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Jointly reforming the prices of industrial fuels and residential electricity in Saudi Arabia

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  • Matar, Walid
  • Anwer, Murad

Abstract

The Saudi electricity sector currently buys fuel and sells electricity at prices administered by the government. In this analysis, we illustratively explore combining the reform of the fuel prices used in power plants with the implementation of alternative electricity pricing schemes for the households. Compared to the scenario replicating the year 2015, we find:•The aggregate gain to the energy system could reach nearly $12 billion per year by raising both electricity prices to households and industrial fuels to reflect the cost of supply or international markets.•Households would pay an additional $3 billion in electricity costs without any mitigation for the low-income households. However, Lifeline prices would halve this burden, while maintaining greater gains than deregulating fuel prices alone.•The average electricity price paid under the lifeline scenario would be a more manageable 4.0cents/kWh, versus an average marginal-cost price of 7.1cents/kWh.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:enepol:v:109:y:2017:i:c:p:747-756
    DOI: 10.1016/j.enpol.2017.07.060
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    References listed on IDEAS

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    1. Simona Bigerna and Carlo Andrea Bollino, 2014. "Electricity Demand in Wholesale Italian Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January.
    3. 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.
    4. Peter C. Reiss & Matthew W. White, 2005. "Household Electricity Demand, Revisited," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 853-883.
    5. Atalla, Tarek N. & Hunt, Lester C., 2016. "Modelling residential electricity demand in the GCC countries," Energy Economics, Elsevier, vol. 59(C), pages 149-158.
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    Citations

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    Cited by:

    1. Ahmed, Tauqir & Bhatti, Arshad Ali, 2019. "Do power sector reforms affect electricity prices in selected Asian countries?," Energy Policy, Elsevier, vol. 129(C), pages 1253-1260.
    2. Shabaneh, Rami & Schenckery, Maxime, 2020. "Assessing energy policy instruments: LNG imports into Saudi Arabia," Energy Policy, Elsevier, vol. 137(C).
    3. 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).
    4. Matar, Walid, 2018. "Households' response to changes in electricity pricing schemes: Bridging microeconomic and engineering principles," Energy Economics, Elsevier, vol. 75(C), pages 300-308.

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