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REPORT 2017
WRITTEN BY VENTURES ONSITE FOR
MIDDLE EAST ELECTRICITY
Produced by
GCC POWER MARKET 2017
REQUIRED GCC INVESTMENT (2016-2020) GENERATION (US$ BN) T&D (US$ BN) TOTAL (US$ BN)
KSA 43 28 71
UAE 20 14 34
Kuwait 8 4 12
Qatar 6 3 9
Oman 6 2 8
Bahrain 2 1 3
The structure of the electricity market has witnessed few changes over the past few years, but reforms are gradually picking up throughout the GCC.
Governments have increased water, electricity and fuel prices to ease the burden on state budgets, which are part of a broader programme that aims
to liberalise domestic energy prices over the medium-term.
The GCC governments are currently looking towards in¬dependent power producers (IPPs) to play an increasing role in power generation due to
plummeting oil prices (refer Figure 1 for IPP projects). The private sector will be responsible for adding more than 20 GW of generating capacity in
the GCC over the next five years. Dependency on IPPs is set to increase as governments have decreasing oil revenues. However, while private sector
involvement eases financial burden on the states, governments need to ensure that IPPs are not just a short-term solution to rising demand. According
to industry experts, the GCC countries are reforming their power sectors in order to allow competition at the generation level through the introduction
of IPPs, and to establish separation in their current single-buyer market to introduce more competition.
The members of the GCC are facing challenges to meet the growing development is for solar energy. UAE, KSA, and Kuwait are the biggest
electricity demand and reduce the associated hydrocarbon emissions. solar markets in the MENA region.
Recently, there has been a pressing need for a shift towards smart
power grids, as smart grids can reduce the stress on the grid, defer the The total GCC power construction contractor awards are forecast
investments for upgrades, improve the power system efficiency, and to increase from US$ 22, 381 million in 2016 to US$ 25,523 million in
reduce emissions. The GCC countries are linked by a 1,200 km electrical 2017. The GCC countries are also set to invest US$ 252 billion over the
grid, built to help provide backup power in case of a blackout in one next five years on projects for setting up new power production plants,
part of the system. Expanded to other countries, that electricity highway distribution systems, and supply grids. KSA is expected to register
could be the backbone of future power trading. The existence of the GCC the highest contractor awards in 2016 and 2017 followed by the UAE
grid, commonly known as the ‘back-bone’, will also provide opportunities (refer Figure 2).
for the establishment of power plants close to resources thus giving
FIGURE 2: REPRESENTS THE GCC POWER CONSTRUCTION CONTRACTOR
freedom for IPPs to select a strategic location, realising the potential in
AWARDS FROM 2016 TO 2017
dealing with a large size market, while facing minimal risks. DEWA has
14,000
adopted a comprehensive smart grid strategy, in adherence with the
Smart Dubai initiative. 12,000
INNOVATION IN
GCC POWER MARKET
SMART CITIES
and connected city” has a strong focus on energy sustainability and using There have been heavy investments across the GCC countries towards
renewable energy sources. Adopting the Smart Cities plan within the new smart city projects. Consulting firms such as IDC are heavily involved
housing projects in the GCC countries is aimed to rationalise energy usage in advising relevant authorities that are aiming to create Smart City
at large. The plans will be considered within the framework of the regional frameworks for various governmental and private organisations. Smart
structural plan, as well as each country’s vision for sustainable electricity Cities are expected to spark the energy revolution in the GCC. Therefore
use. Various ministries in each of the GCC countries have been involved with the rapid advancements in technology and the commitment of GCC
in driving Smart City initiatives, whether as owners or active contributors governments towards, we may soon be seeing several smart cities in the
to national initiatives. In KSA, for example, the Ministry of Municipalities GCC creating benchmarks for the cities worldwide. KSA, the UAE, and Qatar
and Rural Affairs (MoMRA) has initiated a national study to assess the are expected to witness a raft of successful Smart City implementations
readiness of Saudi cities for Smart City deployment and developed a emerge over the next couple of years.
national maturity model.
ANALYSIS OF THE
POWER MARKET FOR
EACH GCC COUNTRY
12 www.middleeastelectricity.com GCC POWER MARKET 2017
GCC POWER MARKET 2017
as well as testing, commissioning and handover to DEWA. The deadline neighbours via the regional power grid.
for tender submissions is 14th November, 2016.
According to reports, Dubai World Trade Centre (DWTC) is eyeing
According to the Emirates Nuclear Energy Corporation (Enec), work is programmes to power its assets through renewable sources. DWTC has
progressing well on the Barakah nuclear power project in Abu Dhabi, UAE, conducted a feasibility study to develop a programme for the deployment
with about 70% of the construction completed at all the four units of the of renewable energy across its real estate assets across Trade Centre and
plant. The UAE’s nuclear energy programme will provide approximately Jebel Ali. Within the DWTC complex, the Dubai International Convention
25% of the UAE’s electricity needs and save up to 12 million tons of and Exhibition Centre (DICEC) is planned to be the flagship asset that
greenhouse gas emissions each year. By 2020, the UAE hopes to have will incorporate technologies to optimise solar power, as well as the
four of the 1400 MWe nuclear units running and producing electricity at energy conservation methods that leverage the facility’s rooftops and
a quarter the cost of that from gas. It plans to export electricity to Gulf facades of the halls that are part of development’s long-term plans. The
solar panel is expected to generate 1,800MWh/year for
the requirements of 60 one-bedroom residential units.
The planned photovoltaic system is being designed
as a noiseless and environment-friendly platform. The
integral convention and exhibition assets in particular will
spearhead Dubai’s efforts to drive innovation and be the
future global benchmark for sustainability, as it is aligned
with Dubai’s master plan for a green future. Solar energy
is likely to assist the UAE in meeting its 2030 renewable
energy targets. Dubai Municipality has completed the
new US$ 5.7 million Pond Park project in Khawaneej-1.
Opening its doors to the public soon, the park is classified
as a sustainable development as it uses the solar energy to
provide all of its electricity needs.
OMAN
Subsidy provided by
the Omani government
towards the supply of
electricity to consumers
across the Sultanate is estimated to total
US$ 1,283 million during 2016. Based on
the government-owned Oman Power &
Water Procurement Company (OPWP),
the demand for power and water is
foreseen to grow by almost 9.5% until
2019. The rising demand for electricity
will require Oman’s power generation
capacity to grow at an annual rate of 9.6%
over the next five years and the country
will need to add 4.8GW capacity by 2020
(Apicorp estimates). The country needs
to add 4.8GW capacity by 2020 i.e., the power generation capacity in the capacity in rural areas in 2016 as a part of a countrywide-initiative aimed
country needs to grow at a year-on-year growth of 9.6% during 2015-2020 at addressing growing power demand in Oman.
in order to cater the growing need of electricity. The Oman Power and
Water Procurement Company (OPWP) had signed an agreement in 2016 There is no doubt Oman faces major energy challenges in the coming
to build two independent power plants in Ibri and Sohar which is expected decades as conventional fossil fuel resources dwindle and its young
to have a combined capacity of 3,219 MW. Currently, power firms in Oman population continues to grow rapidly. Oman will have to devise a long-
plan to invest around US$ 1,036 million for expanding and upgrading term strategy that considers adding alternative power generation sources
transmission and distribution networks in 2016 to expand and improve such as renewable energies, while also enhancing energy efficiency and
services by delivering more than 90% of its annual project budget for the improving demand-side management both on an individual and industrial
first time in the group’s history. Oman’s Rural Areas Electricity Company level. Oman has a nascent renewable energy sector, with several projects
will invest an estimated US$ 326 million to improve power generation making progress. However, increasing consumption of natural gas for new
power projects has led the government to embrace renewable energy Gulf Renewable Energy (GRE) Mena has joined hands with Oman
projects, in line with the sultanate’s Vision 2020 economic diversification government-owned RAECO to develop a wind-based power project on
plan. For example, Oman’s Rural Areas Electricity Company (RAECO) plans Masirah Island off the sultanate’s eastern seaboard. The proposed 1.7
to install 90 MW of renewable capacity by 2020. Oman is developing an MW capacity project is expected to be sultanate’s first commercial wind-
energy strategy that entails the production of 10% of its electricity needs powered plant with an implementation timeframe that is set to precede
from renewable energy resources. In line with this target, there are now the much-anticipated 50 MW wind farm project planned at Thamrait in
several large-scale solar projects entering the pipeline, with more likely to Dhofar Governorate. The latter scheme, originally planned for launch
follow, according to BMI. by 2017, is being jointly implemented by Raeco, a subsidiary of The
Electricity Holding Company (Nama Group)
and Masdar (an investment vehicle of the
Abu Dhabi government) at a cost of US$
125 million. Tenders will soon be floated
for a pair of hybrid photovoltaic and diesel-
based power plants at two locations within
Raeco’s sprawling jurisdiction.
KUWAIT
BAHRAIN
Bahrain, the smallest of the six GCC countries, aims to produce 5% of its generation plants potentially reduces the appeal of new solar projects for
energy from renewables by 2030. The country’s energy resources are limited, private investors.
and its domestic oil production is estimated at only 30,000 barrels per day.
According to IRENA, Bahrain plans to build a 500 MW concentrated-solar- Bahrain will force owners of homes and buildings to use renewable energy
power plant, in addition sources in a bid to ensure
to small-scale hybrid all properties are 100%
power plants using solar dependent on renewable –
and wind. Bahrain is also particularly solar – energy.
developing renewable Owners will be introduced
energy sources to reduce to the alternative sources
its carbon emissions and of energy in stages starting
fuel input costs, with with the use of power from
hopes that the cost of the national electricity
solar infrastructure will grid generated through
eventually lower, making affordable solar panels set
it more cost-effective in homes and buildings.
in comparison to Traffic lights across Bahrain
subsidised conventional will also run on solar energy
utilities. Under the as part of a five-year plan
Kingdom’s blueprint for to incorporate alternative
social and economic energies into electricity
development, named and water production. The
Vision 2030, up to 7% of plan, which is scheduled to
its energy needs are to start in December 2020, will
be met by renewable sources within 15 years. The construction of the pilot include the building of the first government solar centre.
projects is expected to lay the groundwork for the renewable strategy. An
extended period of low hydrocarbon prices may, however, put pressure Bahrain’s power construction contractor awards are expected to increase
on renewable energy investments as cheap input costs for conventional from US$ 1,485 million in 2016 to US$ 2,102 million in 2017.
FUTURE OUTLOOK
The GCC will require as much as US$ 316 billion by 2020 to meet its
growing power needs (The Arab Petroleum Investment Corporation
estimates). According to industry experts, realising the financial burden the
GCC countries are currently and potentially experiencing to meet power
demands, the GCC countries (with the exception of Kuwait) have embarked
on unbundling their power sectors into separate generation, transmission
and distribution segments – thus providing opportunity for these business boosting power efficiency in the GCC as peak demand
segments to focus on their core business, and also encouraging capital increases in the coming years. New construction projects are likely to
investments from the private sector. Reform efforts in most of the GCC incorporate new “smart” dimensions. Among the GCC, the UAE, KSA
countries are limited to opening up the power sector for private investment and Qatar are leading in the forefront in the development of smart cities
in generation, transmission and distribution, however, much consideration projects, which is also likely to continue in the coming years.
is being given by the GCC governments, with Oman leading the way, by
implementing laws to facilitate reform. The introduction of IPPs in the GCC According to Apicorp, the GCC governments will continue to cope well
has been instrumental in meeting rapidly rising electricity demand. Oman with rising demand and energy-price reform will help temper demand
was the first country to open up its power-generating sector. Currently, rises. Although GCC governments have announced budget deficits and
IPPs represent the majority of new capacity and continue to replace indicated that government expenditures will be tightened in response to
government power plants. Therefore, IPPs will continue to be at the lower oil prices, investments in the power sector should not be affected
forefront of GCC governments’ strategies to add generating capacities. and will be given priority. 2016 will also see the rise of coal fired power
With an increasingly demanding population and spiraling rates of power plants, but technologies are being developed in order to mitigate the
consumption, the need for sustainable and renewable sources of energy negative environmental impact from power generated by coal. This has
is expected to garner more importance in the coming years. The solar seen ACWA Power in KSA commit to exploring the power generating
technology is approaching towards grid parity. With further advancement market by building a coal fired power plant in Dubai to supply to the Expo
in technology, reduction of prices, clean technology, solar power is going to 2020.
experience phenomenal growth and could be most likely preferred source
of energy in the future. A latest trend catching up in the GCC countries Therefore, the GCC power construction industry is expected to register
is the ‘Smart Cities’ plan that are being considered in each country’s robust growth over the coming years with UAE, KSA and Kuwait being
vision for sustainable electricity use. Also, smart grids will form key to attractive markets for opportunities for power plants in the future.
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