Middle East countries are seen as paradise in terms of lack of taxes, cheap gasoline, and big cars with huge and powerful engines. Almost 21% of global oil production comes from The Middle East, 13% just from one country – Saudi Arabia, over 16% of proven global oil reserves are owned by Saudi Arabia. Little is known about challenges countries of these region are facing, most of them related to energy and water efficiency, very low efficiency. Saudi Arabia’s electricity consumption per capita is twice as big as global average; water consumption in Qatar is the highest in the world! Let’s look at this topic through one country, the biggest one which is Kingdom of Saudi Arabia. This country is among others in the region which experience significant economic growth and huge growth in demand for electricity and water. To meet growing demand Saudi Arabia alone will have to invest over $200B over the next ten years according to the ministry of electricity. If demand growth continues Saudi Arabia will become oil importer by 2022!
The numbers, big numbers.
Saudi Arabia consumes over 25% of its oil production for internal purposes, almost one third of that is burned to generate electricity and desalinate water. 500 000 barrels of oil is burned daily to meet 65% of electricity demand, remaining 35% is produced by units fired with natural gas. According to the annual report for 2011 published by Saudi Electricity Company, 50% of electricity is being consumed by residential customers. 72% of residential consumption is being used to power air conditioning units. So, 36% of electricity being produced in Saudi Arabia is being used by residential customers to power air conditioning units. It means that almost 280 000 barrels of oil needs is burned every day, annually it gives impressive value of $10 Billion taking $100 per barrel as oil market price. I do not provide numbers regarding industrial and commercial customers, because tariffs they have are significantly different from residential which cover generation cost only partially, the remaining part comes from government subsidies. That’s why the more energy is delivered to residential customers the bigger is cost to Saudi government. We have similar situation in water desalination sector. Daily per capita consumption of water in The Kingdom is about 265 liters and annual growth rate of 7,5%.
Government noticed the problem several years ago and established Saudi Energy Efficiency Center which has to work on several initiatives which will lead to increased efficiency and reduced consumption of water and electricity. 9 teams were appointed to develop resolutions in the areas of transportation, building, industry, inspections, authorizations…. All of them should lead to significant improvement of energy efficiency measures. I’m afraid none of them focuses on … changing behavior of residential consumers of electricity and water. As stated above consumption of electricity just to power AC units by residential customers’ costs $10B annually, we can expect similar number for desalinated water consumption. I strongly believe that by changing customer’s behavior several percent of consumption can be easily cut. Every percentage point equals to $100M of annual cost of fuel to produce electricity supplying residential AC units. We should not forget that it can also help avoiding part of new investments spend.
I think that there is real opportunity to influence residential consumers’ behavior, despite of many opinions saying that “electricity and water are too cheap”, “consumers don’t care”; “government will not increase tariffs”. The last one can be the truth; nobody really considers any changes in residential tariffs. How to influence consumers’ behavior then?
There is other phenomenon which can help – “Social Saudis”. According to Bloomberg BusinessWeek Middle East 7,8 million Saudis (out of 30 m population) use Facebook, 5 m access Facebook via their mobile phones (on average, every Saudi has 1,8 subscription contracts for mobile services). Saudi Arabia has 4,8 million of active Twitter users, this is 32% of online population and places Saudi Arabia number 1 in the world. 4% of active Twitter users currently reside in Saudi Arabia. There are 190 million YouTube views every day by Saudis, 50% of them on smartphones. If smart phones and social media have changed the way residents of Saudi Arabia communicate, can it also support changing behavior in energy consumption? Let’s recall numbers – every percentage point of reduced electricity being used to power residential air conditioning can save at least $100M annually. I’m very confident that reducing consumption by even 10% will not affect living comfort and will just reduce energy waste.