Utility Demand-side Management for Solar Thermal Technology Transfer to Countries Subsidizing Electricity

Oil producing countries in the Middle East and North Africa (MENA) region have a common policy of offering higher energy subsidies compared to other countries. MENA countries depend on fossil fuels to meet their domestic energy needs. Supplying electricity to meet the demand in these countries requires a huge subsidy, placing an extensive burden on the available financial resources. Although solar thermal technologies have been generally proven to be economically feasible in many countries with abundant solar energy, MENA countries have yet to adopt these technologies to meet their energy needs. This is attributed to the low cost of electricity owing to higher subsidies, which have made it difficult for renewable technologies to penetrate these markets. Although previous research and international organizations have recommended the removal of energy subsidies as an approach to addressing the budget deficit crisis, these recommendations did not offer realistic solutions because the resources used for generating electricity are national resources, of which the people feel that they deserve to have a share. In the present study, demand-side management (DSM) programs promoting solar thermal technologies are proposed to overcome this problem. The methodology targets replacing electricity use with that of solar energy, reducing not only the electricity demand and the required subsidies but also the emissions of carbon dioxide and other harmful gases. Two case studies were conducted for the province of Erbil, (Kurdistan Region, Iraq) to develop the methodology. First, the economic feasibility of promoting solar water heaters (SWHs) by DSM was investigated. An estimated investment of US$90 million was required. The net present value (NPV) of installing the SWHs as part of a DSM program was US$776.6 million for a life cycle of 10 years. The program would have the advantage of reducing electricity sales (which are greatly subsidized) for preparing domestic hot water in 100,000 houses. Second, the benefits of replacing standard air conditioners with solar-assisted air conditioners through DSM were assessed for 100,000 offices, costing the utility US$80 million. It was found that a capacity requirement at an estimated cost of US$138 million would be avoided for at least 10 years. Furthermore, the program would help reduce consumer annual energy consumption by approximately 37%, thus removing the need for subsidies. It would be appropriate to differentiate between the two categories of countries in the MENA region, i.e., oil exporting countries and developing oil-producing countries. There would be differences in the DSM approach promoting solar thermal technologies between these two categories of countries as oil exporting countries have stronger financial reserves compared to developing oil-producing countries. Developing oil-producing countries, owing to a fiscal deficit and typically low quality power systems, face challenges in developing their infrastructure as well as meeting the high pre-tax subsidy. The proposed approach would have better implementation potential in developing oil-producing countries as it would facilitate deferral of the construction of new power plants and associated infrastructure; simultaneously, the electricity sales would be reduced significantly.