Posted: June 5th, 2015

cost of electricity production in Kuwait

According to officials in the MEW, the cost of electricity production in Kuwait reached KD 3bn in 2012, while consumers do not pay more than KD 160m annually (due to the aforementioned subsidy).

3.13 Cost Components

The reason for the cost increase lies in the components used in generating electricity in Kuwait. According to top officials, electricity is generated by burning a mixture of liquidated fuel, more than 70% of which is crude oil and other oil products, and 30% is liquidation gas. This draws 300,000 barrels of oil daily from Kuwait’s oil production (about 10% of all national production). In addition, the government has to annually import liquidated natural gas valued at $1.5-2bn (US) to use in the mixture to generate electricity. From an economic point of view, if Kuwait exported the oil used in generating electricity, it would have obtained over KD 3bn annually. It appears that the situation is getting worse, and that the cost of electricity production will increase.

According to the [144], the huge growth in consumption of oil for electricity generation in Kuwait will drain 600,000 barrels per day by 2017 (i.e. about 20% of Kuwait’s oil production). This increase in electricity consumption is expected in view of the expansion of housing, new projects, and increasing population. According to [150], the population of Kuwait is expected to increase to 4.34 million by the end of 2017. Other reports talk about an increase of 5.3% annually in electricity consumption in Kuwait over the coming years.

3.14 Subsidy Comparison of other Gulf Countries and Kuwait

A comparison of the charges for electricity in different Gulf countries shows that the charges collected from electricity consumers in Kuwait are the lowest. Moreover, it is the only country applying a flat rate of 2 fills/kW regardless of the type and amount of usage. This is one of the main factors pushing up the cost of electricity production shouldered by the government.

Other Gulf countries adopt the escalating rate pricing system in electricity charges imposed on users, by dividing them into different segments as per their usage level (Table ‎3.10). As for the charge of residential electricity consumers, in Qatar it is 6 fills/kW for those using less than 4000 kW, rising to 8 fills/kW for those who exceed this limit. In Saudi Arabia the cost is divided into eight segments per the amount of consumption, and ranges from 4 to 20 fills/kW. In Oman it is divided into five segments and ranges from 7.5 to 22 fills/kW. In Bahrain, the charge of electricity paid by the citizens is divided into three segments pursuant to the amount of usage, and ranges from 2.25 to 12 fills/kW, while there is a fixed rate for expatriates (12 fills/kW) regardless of the amount of usage. Dubai has the highest charge of electrical usage among the GCC countries. Charges are divided into four segments according to the used amount, and range from 18 to 30 fills/kW.

Table ‎3.10: Electricity subsidy in GCC countries

3.15 Kuwait Renewable Energy (Al-Shagaya Project)

The Al-Shagaya project can be considered Kuwait’s first ambitious attempt at establishing a base and securing a foothold in the renewable energy market. It is an important step towards the realization of a GCC state that is free of its dependence on oil as a primary means of energy production. This renewable energy project, as a recap, and as aforementioned, will be developed in phases. While the government will finance the first phase, the second and third phases will be offered to investors on a Build-Operate-Transfer (BOT) basis for 25 years, during which the government pledges to buy all output. The project includes 70 MW of different commercially proven technologies, mainly 50 MW parabolic trough technology equipped with Thermal Energy Storage (TES) system, and backed up by fuel boilers of about 10 MW Photovoltaic and 10 MW Wind [151].

3.16 Aim and Objectives of Al-Shagaya Project

According to R&D [151], the purpose behind the development of the Al-Shagaya project is to enable the assessment of the performance of different renewable energy technologies employed by Kuwait. These various technologies are PV, CSP, and wind in addition to energy storage with and without co-firing capacities under local climate conditions. [152] said the target is for renewable energy sources to contribute up to 15 percent of Kuwait’s total power production by 2030.

3.17 The Variables of Attitude and Knowledge in Relation to RE

3.17.1 Attitudes and RE

Attitude is among the more important obstacles faced when trying to implement RE, since there is an existing consistency between an individual’s attitude and his or her subsequent behaviour. The consistent relationship between attitude and behaviour becomes obvious when researchers try to measure attitude as a means of predicting human behaviour. Indeed attitudes and behaviour variables are complex. Thorough, interdisciplinary understanding ‘is a pre-requisite for any strategy aimed at change’ [153]. [154] agreed that looking for social acceptance of RE innovation is an important factor for successful implementation. Studies show that attitudes are learned and not inherited, and are organized around beliefs, but both beliefs and attitudes are learned. However, Bang et al.’s (2000) study of consumer concerns, knowledge, belief and attitudes toward RE suggested that the consumers’ environmental concerns about RE to-date are more emotionally charged than fact- or knowledge-based [155].

For the definition of ‘attitude’, this research adopts the description given by a previous study [156]: ‘a learned predisposition to respond in a consistently favourable or unfavourable manner toward an object’. Predisposition is inside and unobservable, manifest in a hidden readiness to respond to various situations and issues.

3.17.2 Knowledge and RE

[50] stressed the importance of examining public and officials’ understanding and knowledge of RE sources and its benefits for human health and the environment. For the definition of ‘knowledge’, from reading several studies on RE sources knowledge and understanding, the following definition has been postulated: familiarity with new energy technologies, the RE structure and consumption patterns, and understanding of energy requirements.

3.18 Attitudes and Knowledge in Relation to RE

Empirical studies regarding attitudes and knowledge on RE, especially wind and solar energies, have found that the importance of public and official attitudes and knowledge about RE cannot be overemphasized [157]. The lack of public and official awareness of RE sources and its environmental, social, and economic benefits, especially wind and solar, are considered major barriers.

Over the years, the perceptions held by groups or individuals have been of interest in many empirical studies. Many studies [158][159] showed that public attitudes, understanding, and knowledge of RE provide input into decisions and provide factors that will determine the successful implementation of RE technologies, one of which is broadly assumed to be ‘public acceptance’ [55]. The US Federal Energy Administration stated that public understanding of the energy problem is a key issue because ‘consumers will not conserve unless they know how and why they should’ [158]. Some studies [160] [161] have applied both quantitative and qualitative methods (mixed-method approach) and suggested that this combination is more useful in helping researchers gain more powerful information than they would by using either method in isolation. Qualitative interview data provide valuable insights for constructing survey questionnaires as well as providing complete explanations of survey results, and are clearly the best way to ascertain relatively unquantifiable concepts such as attitudes and knowledge.

[162] described surveys as ‘a halfway house on the qualitative-quantitative continuum… may be qualitative, as when interviews or open-ended questionnaires are used, or quantitative, as when closed-end or multiple-choice questions are used’. [163] indicated that ‘surveys can be thought of as ‘methods used for descriptive research’. Finally, [164] claimed that understanding public attitudes and knowledge will provide governments with ways to better formulate RE policies.

As stated by [161], public attitudes, awareness, and understanding are documented as important issues shaping the widespread employment of RE technologies and the achievement of energy policy targets. He found that public attitudes give the fullest understanding of the dynamics of public views about RE technologies.

[157] studied the Croatian assessment of environmental attitudes, knowledge of RE, and attitudes about RE sources and energy efficiency. They found that although Croatia has significant possibilities for energy production from renewable resources, there are two critical barriers: social barriers, which represent lacking knowledge and information, long-term process of changing behaviour, incorrect understanding of the real natural RE, and lack of interest and motivation; and lack of financing or resources due to underestimation of power and influence.

[160] assessed public knowledge, beliefs and attitudes towards electricity alternatives and public acceptance in Australia. They found that the variables of being younger, having higher levels of knowledge, having pro-environmental beliefs, and having more positive attitudes predispose people to have higher acceptance of the distribution of RET; people who valued the economy over the environment reported lower acceptance. The study discovered the utilities distributed generation features: cost to installation, ease of installation, ease of use, reduction in carbon emissions, potential exhaust fumes, the generator’s energy source, reliability and durability, safety levels, and savings over time.

[164] explored how public environmental perceptions are influenced by cultural and ideological identities and how deliberation of these perceptions might help to inform government policy on the development of RE in southwest Britain. The findings of the study focused on public reluctance to invest in RE as the main obstacle and it outlined ways in which government policies on RE might be tailored to stimulate public support and participations.

[165] studied the cultural barriers to RE and energy efficiency in the US using formal semi-structured interviews with 181 participants at 82 institutions. Surprisingly, he found that American attitudes toward RE are led determined by social dimensions and values, such as consumption, trust, control, abundance and freedom. Consequently, participants rejected RE technologies, especially wind farms and solar panels, ‘simply [because] they do not comprehend why such technologies may be needed’ [165]. [166] studied stakeholders’ perceptions and understanding of wind-generated electricity to meet a significant portion of increased electricity demands in Saskatchewan, Canada. They found that the most significant barriers stakeholders hold are technological and political barriers, whereas most members of the public have knowledge barriers.

3.19 Summary of the Review of the Literature

Although GCC countries are strongly defined by their abundant hydrocarbon wealth, they rank among the top 25 of the world’s biggest per capita carbon dioxide emitting countries. Due to the GCC’s obligation to the world, as well as their growing awareness of the negative effects of climate change, these countries have been taking positive steps locally and internationally towards environmental sustainability. Moreover, the GCC countries are starting to position themselves as key players in the development of RETs, supported by large-scale projects (e.g. Masder City in Abu Dhabi). They are leading the way with ideal geography and natural resources to support the transition to alternative energy sources.

The GCC adoption of RE technologies as a substitute for fossil fuels faces many challenges, the most important of which is the lack of a coherent strategy with clear vision. Additional barriers include cost, lack of awareness, and some negative environmental impacts of RETs. In spite of these challenges, the GCC has started to develop environmentally friendly technology projects using wind and solar sources, such as the RE project between Saudi Arabia and the US, Germany, KISR and the MEDRC. Results include a number of solar cooling systems that were successfully installed, and Masder City in Abu Dhabi. This trend needs to be adopted throughout the GCC.

[167] presented the Union of Concerned Scientists report regarding the barriers that preventing RE project from development. The Union categorizes the failure to market the value and benefits of RE as: 1-Commercialization barriers such as underdevelopment infrastructures, lack of economies of scale, and unequal government subsidies and taxes; 2- Market barriers such as lack of RE information and policy; and 3- Institutional barriers such as small size business, high transaction and financing costs, split incentives, energy transaction costs and green market restrictions.