Reducing subsidies and increase in peak-time energy delivery can contribute billions to the economy
A new study published by the King Abdullah Petroleum Studies and Research Center (KAPSARC) has claimed that restructuring Saudi Arabia’s power generation sector, in conjunction with accompanying price reforms, has the potential to contribute an additional SR15 billion ($4 billion) to the Saudi economy.
The report, titled Restructuring Saudi Arabia’s Power Generation Sector: Model-Based Insights, was written with the goal of helping policymakers in the kingdom achieve two key objectives: improving efficiency in supply during periods of peak consumption and reducing inefficient consumption.
To help illustrate their findings, they developed a model that simulated the effects of private generation companies entering the sector as well as revising the price of fuel to $3 per one million British thermal units (MMBtu).
The report was authored by Betrand Rioux, Fernando Oliveira, Axel Pierru and Nader Al Kathiri, all researchers at KAPSARC, an independent think-tank that provides research into energy policy, technology and the environment, in collaboration with the Principal Buyers Department of Saudi Electricity Company.
Their findings resulted in surplus driven by greater efficiency and, therefore, a reduction in fuel subsidies. They calculate that this exceeds the reduction in consumer spending caused by the fuel increases as the surplus will be enough to fund compensation schemes such as the Citizen Account.