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Efficient industrial energy use: The first step in transitioning Saudi Arabia's energy mix


  • Matar, Walid
  • Murphy, Frederic
  • Pierru, Axel
  • Rioux, Bertrand
  • Wogan, David


In Saudi Arabia, industrial fuel prices are administered below international prices and firms make decisions based on low energy prices, increasing domestic energy demand. This analysis explores alternative policies designed to induce a transition to a more efficient energy system by immediately deregulating industrial fuel prices, gradually deregulating fuel prices, and introducing investment credits or feed-in tariffs. It uses a dynamic multi-sector, mixed-complementarity model. Continuing existing policies results in a power system still fueled completely by hydrocarbons. The alternative policies result in a transition to a more efficient energy system where nuclear and renewable technologies become cost-effective and produce 70% of the electricity in 2032. Introducing the alternative policies can reduce the consumption of oil and natural gas by up to 2 million barrels of oil equivalent per day in 2032, with cumulative savings between 6.3 and 9.6 billion barrels of oil equivalent. The energy system sees a net economic gain up to half a trillion 2014 USD from increased oil exports, even with investments in nuclear and renewables. The results are robust to alternative assumptions regarding the value of oil saved and the growth in end-use energy demand.

Suggested Citation

  • Matar, Walid & Murphy, Frederic & Pierru, Axel & Rioux, Bertrand & Wogan, David, 2017. "Efficient industrial energy use: The first step in transitioning Saudi Arabia's energy mix," Energy Policy, Elsevier, vol. 105(C), pages 80-92.
  • Handle: RePEc:eee:enepol:v:105:y:2017:i:c:p:80-92
    DOI: 10.1016/j.enpol.2017.02.029

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    References listed on IDEAS

    1. Al-Abbadi, Naif M., 2005. "Wind energy resource assessment for five locations in Saudi Arabia," Renewable Energy, Elsevier, vol. 30(10), pages 1489-1499.
    2. Frederic Murphy & Axel Pierru & Yves Smeers, 2016. "A Tutorial on Building Policy Models as Mixed-Complementarity Problems," Interfaces, INFORMS, vol. 46(6), pages 465-481, December.
    3. Matar, Walid & Murphy, Frederic & Pierru, Axel & Rioux, Bertrand, 2015. "Lowering Saudi Arabia's fuel consumption and energy system costs without increasing end consumer prices," Energy Economics, Elsevier, vol. 49(C), pages 558-569.
    4. Mansouri, Noura Y. & Crookes, Roy J. & Korakianitis, Theodosios, 2013. "A projection of energy consumption and carbon dioxide emissions in the electricity sector for Saudi Arabia: The case for carbon capture and storage and solar photovoltaics," Energy Policy, Elsevier, vol. 63(C), pages 681-695.
    5. Rehman, Shafiqur & Ahmad, Aftab, 2004. "Assessment of wind energy potential for coastal locations of the Kingdom of Saudi Arabia," Energy, Elsevier, vol. 29(8), pages 1105-1115.
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    Cited by:

    1. Khalifa, Ahmed & Caporin, Massimiliano & Di Fonzo, Tommaso, 2019. "Scenario-based forecast for the electricity demand in Qatar and the role of energy efficiency improvements," Energy Policy, Elsevier, vol. 127(C), pages 155-164.
    2. Rioux, Bertrand & Galkin, Philipp & Murphy, Frederic & Feijoo, Felipe & Pierru, Axel & Malov, Artem & Li, Yan & Wu, Kang, 2019. "The economic impact of price controls on China's natural gas supply chain," Energy Economics, Elsevier, vol. 80(C), pages 394-410.
    3. Matar, Walid & Anwer, Murad, 2017. "Jointly reforming the prices of industrial fuels and residential electricity in Saudi Arabia," Energy Policy, Elsevier, vol. 109(C), pages 747-756.
    4. Octavio Escobar, Ulises Neri, Stephan Silvestre, 2020. "Energy policy of fossil fuel–producing countries: does global energy transition matter?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 17(1), pages 5-30, June.
    5. Soummane, Salaheddine & Ghersi, Frédéric & Lefèvre, Julien, 2019. "Macroeconomic pathways of the Saudi economy: The challenge of global mitigation action versus the opportunity of national energy reforms," Energy Policy, Elsevier, vol. 130(C), pages 263-282.
    6. Poudineh, Rahmatallah & Sen, Anupama & Fattouh, Bassam, 2020. "An integrated approach to electricity sector reforms in the resource rich economies of the MENA," Energy Policy, Elsevier, vol. 138(C).
    7. Wogan, David & Murphy, Frederic & Pierru, Axel, 2019. "The costs and gains of policy options for coordinating electricity generation in the Gulf Cooperation Council," Energy Policy, Elsevier, vol. 127(C), pages 452-463.
    8. Lopez-Ruiz, Hector G. & Blazquez, Jorge & Vittorio, Michele, 2020. "Assessing residential solar rooftop potential in Saudi Arabia using nighttime satellite images: A study for the city of Riyadh," Energy Policy, Elsevier, vol. 140(C).
    9. Frederic Murphy & Axel Pierru & Yves Smeers, 2016. "A Tutorial on Building Policy Models as Mixed-Complementarity Problems," Interfaces, INFORMS, vol. 46(6), pages 465-481, December.


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