A look at the response of households to time-of-use electricity pricing in Saudi Arabia and its impact on the wider economy

Abstract

Households in Saudi Arabia account for about half of domestic electricity demand. This high level of consumption is partly due to historically low prices. These prices have also been flat throughout the day. Policymakers are exploring different pricing policies to help reduce this share. Time-of-use (TOU) pricing is one such option. This paper assesses the potential effects TOU pricing will have on households and the wider economy.We quantify how households may react to a price change by focusing on two of the biggest electricity-consuming household items: appliances and air-conditioners. Price response features that deal with the usage of these items are incorporated in a modeling framework that we have developed. Based on an assumed TOU price that the power utility may charge during peak summer hours, the main findings of our analysis for the year 2011 are: Keywords: Saudi Arabia, TOU price, Residential sector, Price response