"In Saudi Arabia today, we are power hungry and
water thirsty," said John Sfakianakis, chief economist, Banque Saudi
Fransi, Riyadh. "We need to have a fundamental, paradigm shift on our
thinking and planning for the future of our energy and water generation to meet
rapidly growing demand. We must become more efficient in how we consume energy
and water, and more resourceful in how we produce and distribute them."
He said "We have to transform the current dependence
on hydrocarbons to produce energy to a variable energy mix. Saudi Arabia has all
the elements to become a world leader in renewables, especially in solar
energy. The current direction of Saudi Arabia is a one way street that won't
lead us anywhere."
Population is increasing by more than 2 percent currently
and energy consumption is annually growing by 8 percent and in certain areas
during the summer electricity demand grows by more than 30 percent. "As
demand is growing, we are also consuming more and more oil and gas to cater
toward domestic demand which rising exponentially. More oil and gas for
domestic consumption, means less hydrocarbons underground and less capacity to
export which should not exceed 7 million by 2028," he added.
Preserving and efficiently consuming oil would permit a
higher share for export to a global market which always requires secure
supplies, often ignoring security of demand. Energy inefficiencies compound the
problem as market prices are inexistent breading more unscrupulous consumption.
People are takers and they will take the incentives provided by governments, if
low gasoline prices are available then consumers will opt for large cars if
gasoline prices rise, then fuel efficiency will become more prevalent in
people's minds. The same goes for households who are energy inefficient both in
terms of consumption as well as being owners of homes and commercial space.
People are inefficient or efficient users as prices and incentives fluctuate.
Saudi housing insulation is inadequate and more than 75 percent of homes remain
improperly insulated. The future of the country's environment is being
currently compromised as the country's carbon footprint is also rising which
means that quality of life has an impact on productivity and economic output.
So, more people and less exportable oil capacity in an energy inefficient
environment is a very perilous mix.
According to data revealed by Sfakianakis, who was
speaking at the Saudi Arabian Infrastructure Congress 2010 in Riyadh, the
Kingdom is No.3 globally in per capita water consumption. Additionally, water
consumption projections see a 70 percent increase by 2014, which is a huge
burden on the government and the country's resources. This fact is put into
better light given the fact that 33 percent of the water supply is lost to
leakage in the distribution system. Paris, which has become a leader in water
conservation within its network, only looses 5 percent.
On the issue of hydrocarbon energy production and
consumption, there is a great looming danger of growing local consumption of
energy burning away potential export revenues. "Today, the opportunity
cost of increased local consumption of energy can be monetized to the tune of
hundreds of billions of riyals if we take into account the current water and
electricity price incentives as well as the future opportunity cost of
hydrocarbons. These are monies that could have been made from exporting the oil
for hard currency, but instead, this value is being consumed, hence 'burned,'
locally," he commented.
In terms of electricity, the Kingdom today consumes 41
gigawatts of energy, a number that is expected to triple by 2032 to reach 120
gigawatts. To put the level of consumption into perspective, total Gulf
Cooperation Council (GCC) consumption amounts to 665 gigawatts, while that of
Saudi Arabia adds up to 345 gigawatts, or more than half.
"If this detrimental trend of high energy and water
consumption continues, we will find ourselves in a situation where the only
exportable goods we have hydrocarbons" are insufficiently available to
sustain our population growth and economic aspirations. Our water will be less
available and more costly to find and consume," said Sfakianakis.
"There is no other choice but to invest in nuclear power and in sources of
renewable energy like solar and wind power." Sfakianakis concluded by
saying that the country has the elements to become a bright star in renewables
using its current hydrocarbon platform to build its future. But hard decisions
have to be made today. In economics like in life, it's all about taking
decisions, some are good and some are bad but all decisions have to be
prioritized and choices have to be made. The current situation does not allow
for Saudi Arabia to continue on the path of energy luxury within.
