An econometric framework for electricity infrastructure modernization in Saudi Arabia

Alaqeel, Turki, author
Suryanarayanan, Siddharth, advisor
Coats, Jennifer, committee member
Collins, George J., committee member
Maciejewski, Anthony A., committee member
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The electricity infrastructure in Saudi Arabia is facing several challenges represented by demand growth, high peak demand, high level of government subsidies, and system losses. This dissertation aims at addressing these challenges and proposing a multi-dimensional framework to modernize the electricity infrastructure in Saudi Arabia. The framework proposes four different scenarios—identified by two dimensions—for the future electric grid. The first and second dimensions are characterized by electricity market deregulation and Smart Grid technologies (SGTs) penetration, respectively. The framework analysis estimates global welfare (GW) and economic feasibility of the two dimensions. The first dimension quantifies the impact of deregulating the electricity market in Saudi Arabia. A non-linear programming (NLP) algorithm optimizes consumers surplus, producers surplus, and GW. The model indicates that deregulating the electricity market in Saudi Arabia will improve market efficiency. The second dimension proposes that allowing the penetration of SGTs in the Saudi electricity infrastructure is expected to mitigate the technical challenges faced by the grid. The dissertation examines the priorities of technologies for penetration by considering some key performance indicators (KPIs) identified by the Saudi National Transformation Program, and Saudi Vision 2030. A multi-criteria decision making (MCDM) algorithm—using the fuzzy Analytic Hierarchy Process (AHP)—evaluates the prioritization of SGTs to the Saudi grid. The algorithm demonstrates the use of triangular fuzzy numbers to model uncertainty in planning decisions. The results show that advanced metering infrastructure (AMI) technologies are the top priority for modernizing the Saudi electricity infrastructure; this is followed by advanced assets management (AAM) technologies, advanced transmission operations (ATO) technologies, and advanced distribution operations (ADO) technologies. SGTs prioritization is followed by a detailed cost benefit analysis (CBA) conducted for each technology. The framework analysis aims at computing the economic feasibility of SGTs and estimating their outcomes and impacts in monetary values. The framework maps Smart Grid assets to their functions and benefits to estimate the feasibility of each Smart Grid technology and infrastructure. Discounted cash flow (DCF) and net present value (NPV) models, benefit/cost ratio, and minimum total cost are included in the analysis. The results show that AAM technologies are the most profitable technologies of Smart Grid to the Saudi electricity infrastructure, followed by ADO technologies, ATO technologies, and AMI technologies. Considering the weights resulting from the fuzzy AHP and the economic analysis models for each infrastructure, the overall ranking places AAM technologies as the top priority of SGTs to the Saudi electricity infrastructure, followed by AMI technologies, ADO technologies, and ATO technologies. This dissertation has contributed to the existing body of knowledge in the following areas: • Proposing an econometric framework for electricity infrastructure modernization. The framework takes into account technical, economic, environmental, societal, and policy factors. • Building an NLP algorithm to optimize a counterfactual deregulation of a regulated electricity market. The algorithm comprises short run price elasticity of electricity demand (ε), level of technical efficiency improvement, and discount rate (r). • Proposing an MCDM model using AHP and fuzzy set theory to prioritize SGTs to electricity infrastructures. • Adapting a Smart Grid asset-function-benefit linkage model that maps SGTs to their respected benefits. • Conducting a detailed CBA to estimate the economic feasibility of SGTs to the Saudi electricity infrastructure, This work opens avenues for more analysis on electricity infrastructure modernization. Measuring risk impact and likelihood is one area for future research. In fact, risk assessment is an important factor in determining the economic feasibility of the modernization. Probabilistic economic analysis can be applied to assess the risk associated with the implantation of the previously mentioned dimensions. The parameters used for the economic analysis, such as economic life of a project, and the discount rate, are usually deterministic. However, a probabilistic method can be applied to capture the uncertainty of the parameters. Another area for future research is the integration of both dimensions into one model in which GW resulted from market deregulation and SGTs insertion are summed.
2017 Summer.
Includes bibliographical references.
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econometric analysis
electricity market deregulation
smart grid
electricity infrastructure modernization
decision making
Saudi Arabia
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