King Abdullah Petroleum Studies and Research Center (KAPSARC) has published the first study of its kind that analyzes regional electricity demand in the Saudi Arabia after energy price reforms.
The paper, prepared by the center’s researchers Jeyhun Mikayilov, Abdulelah Darandary, Ryan al-Yamani, Fakhri Hasanov and Hatem al-Atawi showed that residential electricity demand is determined by a variety of drivers, which vary from one area to another.
These drivers include, among other things, market concentration, regional wealth, population and income.
According to the study, dubbed “Regional Heterogeneous Drivers of Electricity Demand in Saudi Arabia: Modeling Regional Residential Electricity Demand,” a better understanding of regional electricity demand and its drivers may allow for tailored price reform and regional household assistance programs.
This is in addition to better anticipating demand responses and estimating the revenues they would get from future price reforms more accurately.
The impact of the 2018 price reforms led to a decline in the total residential electricity consumption of 9.1% nationwide, it noted.
Meanwhile, the central region ranks as the most affected region in the reduction of residential electricity consumption, which decreased to 10.7 percent followed by the eastern region with 8.8 percent, then the western and southern regions with 8.1 percent.
Researchers found that the price, income, weather, and population were considered the drivers of residential electricity consumption in each region.
The short-run impacts of price changes on demand were found to be significant for all regions, at around 0.1 percent, except for the eastern region, for which they were insignificant.
Notably, the eastern region has specific features. It has the highest income compared with the other regions.
The paper recommended utilization of smart meters and deploying strategies to promote the use of efficient appliances, as these meters offer consumers the ability to adjust their habits by monitoring their energy use and supplying them with the data.
Suppliers can also use smart meters to allow consumers to compare their energy use with that of other consumers.
In addition, the research suggests planning optimal housing types considering region-specific features, increasing the insulation capacities of the existing houses/buildings, setting centralized AC's in apartments. The population densities should also be considered in future city expansion plans to ensure sustainable energy consumption.
The study comes under the KAPSARC Global Energy Macroeconometric Model (KGEMM), aiming to analyze the effects of different policy choices, such as energy price and fiscal policy changes, on the economy, assess the effects of the Saudi Vision 2030 initiatives and its targets and link Saudi Arabia’s macroeconomic-energy environment with the global economy/energy markets.
In February 2020, KAPSARC announced making progress in the list of the best research centers regionally and globally, as it jumped 14 ranks in the Middle East and North Africa (MENA) research centers.
It was ranked 15th out of 103 research centers regionally, and 13th out of 60 research centers globally specializing in energy policy.