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Taking Advantage of Energy Efficiency Potential in the Middle East

View this blog post in Arabic.

The Trend

Today, decreasing revenue for oil rich countries, increasing energy per capita consumption and ongoing energy subsidies by the government continue to require further network development, requiring capacity expansion and constraining governmental budgets. Implementing energy efficiency and demand side management can significantly decrease the need for rapid expansion of power systems and thus reducing the constraints imposed by it and slowing down the pace of government spending in capital intensive projects.

Building Retrofit and Benchmarking of energy performance has been implemented in Europe and the US and has proven to bring benefits in terms of energy savings and energy consumption consciousness. These benefits stem from increased economic activity in primary affected sectors (reduced need for expanding power systems, reduced unemployment) and through the indirect impact on secondary sectors i.e. improved health through reduced air pollution, improved indoor climate, reduced outlay on government subsidies and macroeconomic benefits.  In fact, according to a study conducted by Dodge Data and Analytics in 2015, the ability of energy efficiency to support the domestic economy was one of the top social reasons for investments in energy efficiency by Saudi Arabia.

The survey of over 1000 respondents across 69 countries around the world showed that most of the companies working on retrofit projects found that the payback time for energy efficiency investments is around 7 years, with a 9% decrease in operating costs over one year, and 13% decrease in operating costs over five years.

Current State of Energy efficiency in the Middle East

Recognizing the potential of building retrofits to decrease the constraints imposed by rapid expansion of GCC power systems, work in the Middle East is ongoing on promoting to establish audit and retrofit policies and building labeling schemes.

Several key movements are currently being undertaken in the Middle East:

Abu Dhabi, UAE – Estidama (Sustainability) program commenced in 2012.  It aims to change the built environment within the four pillars: environmental, economic, cultural and social. Under this program building rating system has already been developed. In the long term the programme aims to implement Abu Dhabi 2030 urban master plan.

Dubai, UAE – In 2013 a Demand Side Management (DSM) strategy was developed by the Dubai Supreme Council of Energy, as part of the Dubai Integrated Energy Strategy 2030 (DIES 2030). The Emirate has decided that for successful implementation of a retrofit programme a regulatory framework could prove to be more effective than the current voluntary system of accreditation within the EPC and Energy Services markets.

The Regulatory Supervisory Bureau (RSB) is currently developing the regulatory framework to encourage building retrofit uptake.

Kingdom of Saudi Arabia – Steps to reduce energy demand have been taken by the Saudi Arabian Standards Organization (SASO) with standards for the use of advanced insulating materials in the construction of new commercial buildings, and by the restructuring of  electricity tariffs by the Saudi Electric Company.

The National Energy Efficiency Programme (NEEP) conducted a programme of energy audits to focus attention on the concept and benefits of energy efficiency by providing demonstrable ‘proof of concept’. The energy audits increased corporate awareness of energy efficiency measures and technical and economic recommendations were made available for policy makers.

Bahrain – An organization in Bahrain has developed a model that allows stakeholders in the building, construction and energy sectors to become more informed in conducting Building Integrated PV (BIPV) or Building integrated wind turbines (BIWT) projects creating partial sustainable/ green buildings. The model allows the calculation of the Sustainable building index (SBI), which ranges from 0.1 (lowest) to 1.0 (highest); the higher figure the more chance for launching BIPV or BIWT.

However, much more can be done to achieve the potential of energy efficiency.

Retrofit implementation challenges

Nevertheless, achieving results from energy efficiency in buildings is a complex process. Achieving the reduction in energy consumption requires regulatory leadership and effective policies developed specifically for the market, taking into account the local building stock, energy consumption characteristics and drivers of market behavior. There are several aspects that need to be thought through.

For example, the efficiency of energy efficiency highly depends on stakeholder engagement – the customer needs to be aware of how much energy is being consumed by the various appliances and what can be done to reduce consumption. Only by a behavioral change it is possible to achieve 10% of energy saving.

But also information access on energy consumption, financing an incentive schemes for retrofitting, data privacy and protection, and training and education of energy professionals and end users are vital to enable customers to understand how energy is being consumed and how it can be saved.

Energy Efficiency potential in the Middle East

In the Middle East, there is a great potential for retrofit investments. Energy intensity levels in the Middle East are more than twice on PPP (Purchasing Power Parity) basis. For instance, there are nearly 11 million buildings in Saudi Arabia, of which approximately 70% are not insulated (Source: Saudi Aramco, 2011). This presents an enormous energy saving opportunity and thus mitigating the need to expand power systems, whereas in the UAE, approximately 70% of annual power is consumed by buildings in UAE. The Chairman of Emirate GBC commented that, existing building energy consumption can be saved by at least 20%.

The Middle East is not yet exploring the benefits from these schemes. From our experience in the Middle East, due to fairly low energy prices, energy efficiency is most efficiently encouraged through the regulatory drive. For instance, creation of an effective regulatory framework around building energy audits, retrofits, sub-metering and benchmarking and facilitation of an ESCO market –  something that is still missing in many countries in the Middle East-. Implementing appropriate incentives for energy efficiency schemes would also encourage energy efficiency and facilitating data on electricity consumption through benchmarking and incentives could further show customers what they could achieve. Each of these approaches needs to take into account the specificities of each country and requires careful analysis and approach development to ensure achieving full potential achievements. However, the benefits of implementing energy efficiency measures would far outweigh the costs.

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