Saudi Arabia has a greater incentive than most to curb its electricity consumption. Power demand is forecast to almost double over the next 10 years and Saudi Electricity Company (SEC) has responded with an ambitious and costly capacity building programme.
While the kingdom is oil rich, it does not have natural gas reserves to support fuel efficient gas-fired power generation. About 44 per cent of the country’s electricity is generated from oil. This wastes resources the country could otherwise sell internationally at a profit.
According to research by US management consulting firm Oliver Wyman, if Saudi Arabia implements energy-saving initiatives, it could reduce its annual fuel costs by at least $15bn by 2030. Most of the savings – about 52 per cent – would be achieved through the residential sector.
SEC would also be able to significantly slow down its capacity building programme. This could save about $100bn in planned capital investments, which could then be diverted towards other activities including supporting green energy.
Saudi Arabia has taken some steps towards energy conservation, but future initiatives hinge on curbing residential usage. The most effective way to curb electricity consumption would be to raise tariffs to non-commercial customers.
Domestic consumers currently pay between 5 and 26 hals ($ 0.13-0.69) a kilowatt hour, a value much lower than the true cost of production. There are also many exceptions and poor enforcement of the fees.
As a result, citizens have very little to gain from reducing their energy consumption. While reform would bring about immediate results, the government remains hesitant to implement any changes as this would likely prompt a backlash. Until this mindset is reversed, Saudi Arabia will continue to burn vast amounts of oil for domestic power consumption and spend heavily on electricity generation capacity building.