors, and raising expectations that natural gas production and prices in Saudi Arabia will increase over the next decade.

13th January 2020

KAPSARC’s Contribution to Evaluating the Impact of Price Controls

The European Journal of Operational Research has just published a paper, “Measuring the effects of price controls using mixed complementarity models” (2019). It detailed a series of innovative modeling approaches developed by KAPSARC researchers over the last six years. The models were used to study the effects of administered energy prices in Saudi Arabia and assess the potential benefits of price reform. This commentary gives an overview of that research, including its motivation, coverage and findings.

1st September 2019