**6. Conclusion**

applied across all the scenarios. Five input variables were selected for the sensitivity analysis, and they are air conditioner cost, assumed EER values of the existing air conditioner fleet, assumed EER values of the new air conditioner fleet, utility discount rate, and the average annual operating hours of air conditioners. The applied variabilities to the input variables were 25% for each variable. The below

**(75% gov.)**

**% Diff.**

**NPV (\$b)**

6.8 50% 7.5 48% 9.6 41%

24.8 82% 25.5 77% 27.5 68%

18.3 35% 18.9 31% 21 28%

6 56% 6.8 53% 8.8 46%

16.6 22% 17.3 20% 19.3 18%

10.8 21% 11.5 20% 13.5 18%

**Scenario 3 (0% gov.)**

> **% Diff.**

**NPV (\$b)**

**Input variables Scenario 1 (100% gov.) Scenario 2**

**NPV (\$ billion)**

AC unit cost (+25%) 13.2 3% 14 3% 16.4 0% AC unit cost (25%) 14.5 7% 15 4% 16.4 0%

Utility discount rate (+25%) 11.2 18% 11.9 17% 13.8 16% Utility discount rate (25%) 16.9 24% 17.7 23% 19.9 21%

Current proposal NPV (\$ billion) **13.6 14.4 16.4**

It can be noticed that varying the EER values whether for the existing or new fleets has the biggest impact on the results, while the input variable with the least impact among the five is the air conditioner unit cost. It can be also noticed from the above table that the AC unit cost variable has no impact on scenario three results as in this scenario the capital cost is transferred to non-efficient air conditioner buyers with no contribution from the government. In summary, despite applying aggressive variabilities to key input variables in all the three scenarios, the results still show positive net present values for all the scenarios which indicate that this proposal is valid and also highly recommended for deployment in order to reap such

In addition to the savings expected to be realized out of implementing the incentive program, there are other economic gains. Using input–output analysis ("I-O"), it was found that the program will add an average of \$0.5 billion per year to the kingdom's GDP for the duration of the program. It was also estimated that around 2000 direct and indirect jobs will be created throughout the duration of the

**% Difference**

table summarizes the results of the analysis.

Assumed EER values of existing fleet

Assumed EER values of existing fleet

Assumed EER values of new fleet

Assumed EER values of new fleet

Average annual operating hours of AC

Average annual operating hours of AC

*5.2.2 GDP and employment contribution*

(+25%)

*Energy Policy*

(25%)

(+25%)

(25%)

unit (+25%)

unit (25%)

huge benefits.

program.

**60**

This chapter investigated the savings from a residential air conditioning incentive program rather than detailing the design of the program as this needs specialized entities who should evaluate different factors before designing such program. The proposed 8-year program included residential air conditioning units, namely, window and split, where participants are provided with efficient AC units as a substitute to their existing low efficiency AC units. The program was designed to replace 5.75 million AC units (25% of estimated 2016 stock) over an 8-year period. The proposal was presented under three different scenarios when it comes to the capital cost handling where the government will take care of all the capital cost, 75%, and none of the capital cost in scenarios 1, 2, and 3, respectively. The cumulative estimated savings from the program adds up to 17.11 TWh by the year 2025. Moreover, this suggested program would result in a reduction of a yearly average of 7.5 million metric ton of CO2 emissions which is basically equivalent to removing 1.38 million cars from the streets or planting more than 27 million trees. Furthermore, the expected NPVs from the program are substantial, and they are \$13.7 billion, \$14.4 billion, and \$16.4 billion under the three different scenarios. From the economics perspective, the program will add an average of \$0.5 billion per year to the kingdom's GDP over the duration of the program. It was also estimated that around 2000 direct and indirect jobs will be created throughout the duration of the program.

As incentive programs regularly take care of the initial investment cost of energy-efficient products and hence implicate significant capitalization, the program administrator shall evaluate different experiences from developed and developing nations to instigate the development of new funding mechanisms to suit unique local circumstances such as Saudi Arabia. In addition, such programs will support the country's current efforts to improve the permeation of energy-efficient equipment in the Saudi market. Subsidy programs are essential to balance the present compulsory standards by increasing market permeation of equipment that have better energy performance than current standards requirement, therefore paving the road for further increase in standards stringency in the future. Moreover, the program administrator shall comprehend the fact that the success of such program depends heavily on an outstanding plan in place before the program initiation. The plans shall include monitoring and verification plans along with continuous evaluation plans in place in which a reserved budget for those purposes is crucial.

### **Acknowledgements**

The author would like to extend sincere thanks to Hussien Mohammad, from Saudi Aramco, for his support in obtaining bin weather data for several Saudi cities along with his support in reviewing the EER degradation analysis. Also, the author would like to thank Aabed Saber, from Saudi Aramco, for his contribution in reviewing the chapter and providing useful insights especially concerning the questionnaire.

*Energy Policy*
