02/02/2025
Share:
02/02/2025
Share:
KUWAIT CITY, Feb 2: With the issuance of Decree Law No. (1) of 2025 on January 18, allowing government entities to set fees, costs and usage charges for public facilities and services based on cost and usage criteria, the path has been paved for the re-pricing of numerous services -- especially energy costs, including electricity and fuel, reports Al- Seyassah daily. This aligns with announced economic reform plans aimed at reducing the budget deficit and increasing non-oil revenues. In this context, the Baker Institute for Public Policy in Washington has emphasized the “necessity of restructuring state subsidies for electricity in Kuwait.”
The institute suggested that “it is possible to fully eliminate electricity subsidies and impose market prices while providing a monthly cash payment to every Kuwaiti homeowner based on average household consumption.” These electricity reforms would be implemented gradually over a period of three to five years.
A recent study by the institute, titled “The Distorted Effects of Low Electricity Prices in Kuwait and the Need for Fair Reform,” revealed that Kuwait has provided electricity to its citizens at a fixed rate of 7 cents per kilowatt-hour since 1966, making it the sixth-lowest electricity price in the world. This tariff covers only 5 percent of the cost incurred by the state to supply electricity and due to inflation, the real value of residents’ contributions to electricity costs has declined by 800 percent. The study further noted that in 2022, the government spent $13.7 billion to provide electricity services to a population of 4.3 million, which equates to $3,200 per person and $16,000 per family.
Additionally, the residential sector in Kuwait consumes 58 percent of the total electricity produced. According to the report, electricity subsidies for the residential sector alone amounted to $7.2 billion in 2022. It highlighted that 99 percent of Kuwait’s electricity is generated using fossil fuels, resulting in 24.9 metric tons of carbon emissions -- more than five times the global average.
The continuation of government subsidies poses a significant challenge to achieving the goal of net-zero carbon emissions by 2060. The Baker Center pointed out that the existence of parliament has historically made electricity subsidy reforms difficult, as it has obstructed tariff increases. However, the dissolution of parliament presents an opportunity to streamline decision-making in Kuwait, including the adoption of electricity tariff reforms.
The report cited other Gulf Cooperation Council (GCC) countries, such as Saudi Arabia and the UAE, that have successfully implemented electricity subsidy reforms, leading to reduced demand growth. Additionally, the report criticized Kuwait’s inefficient electricity billing system, which results in revenue losses in some years. For instance, in 2022, there were $460 million in unpaid electricity bills. The report also highlighted the slow adoption of smart meters, which could enhance billing accuracy. The study also observed that subsidy reforms introduced in Kuwait in 2017 led some consumers to move from apartments to villas to benefit from the lower electricity rates offered to standalone homes.
The following are the key findings: - The state provides electricity to citizens at 7 cents per kilo watt/ hour, the sixth-lowest rate globally. - The current tariff covers only 5 percent of actual costs and its real value has declined by 800 percent due to inflation. - The government spent $13.7 billion on electricity in 2022, equating to $3,200 per person. - The residential sector consumes 58 percent of total electricity production. - Electricity subsidies for the residential sector alone cost $7.2 billion in 2022. Ninety-nine percent of Kuwait’s electricity is generated using fossil fuels, resulting in carbon emissions exceeding five times the global average.
The inefficiency of electricity billing led to $460 million in unpaid bills in 2022. As Kuwait moves toward economic reform, the government faces a crucial decision on whether to continue its heavy subsidies or transition toward a more sustainable, marketdriven pricing model for electricity.