KAPSARC Study Analyzes Regional Electricity Demand After Energy Price Reform

Energy price reform contributes to reducing electricity consumption in Saudi Arabia (Asharq Al-Awsat)
Energy price reform contributes to reducing electricity consumption in Saudi Arabia (Asharq Al-Awsat)
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KAPSARC Study Analyzes Regional Electricity Demand After Energy Price Reform

Energy price reform contributes to reducing electricity consumption in Saudi Arabia (Asharq Al-Awsat)
Energy price reform contributes to reducing electricity consumption in Saudi Arabia (Asharq Al-Awsat)

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.



Biden Blocks Takeover of US Steel by Japan's Nippon Steel

FILE PHOTO: The logos of Nippon Steel Corp. are displayed at the company headquarters in Tokyo, Japan March 18, 2019. REUTERS/Yuka Obayashi/File Photo
FILE PHOTO: The logos of Nippon Steel Corp. are displayed at the company headquarters in Tokyo, Japan March 18, 2019. REUTERS/Yuka Obayashi/File Photo
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Biden Blocks Takeover of US Steel by Japan's Nippon Steel

FILE PHOTO: The logos of Nippon Steel Corp. are displayed at the company headquarters in Tokyo, Japan March 18, 2019. REUTERS/Yuka Obayashi/File Photo
FILE PHOTO: The logos of Nippon Steel Corp. are displayed at the company headquarters in Tokyo, Japan March 18, 2019. REUTERS/Yuka Obayashi/File Photo

US President Joe Biden blocked Nippon Steel's proposed $14.9 billion purchase of US Steel on Friday, citing national security concerns, dealing a potentially fatal blow to the contentious plan after a year of review.

The deal was announced in December 2023 and almost immediately ran into opposition across the political spectrum ahead of the Nov. 5 US presidential election. Both then-candidate Donald Trump and Biden vowed to block the purchase of the storied American company, the first to be valued at more than $1 billion. US Steel once controlled most of the country's steel output but is now the third-largest US steelmaker and 24th biggest worldwide.

"A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains," Reuters quoted Biden as saying. "Without domestic steel production and domestic steel workers, our nation is less strong and less secure."

Nippon, the world's fourth-largest steelmaker, paid a hefty premium to clinch the deal and made several concessions, including a last-ditch gambit to give the US government veto power over changes to output, but to no avail.

In a statement, Nippon and US Steel blasted Biden's decision, calling it a "clear violation of due process" and a political move, and saying they would "take all appropriate action" to protect their legal rights.
Pittsburgh-based US Steel had warned that thousands of jobs would be at risk without the deal.
US Steel CEO David Burritt said late on Friday the company planned to fight Biden's decision, which he termed "shameful and corrupt." He added that the president had insulted Japan and also refused to meet with the US company to learn its point of view.
"The Chinese Communist Party leaders in Beijing are dancing in the streets," Burritt added.
The United Steelworkers union, which opposed the merger from the outset, praised Biden's decision, with USW President David McCall saying the union has "no doubt that it's the right move for our members and our national security."
White House spokesperson John Kirby defended the decision.
"This isn't about Japan. This is about US steelmaking and keeping one of the largest steel producers in the United States an American-owned company," Kirby said, rejecting suggestions the decision could raise questions about the reliability of the US as a partner. Nippon Steel has previously threatened legal action if the deal was blocked. Lawyers have said Nippon Steel's vow to mount a legal challenge against the US government would be tough.
The Committee on Foreign Investment in the United States spent months reviewing the deal for national security risks but referred the decision to Biden in December, after failing to reach consensus.
It is unclear whether another buyer will emerge. US Steel has reported nine consecutive quarters of falling profits amid a global downturn in the steel industry. US-based Cleveland-Cliffs, which previously bid for the company, has seen its share price fall to the point where its market value is lower than that of US Steel.
Shares of US Steel closed down 6.5% at $30.47 on the New York Stock Exchange.
A spokesperson for President-elect Trump, who also vowed to block the deal, did not immediately comment on Friday.