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Cost, emission, and macroeconomic implications of diesel displacement in the Saudi agricultural sector: Options and policy insights

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  • Elshurafa, Amro M.
  • Alatawi, Hatem
  • Hasanov, Fakhri J.
  • Algahtani, Goblan J.
  • Felder, Frank A.

Abstract

The Saudi agricultural sector relies on diesel for irrigation that is provided to farmers at a price much lower than the average global price, implying significant opportunity costs. By soft-coupling power and macroeconometric models, we assessed cost and economic (macro and sectoral) implications of electrifying irrigation activities in the Saudi agricultural sector via three scenarios: electrifying each individual farm with a dedicated hybrid renewable micro-grid, electrifying the entire farm cluster with central generation, and connecting the entire cluster to the national grid. Compared with the base-case, connecting the farm cluster to the national grid was the most economic but least environmentally friendly. The renewable and central generation scenarios were costlier due to high battery costs and gas infrastructure needed, respectively. Further, the financial viability of the renewable microgrid option depends on the opportunity cost assumption. From an economic (macro and sectoral) perspective, we found that: (i) job and value-added creation effects of saved-diesel spending from export revenues is positive, but quite small implying the more diesel displaced the more benefits realized, (ii) sectoral-specific spending is more growth- and employment-enhancing than general-spending of the government suggesting taking measures to further enhance the efficiency of governmental spending as highlighted in the Fiscal Sustainability Program.

Suggested Citation

  • Elshurafa, Amro M. & Alatawi, Hatem & Hasanov, Fakhri J. & Algahtani, Goblan J. & Felder, Frank A., 2022. "Cost, emission, and macroeconomic implications of diesel displacement in the Saudi agricultural sector: Options and policy insights," Energy Policy, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003159
    DOI: 10.1016/j.enpol.2022.113090
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