Energy efficiency vital for KSA’s economic and social development

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Updated 20 July 2014
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Energy efficiency vital for KSA’s economic and social development

The Kingdom has witnessed unprecedented economic and industrial development in the last decades, which has led to an increase in the Kingdom’s domestic energy consumption.
Based on the local energy consumption trends, forecasts indicate an increase in domestic energy consumption with a growth rate which could reach 4 per cent to 5 percent annually until 2030.
Although this growth in demand is partially attributed to the industrial growth and growing economic prosperity in the Kingdom, a rather signify cant portion of it results from the inefficient use of energy; deeming this accelerated growth unsustainable.
Whereas the vast majority of countries have managed to lower the energy intensity of their economies, the Kingdom’s energy intensity increased significantly over the last two decades.
Hence, it is a strategic imperative for the Kingdom that energy efficiency becomes a major topic for all decisions related to an increase in demand for fuel and feedstock.
The Kingdom’s demand-side energy efficiency journey the first National Energy Efficiency Program (NEEP) was launched in 2003 as a three-year term temporary program to improve the management and the efficiency of electricity generation and consumption in the Kingdom. This program was ended in 2006.
To build on the experience gained from the previous program and to sustain and unify energy efficiency efforts under one permanent roof, in 2007 the Ministry of Petroleum and Mineral Resources, supported by other government entities in the Kingdom, recommended the creation of a permanent national entity. As a result of this recommendation, the Saudi Energy Efficiency Center (SEEC) was established in 2010 by a Council of Ministers’ decree. Since then, SEEC has been responsible for the demand-side energy efficiency effort in the Kingdom, with the mission to improve domestic energy consumption efficiency, and coordinate all related activities between governmental and non-governmental stakeholders. SEEC is temporarily under the King Abdulaziz City for Science & Technology (KACST) with a Board of Directors composed of more than 20 entities from ministries, government entities, and companies.

The key objectives of SEEC are to:
Develop a national energy efficiency program; Propose energy efficiency policies and regulations, and monitor their implementation; Promote awareness; Participate, as needed, in the implementation of pilot projects.
In 2012, SEEC launched the Saudi Energy Efficiency Program (SEEP – called hereafter ‘the Program’) with the objectives of improving the Kingdom’s energy efficiency by designing and implementing initiatives and their enablers.
A sub-committee was established by SEEC’s Board, chaired by the Ministry of Petroleum and Mineral Resources and composed of members from all related government entities, to establish the program. The subcommittee focused the program’s scope of work on three main sectors (buildings, transportation, and industry) representing more than 90 per cent of the Kingdom’s energy consumption, and five enablers (regulations, Energy Services Companies, funding, governance, and awareness). The sub-committee also ensured that the program followed a set of guiding principles:

The program is limited to energy demand-side management only;
The program does not include price reforms;
The program designs energy efficiency initiatives based on the effects on the end-users (to ensure reasonable payback periods);
The program designs the initiatives in consensus with the stakeholders, including the private sector if necessary.
Since its inception, the program has been a consensus-based intergovernmental effort involving all government, semi-government, and private stakeholders through weekly working sessions, workshops, and detailed technical research and studies. In addition, partnerships and collaboration were established with foreign government entities and experts to benefit from their experience (for example best practice exchange, data sharing).
Approximately 120+ professionals from 20+ entities have been mobilized to work directly on the program while hundreds of government employees have been working on implementing the energy efficiency initiatives. The program is organized in specialized work-streams by sectors and enablers; the technical teams have used the same fact-based bottom-up approach to define the strategy, the initiatives, the enablers, and their implementation plan.
The approach has been as follows:

Step 1 – Energy demand analysis consisting of:
Data collection and analysis of energy demand by end-use sectors in the Kingdom; Identification of key energy consumption drivers for each sector; Prioritization of sectors and drivers.

Step 2 – Establishment of technical teams and mobilization of stakeholders consisting of:
Identification of government, semi-government, and private sector stakeholders for each sector;
Creation of technical team for each sector with stakeholders’ representatives and technical experts;
Liaison with international organizations and experts, and establishment of partnerships.

Step 3 – Design and planning of initiatives and enablers consisting of:
Benchmarking of energy efficiency initiatives globally and assessment of applicability in the Kingdom;
Proposal of energy efficiency initiatives to the sub-committee (monthly meetings);
Selection of energy efficiency initiatives by the sub-committee;
Design and implementation plan detailing for selected energy efficiency initiatives.

Step 4 – Implementation of energy efficiency initiatives and enablers consisting of:
Ensuring that enablers are in place: budget and manpower for government entities,
private sector infrastructure (e.g. testing labs, ESCOs), regulations & standards;
Handing over of energy efficiency initiatives to the relevant entities for implementation;
Monitoring of implementation and evaluation of impact on energy consumption/efficiency.

The energy efficiency initiatives are implemented by the various entities in accordance with their jurisdiction and mandate. The program may provide temporary support to launch and monitor the implementation of the initiatives until the entities have been enabled through allocation of new resources.
The program is being monitored by the Review & Coordination Team (RCT) to ensure adherence to the initiatives’ objectives and their timeline commitments. In addition, the RCT coordinates and identifies interdependencies amongst the program’s teams and the various government entities implementing the energy efficiency initiatives.

Developments in the buildings sector
The program has focused its initial efforts on increasing the minimum energy performance standards (MEPS) for air conditioners (ACs), lighting products, various other home appliances (such as washing machines and driers), and on enforcing thermal insulation in new buildings. In addition, efforts have been initiated with the National Committee of the Saudi Building Code to enhance and revise measures and enforcement mechanisms related to energy efficiency in new buildings. Existing public buildings will be retrofitted to increase their energy efficiency, whereas households in residential buildings will be incentivized through financial schemes to replace existing inefficient products with efficient ones.

Developments in the industrial sector
The program has been focused on the petrochemical, cement, and steel industries, representing roughly 80 per cent of industrial energy consumption.

ACs example: Cooling of buildings roughly accounts for half of the electricity consumed in the Kingdom.
Yet at the outset of the Program, the MEPS for ACs were low and inadequately enforced. The Saudi Standards Metrology & Quality Organization (SASO) and the program worked with ASHRAE, AHRI, and the AC industry (manufacturers, importers, and distributors) to increase MEPS in line with international best practices.
Subsequently, all stakeholders, such as the Ministry of Commerce & Industry (MoCI) and Saudi customs, jointly revamped the AC product control mechanism to enforce a high level of compliance with the new MEPS. Local and international testing laboratories were also engaged to ensure the readiness of the testing/ inspection/certification (TIC) infrastructure in the Kingdom. Split AC MEPS were raised on 7 September 2013 to 9.5 Energy Efficiency Rating (from 7.5) with an additional increase to 11.5 EER in 2015, yielding a 30–35 percent electricity saving for cooling compared to the businesses-usual scenario. To date, around 50 AC suppliers have declared more than 800,000 non-compliant AC units to be re-exported, dismantled for spare parts, or revamped to meet new MEPS.

Existing plants (in those sectors) are to be given aspirational energy intensity (EI) levels based on international benchmark average performance, to be achieved within a specific timeframe. A consensus is being built with the industry players to ensure that these levels are not jeopardizing their competitiveness. In addition, the Program is putting in place tools to support the industry in achieving these levels.
New plants will have to be designed and built to meet international energy efficient standards in order to obtain the various licenses and permits required to operate in the Kingdom. MEPS for electrical motors have been increased and the Program will follow suit with other common industrial equipment (such as boilers).

Developments in the land transportation sector
Land transportation accounts for over 90 per cent of the energy consumption of the transportation sector in the Kingdom. The program has focused most of its initial efforts on light duty vehicles (LDVs) with two goals in mind: Enhance the fuel economy of incoming vehicles and reduce the fuel consumption of on-the-road vehicles.
As for new incoming LDVs, a label reporting the fuel economy of the vehicle will be mandatory starting in August 2014. In addition, automotive manufacturers are to comply with the Kingdom’s new fleet average fuel economy standard for incoming LDVs, starting in the second half of 2015 or early 2016.
For the on-the-road fleet of LDVs, the program is assessing the opportunity to incentivize owners to replace their old inefficient vehicles with new efficient ones. In addition, the program is collaborating with multiple government agencies to establish temporary mass transport solutions until the planned public transportation projects are completed.
Heavy duty vehicles (HDVs) have not been overlooked, since they account for a significant share of the energy consumption. Multiple HDV initiatives are currently under analysis including: Anti-idling regulations, aerodynamic additives, and retirement programs for old vehicles.
Both LDVs and HDVs are to be subject to rolling resistance and wet grip requirements for tires starting November 2015 and November 2016 respectively.

Enablers
The program has been collaborating with the various government entities involved in urban planning decisions to ensure that energy efficiency requirements are included in their guidelines.
The program has placed special attention on product control mechanisms and enforcement (Testing, Inspection, and Certification) to ensure a high level of compliance with the new regulations and standards.
The development of awareness campaigns by the program has been synchronized with changes to the regulations and standards, in order to provide the general public with the rationale for those changes.
For example, an unprecedented AC awareness campaign is set to be launched before the summer in full collaboration with the AC industry, which will be contributing financially with its Corporate Social Responsibility (CSR) programs.
The program has worked with the Ministry of Finance to establish a mechanism with quantitative criteria for selecting initiatives with financial incentives. Those potential energy efficiency initiatives would be focused on incentivizing households to accelerate the retirement of their inefficient assets (such as AC, lighting products, and cars).
The program has been devising strategies to support the development of Energy Services Companies in
the Kingdom. These include the establishment of an accreditation system, a measurement and verification protocol, and standard energy services performance contracts. In addition, the ambitious government buildings retrofitting lead-by-example initiative will create strong demand for their services.

‘Cooling of buildings roughly accounts for half of the electricity consumed in the Kingdom.’

The government intends to have a Saudi Energy Efficiency Law and it has been working with an international law firm and the legal representatives from the stakeholder government entities to draft it.
Lessons learnt by the program through the challenges faced
A number of important lessons were learned during the development of the program:
1. Technical expertise and approach: The team should use a fact-based systematic methodological approach in the design and implementation of the Program to avoid conflicts of opinions and give confidence to the stakeholders that decisions are rational and unbiased.
2. Stakeholder engagement: The team should engage with the government and private sector stakeholders from the inception of the program to ensure practical initiative design and buy-in for smooth implementation.
3. Leadership commitment: The team should have the continuous support of the highest level of the government, to alleviate the hurdles which are bound to present themselves for the program, as the interest of the Kingdom might conflict with the status quo.
4. Coordinated enforcement: Enforcement of the regulations and standards ought to be optimized by developing a unified enforcement approach and coordinating the various government entities’ enforcement efforts, in order to ensure high levels of compliance.

Prince Abdulaziz bin Salman is Deputy Minister in the Ministry of Petroleum and Mineral Resources.


Pakistani central bank lifts interest rate as inflation bites

Updated 44 min 39 sec ago
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Pakistani central bank lifts interest rate as inflation bites

ISLAMABAD: Pakistan’s central bank raised its key interest rate to 12.25% on Monday, warning that already soaring inflation risked further rises on the back of higher oil prices and reforms required for a bailout from the International Monetary Fund.
The 150 basis points increase follows a preliminary agreement last week with the IMF for a $6 billion loan that is expected to come with tough conditions, including raising more tax revenues and putting up gas and power prices. It was the eighth time the central bank has increased its main policy rate since the start of last year.
With economic growth set to slow to 2.9% this year from 5.2% last year, according to IMF forecasts, the rate rise adds to pressure on Prime Minister Imran Khan, who came to power last year facing a balance of payments crisis that has now forced his government to turn to the IMF.
Higher prices for basic essentials including food and energy has already stirred public anger but the central bank suggested there was little prospect of any immediate improvement.
Noting average headline inflation rose to 7% in the July-April period from 3.8 percent a year earlier, the central bank said recent rises in domestic oil prices and the cost of food suggested that “inflationary pressures are likely to continue for some time.”

 

It said it expected headline inflation to average between 6.5% and 7.5% for the financial year to the end of June and was expected to be “considerably higher” in the coming year. Expected tax measures in next month’s budget as well as higher gas and power prices and volatility in international oil prices could push inflation up further, it said.
It said the fiscal deficit, which the IMF expects to reach 7.2% of gross domestic product (GDP) this year, was likely to have been “considerably higher” during the July-March period than in the same period a year earlier due to shortfalls in revenue collection, higher interest payments and security costs.
Despite some improvements, financing the current account deficit remained “challenging” and foreign exchange reserves of $8.8 billion were below standard adequacy levels at less than the equivalent of three months of imports.
The central bank said it was watching foreign exchange markets closely and was prepared to take action to curb “unwarranted” volatility, after the sharp fall in the rupee over recent days that saw the currency touch a record low of 150 against the US dollar.
Details of what Pakistan will be required to do under the IMF agreement, which must still be approved by the Fund’s board, have not been announced but already opposition parties are planning protests.
As well as higher energy prices that will hit households hard, there are also expectations of new taxes and spending cuts in next month’s budget to reach a primary budget deficit — excluding interest payments — of 0.6% of GDP.
With the IMF forecasting a primary deficit of 2.2% for the coming financial year, that implies squeezing roughly $5 billion in extra revenues from Pakistan’s $315 billion economy, which has long suffered from problems raising tax revenue.

FACTOID

Pakistan’s economic growth is set to slow to 2.9% this year.