GCC POWER MARKET REPORT 2017

Transcription

1 GCC POWER MARKET REPORT 2017 WRITTEN BY VENTURES ONSITE FOR MIDDLE EAST ELECTRICITY Produced by

2 OVERVIEW OF THE GCC POWER MARKET According to Arab Petroleum Investments Corporation (Apicorp), the GCC represents 47% or 148 GW of the current MENA power-generating capacity. Factors such as population growth, urbanisation, improvements in income levels, industrialisation, and low electricity prices have led to a rise in the GCC s demand for energy. The region would require US$ 85 billion for the addition of 69 GW of generating capacity and another US$ 52 billion for T&D over the next five years. The GCC power capacity needs to expand at an average annual pace of 8% between 2016 and Saudi Arabia (KSA) leads the drive to make the necessary capacity additions by 2020 as the kingdom will need to invest US$ 71 billion to increase capacity to 114GW (refer Table 1). TABLE 1: REPRESENTS THE REQUIRED GCC INVESTMENT IN POWER FROM 2016 TO 2020 REQUIRED GCC INVESTMENT ( ) GENERATION (US$ BN) T&D (US$ BN) TOTAL (US$ BN) KSA UAE Kuwait Qatar Oman Bahrain Source: Apicorp Research 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. 2

3 FIGURE 1: REPRESENTS THE MAJOR IPP PROJECTS IN THE GCC PROJECT NAME COUNTRY CLIENT EST VALUE (US$ MILLION) Nuwaiseeb IPP Kuwait Ministry of Electricity & Water (MEW), Kuwait 2,500 Sohar 3 - Ibri Independent Power Plant (IPP) Oman Oman Power and Water Procurement Company 2,300 Shuqaiq IPP KSA Saudi Electricity Company (SEC) 2,000 Independent Power Project (IPP) at Addur - Phase 2 Bahrain Bahrain Ministry of Finance 2,000 Coal Fired Power Plant at Hassyan - Phase 1 UAE Dubai Electricity and Water Authority (DEWA) 1,800 Rabigh IPP Phase - 2 KSA Saudi Electricity Company (SEC) 1,559 Dubai Power Plant KSA Saudi Electricity Company (SEC) 1,150 Mohammed Bin Rashid Al Maktoum Solar Park - Phase 3 UAE Dubai Electricity and Water Authority (DEWA) 1,000 Salalah 2 IPP Oman Oman Power and Water Procurement Company 620 Sweihan IPP (PV) UAE Abu Dhabi Water and Electricity Authority (ADWEA) 550 Source: 3

4 OVERVIEW OF THE GCC POWER MARKET The members of the GCC are facing challenges to meet the growing electricity demand and reduce the associated hydrocarbon emissions. 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 investments for upgrades, improve the power system efficiency, and reduce emissions. The GCC countries are linked by a 1,200 km electrical grid, built to help provide backup power in case of a blackout in one part of the system. Expanded to other countries, that electricity highway could be the backbone of future power trading. The existence of the GCC grid, commonly known as the back-bone, will also provide opportunities for the establishment of power plants close to resources thus giving freedom for IPPs to select a strategic location, realising the potential in dealing with a large size market, while facing minimal risks. DEWA has adopted a comprehensive smart grid strategy, in adherence with the Smart Dubai initiative. Currently, GCC government organisations and businesses are also witnessing the benefits of renewables as a cost-effective and reliable power source. The GCC countries have all targeted that 10% of the power production comes from renewable sources of energy by 2020 and are rapidly moving towards realising this target. The key to renewable energy development in the GCC region is solar power, as it is the single most abundant renewable source of energy available. The topography of the region gives it immense solar energy potential throughout the year and benefits the space to develop large solar power plants. Almost 85 to 90% of the money spent on renewable energy Value in US$ Million development is for solar energy. UAE, KSA, and Kuwait are the biggest solar markets in the MENA region. The total GCC power construction contractor awards are forecast to increase from US$ 22, 381 million in 2016 to US$ 25,523 million in The GCC countries are also set to invest US$ 252 billion over the next five years on projects for setting up new power production plants, distribution systems, and supply grids. KSA is expected to register the highest contractor awards in 2016 and 2017 followed by the UAE (refer Figure 2). FIGURE 2: REPRESENTS THE GCC POWER CONSTRUCTION CONTRACTOR AWARDS FROM 2016 TO ,000 12,000 10,000 8,000 6,000 4,000 2,000 BAHRAIN KUWAIT OMAN KSA UAE QATAR ,485 2,044 3,186 8,089 5,577 2, ,102 2,902 3,653 12,349 4, Source: 4

5 INNOVATION IN GCC POWER MARKET 5

6 INNOVATION IN THE GCC POWER MARKET A surge in electricity demand leads to innovation. The GCC countries have been playing a critical role in the global shift towards renewable energy. They have done so as investors in major solar and wind power projects worldwide and also by adopting innovative and increasingly cost-competitive technologies in their own domestic markets. Accelerating the growth of solar is the continued development of innovative technologies and services that are further driving down the cost of solar systems, offering the GCC countries a more valuable and economically viable energy alternative to conventional fossil fuels. Among the GCC countries, the UAE s Vision 2021 focuses on fostering innovation in its power sector (renewable energy). As a clear example, the recently announced Dubai Clean Energy Strategy 2050 aims to provide 7% of Dubai s energy from clean energy sources by 2020, 25% by 2030, and ultimately 75% by This drive toward clean energy is complimented by Dubai s intent to become the world s smartest city by The convergence of clean energy and intelligent system demand will make Dubai an important global location for deploying a number of energy system innovation. Particularly interesting is the opportunity for distributed clean energy generation. In Dubai and throughout the UAE, electricity price reforms are underway that are supportive of distributed generation and Dubai Clean Energy Strategy has a target for all rooftops in the city to produce solar energy by One other very important example of UAE s clean energy project is Dubai s Mohammed Bin Rashid Al Maktoum Solar Park. Currently, space technology is used to support the renewable projects in the UAE. One of the most important steps towards improving electricity diversification and conservation in the GCC is to develop smart grid and smart metering roll-out under the overall umbrella of demand side management. It is estimated that GCC countries can save up to US$ 10 billion in infrastructural investment by 2020 through the use of smart grid, which optimises supply and demand by using information technology to provide a two-way flow 6

7 GCC as advanced metering infrastructure, ESS and automated distribution systems. Rapid developments have resulted in the availability of new technologies in generation, transmission and distribution of power. Additionally, the rising demand and high dependence on reliable electricity supply has resulted in the need for network configuration that supports the increase of high voltage direct current (HVDC) technology, thereby guaranteeing smart, reliable and flexible power transmission. The Gulf Cooperation Council of real time information between power generation, grid operators and consumers. DEWA is fully-prepared to turn this vision into reality through new smart initiatives and services. DEWA invests heavily in innovation in the field of renewable and clean energy technology. These are Shams Dubai to connect solar power in homes and buildings to DEWA s grid, Smart Applications via Smart Meters and Grids, and the Green Charger to build the infrastructure and electric-vehicle charging stations. The project will include the construction of a model of a smart grid model at DEWA s headquarters, which will include solar panels, an energy storing system (ESS) and integrated operating system. Korea Electric Power Corporation (Kepco) and DEWA have additionally been cooperating in areas such Interconnection Authority (GCCIA) has commissioned the first ever 400-kV super grid that connects the power network of the GCC countries. In a bid to combat the risk of blackouts on each national grid and share energy resources, GCCIA linked the electrical power network of all its member states. GCCIA promotes reliable, competitive and sustainable electrical transmission services and the successful implementation of the GCC smart grid project has brought to the foray suggestions focusing on the interconnection of GCCIA to other regional and global grids. Implementing a large interconnection across different continents will play a pivotal role in enhancing the capabilities of the HVDC network and mitigating the power outage issues. Enabling real-time decision-making, greater control and remote monitoring, the switch to smart grid technology also facilitates the growth and use of renewable power generation sources. Apart from establishing a high voltage direct current (HVDC) network that has the capability to transport and harness large amounts of electricity 7

8 over long distances, Qatar General Electricity and Water Corporation (Kahramaa) has forayed into multiple other ventures simultaneously to strengthen its transmission system, including the installation of solar (PV) systems in the distribution grid and introduction of smart meters. Qatar has set a benchmark with its implementation of massive innovative programmes in deploying large solar power plants. The GCC has seen rapid growth in renewable energy generation and consumption, with Qatar leading the region, supported by innovative research and infrastructure development plans. Deployment of new renewable energy initiatives has ensured that the small Gulf country has become a primary producer of solar energy, enhancing its sustainability drive. The Solar-Smart Grid project an initiative of the Qatar Foundation (QF) is also the first commercial photovoltaic (PV) project to be granted approval for grid connection from Kahramaa. According to industry approximations, QF s solar energy smart-grid-enabled systems generate up to 85% of Qatar s total solar energy output. Qatar is also looking at Building Integrated Photovoltaic (BIPV) technologies for the FIFA World Cup A major initiative of GE in 2016 is the opening of the GE Kuwait Technology Center, the first GE facility of its kind to be located outside the United States. Focused on the power generation sector, the center will offer service and maintenance, and a platform for collaborative research and innovation to address local challenges. During an event organised in partnership with the US embassy in Kuwait in June 2016, GE presented a number of cutting-edge technologies, including the GE Digital Power Plant, and high-efficiency combined cycle power plant and clean and high-efficiency steam plant technologies from GE that can be used to help address Kuwait s power needs. As Kuwait focuses on expanding its power capacity, the introduction of digital industrial and advanced technology solutions including opportunities for fuel diversification will serve as strong opportunity to meet the growing demand for power in the country. GE provides technology that delivers nearly 37% of Kuwait s power generation. 8

9 SMART CITIES Technological innovation throughout the ages has continued to transform cities and way of life, culminating in human feats like the industrial revolution. Currently there is an emergence of another potential revolution- the emergence of smart cities. It is a revolution that the renewable energy sector and GCC countries such as the UAE, Qatar and KSA, stand as the front runners. Currently, the Smart City phenomenon is a key focus area in GCC countries as national governments and municipalities look for new opportunities to reduce energy consumption and improve the citizen experience. By definition, Smart Cities focus on enabling improved economic development, sustainability, innovation, citizen engagement, and the development of an ecosystem of partners that work together to fundamentally change and improve the quality of life for the city s residents. According to industry experts, any push for smart city development needs to include citizen participation and empowerment. With open innovation and ecosystems in the cities increasingly coming to the forefront, strategies must be developed with an eye on understanding newer concepts of innovation and collaboration, global innovation chains, transformative and reactive governance models, and the crucial role of the citizen in shaping the direction of participatory urban development. By adopting a more comprehensive approach, smart cities allow city planners and managers to improve efficiency at the intersection of different infrastructure sectors, such as electricity. As the GCC economies are under stress these days due to the oil prices, which are a major source of revenue for the whole region, this gives a good opportunity for providers solutions. In a period of economic slowdown, the public sector and the private sector are looking for solutions that will 9

10 impact positively the bottom line. In the GCC, the trend of linking smart cities to the agenda of economic diversification is fast gaining ground. Initiatives have been taken in the GCC region, with three countries announcing projects for future Smart Cities: six greenfield economic cities in KSA (complemented by efforts to uplift cities such as Mecca toward Smart City status); three projects in Qatar (Lusail s Smart and Sustainable City, Pearl-Qatar Island, and Energy City Qatar); and two projects in the UAE (Masdar City in Abu Dhabi and Smart City Dubai). Dubai s smart city strategy plans to transform a thousand government services into smart services. The project aims to encourage collaboration between the public and private sectors to achieve targets in six particular focus areas: Smart Life, Smart Transportation, Smart Society, Smart Economy, Smart Governance and Smart Environment. The strategy will rely on three basic principles communication, integration and cooperation. Another important aspect of smart cities is transportation, an area in which technology has advanced dramatically. The UAE is encouraging the use of electric cars and building the necessary infrastructure to support them. Schneider Electric provides smart utilities and smart grids, particularly with DEWA. All their devices that are guiding, cutting and connecting electricity are connected to the cloud. A number of initiatives including the development of smart electrical grid to encourage owners of houses and buildings in Dubai to use solar energy and sell the surplus to the government through the network itself, as well as smart meters that contribute to rationalising the consumption of electricity and water are being developed. The Dubai Plan 2021 which plans to develop Dubai into a smart, integrated 10

11 and connected city has a strong focus on energy sustainability and using renewable energy sources. Adopting the Smart Cities plan within the new housing projects in the GCC countries is aimed to rationalise energy usage at large. The plans will be considered within the framework of the regional structural plan, as well as each country s vision for sustainable electricity use. Various ministries in each of the GCC countries have been involved in driving Smart City initiatives, whether as owners or active contributors to national initiatives. In KSA, for example, the Ministry of Municipalities and Rural Affairs (MoMRA) has initiated a national study to assess the readiness of Saudi cities for Smart City deployment and developed a national maturity model. There have been heavy investments across the GCC countries towards smart city projects. Consulting firms such as IDC are heavily involved in advising relevant authorities that are aiming to create Smart City frameworks for various governmental and private organisations. Smart Cities are expected to spark the energy revolution in the GCC. Therefore with the rapid advancements in technology and the commitment of GCC governments towards, we may soon be seeing several smart cities in the GCC creating benchmarks for the cities worldwide. KSA, the UAE, and Qatar are expected to witness a raft of successful Smart City implementations emerge over the next couple of years. 11

12 ANALYSIS OF THE POWER MARKET FOR EACH GCC COUNTRY 12

13 UAE The UAE boasts of one of the most advanced power sectors in the region - with the seven emirates given control over their programmes and strategies. UAE s Vision 2021 was developed by the government to diversify the economy with a focus on initiatives and projects in renewable energy sector. The UAE has the right regulatory environment to foster solar energy investments, which will help achieve net zero energy buildings to support the nation s sustainable development goals. Both emirates have ambitious initial targets: Abu Dhabi wants solar to account for 7% of its output by 2020, while Dubai is aiming for 5% by The UAE firmly believes that meeting the world s growing energy demand requires a mix of energy sources, where they build on their existing assets of conventional energy, complementing them with alternative sources. By using multiple sources of energy such as natural gas, nuclear and solar, UAE is delivering both base-load generating capacity and the ability to meet peak power demand efficiently and cost effectively. According to IRENA, renewable energy has become economically attractive in the UAE. Increasing renewables to 10% of the country s total energy mix, and 25% of total power generation, could generate annual savings of US$ 1.9 billion by 2030 by reducing fossil-fuel consumption and could lower energy costs. Strengthening the drive to promote renewable energy, the Dubai Electricity and Water Authority (DEWA) had announced that it will launch Concentrated Solar Power (CSP) projects that will generate 1,000 megawatts by The UAE has been financing over 30 renewable energy projects worth US$ 840 million in 28 emerging countries under an ambitious funding programme launched six years ago. DEWA is building three 132/11 kilovolt (kv) substations with 45 km of high-voltage (132kV) cables in support of the Expo 2020 expected to be ready by The total cost of the electricity projects will be US$ million. To emphasise its commitment to sustainability, one of the main pillars of the Expo 2020, DEWA has also assigned a large part of the budget to clean-energy-related projects in support of the Dubai Clean Energy Strategy 2050, launched by His Highness Sheikh Mohammed, to provide 75% of Dubai s total power output from clean energy by

14 Most prominent of these projects is the Mohammed bin Rashid Al Maktoum solar park and the Shams Dubai project to encourage building owners to install photovoltaic, panels to generate electricity from solar energy and connect it to DEWA s grid. The Mohammed bin Rashid Al Maktoum Solar Park will provide a dedicated supply of 100 MW of electricity to the Expo 2020 to manage its energy requirements. DEWA has also budgeted for research and development, and research and innovation in renewable energy. All these will promote sustainable development in the UAE. DEWA has announced plans to build 64 new power stations over the next three years at an investment of US$ 1.82 billion. These projects reflect UAE s position as a global leader for competitiveness in electricity. In August 2016, DEWA awarded a contract for the advisory services to develop the fourth phase of the Aweer Power Station H, worth US$ 6 million. The project aims to test, supply, and install three gas turbines with a total capacity of 700 megawatts (MW). The first turbine will be operational by January 1, 2020, the second on March 1, 2020, and the third on April 30, 2020.The power station is deemed as one of Dewa s most important projects, to help meet the growing electricity demand. As represented by DEWA, the UAE has been ranked first in MENA for getting electricity for the third consecutive year in a row and fourth globally, according to the World Bank s Doing Business 2016 report. DEWA has also allocated US$ billion worth of investments for smart grids development. The UAE relies on natural gas for 97% of its power generation. However, government-led initiatives will have clean energy from solar to nuclear and also less-polluting coal, making up just under a quarter of the power mix in five years. In addition, smart applications, from meters to grids, are currently being installed throughout Dubai to monitor and rationalise consumption. DEWA installed 200,000 smart meters in January 2016 with the goal to have over 1 million by Nakheel has recently floated a tender for the construction of substations at Deira Islands and Jumeirah Village Triangle in Dubai. The scope of work at Deira Islands includes the complete design, construction, supply and installation of a new 132/11kV substation in addition to supplying and erecting equipment 14

15 as well as testing, commissioning and handover to DEWA. The deadline for tender submissions is 14th November, According to the Emirates Nuclear Energy Corporation (Enec), work is progressing well on the Barakah nuclear power project in Abu Dhabi, UAE, with about 70% of the construction completed at all the four units of the plant. The UAE s nuclear energy programme will provide approximately 25% of the UAE s electricity needs and save up to 12 million tons of greenhouse gas emissions each year. By 2020, the UAE hopes to have four of the 1400 MWe nuclear units running and producing electricity at a quarter the cost of that from gas. It plans to export electricity to Gulf neighbours via the regional power grid. According to reports, Dubai World Trade Centre (DWTC) is eyeing programmes to power its assets through renewable sources. DWTC has conducted a feasibility study to develop a programme for the deployment of renewable energy across its real estate assets across Trade Centre and Jebel Ali. Within the DWTC complex, the Dubai International Convention and Exhibition Centre (DICEC) is planned to be the flagship asset that will incorporate technologies to optimise solar power, as well as the energy conservation methods that leverage the facility s rooftops and 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. The power construction contractor awards in the UAE are expected to decrease from US$ 5,577 million in 2016 to US$ 4,049 million in

16 SAUDI ARABIA (KSA) KSA will need investments worth US$ billion in electricity projects over the next 10 years to cope with the rising power demand and wherein the private sector is expected to take part. The country expects peak electricity to hit 90,000 megawatts (MW) in Currently, installed capacity is around 70,000 MW. SEC has agreed to invite private investors to participate in creating an additional 5,400 MW of generating capacity. The projects may be executed in phases. KSA s economic reform plans for 2016 focus on saving the government money by introducing public-private partnerships, in which private firms would provide much of the financing for projects and then operate them to earn profits. In June 2016, Saudi Electricity invited expressions of interest from companies or consortiums around the world in building two solar power plants at Al-Jouf and Rafha in the north of the country. An electricity grid to connecting KSA and Egypt are likely to operate at full capacity before mid KSA plans to construct 16 nuclear power reactors over the next 20 years at a cost of more than US$ 80 billion, with the first reactor on line in However, there have been differences over KSA s solar ambitions, as there are concerns about the scale of the project, its ownership, and the technology. Regulations governing the development of the sector, long awaited by foreign investors who set up offices in KSA in anticipation of huge, lucrative solar projects have still not been approved. According to BMI research, a sustained period of lower oil prices and the resultant fiscal pressures will curb KSA s ambitious plans to build nuclear and solar capacity and lead to a bigger focus on a smaller number of strategically important power projects. KSA s energy consumption was expected to grow by 4% to 5% annually in the next few years, reaching double its current level by 2030 if no efficiency measures are taken. The government s plans to meet the country s growing demand for power and increase focus on developing renewable energy sources will be the major drivers behind the expansion in the market. The kingdom is the biggest power market of all the GCC countries and analysts forecast increased investment in utilities over the next ten years and beyond, to meet rising demand from a growing population. Demand 16

17 for electricity alone is projected to double by 2030, according to Business Monitor Intelligence (BMI). KSA has to invest at least US$ 140 billion by 2020 to uplift generating capacity from 51.5 GW to 71 GW at Saudi Electricity Company (SEC) power stations, according to the Electricity and Cogeneration Regulatory Authority (ECRA). Renewable energy has gained momentum in KSA following the announcement of a three-year feasibility study to construct nuclear reactors at a cost of US$ 7.5 billion in partnership with South Korea. This initiative is part of wider plans by the King Abdullah City for Atomic and Renewable Energy (KACARE) to invest deeply in nuclear energy and renewables by 2032 in a bid to scale down heavy dependence on hydrocarbons. Although KACARE announced last year that it was delaying its planned implementation of the kingdom s energy mix by eight years to 2040, it is still committed to building up to 41 GW of solar power plants and investing in an additional 21 GW of wind and geothermal power in the next 25 years. This is expected to present unprecedented business prospects for regional providers of specialised products and services. KSA plans to generate 9.5 GW of electricity from renewable energy by The forthcoming launch of King Salman s Renewable Energy Initiative will allow the private sector to buy and invest in the renewables energy sector. If the country deploys new power plants at a constant rate until 2023, an average of about 1,600 MW of new renewable energy capacity per year would need to be built. With the rapid growth in Saudi electricity consumption, the target would only translate to a renewable-energy share of roughly 5% of the country s total electricity consumption. With its abundant solar resource and regions with high wind speeds, KSA should in principle have no difficulty reaching and exceeding its target, if the political will exists and a renewable-energy program is rigorously executed, according to industry experts For the renewable energy sector, Saudi Vision 2030 offers encouragement to potential power developers and other renewable energy industry participants. KSA s power construction contractor awards are expected to increase from US$ 8,089 million in 2016 to US$ 12,349 million in

18 QATAR The next two years will see Qatar increase its power capacity by 50%. Qatar Electricity & Water Company (QEWC) announced that plans are in place to increase Qatar s power capacity to 13.1 GW by According to Apicorp, Qatar needs US$ 9 billion investment in its power sector from 2016 to Qatar has not built additional capacity over the past five years because its current capacity was 8.8 GW and demand is around 8.2 GW. With the completion of ongoing projects, including the Umm Al Houl plant, the estimated installed capacity is expected to exceed about 11,000 MW of electricity and 490 MIGD of water by the end of Located between Al Wakrah and Mesaieed, Umm Al Houl will be home to the country s largest plant and is anticipated to be among the biggest in the Middle East. Along with a second plant at Ras Laffan, it will add 4.5 GW of power in the medium term. Currently, Qatar s power supply is complemented by five plants and three satellite stations in and around Doha. building in the lead-up to the 2022 FIFA World Cup, requiring increasingly more people and electricity. The energy sector has been a major target for investment by the Qatari government, with plans to invest US$ 22 billion in its power (includes water) infrastructure up to 2020, according to the Qatar Electricity and Water Company (Kahramaa). Qatar is geographically well positioned to tap its tremendous solar energy potential and has set a target of 2% renewable energy contribution in the national energy mix by Qatar s solar energy future is steadily developing. Being the most abundant and viable energy source, solar Qatar is yet to witness the all-time peak demand of utilities in the run-up to the 2020 FIFA World Cup preparations, and Qatar Electricity and Water Company (QEWC) is much ahead enhancing the installed capacity, which is always maintaining big surplus than the actual peak demand. Fast growing economy and rising population mean that demand for power from both industry and households in Qatar will increase manifolds. This trend is set to continue for some time, with a multi-billion dollar programme of infrastructure 18

19 GCC region as a whole covering the entire Electricity Distribution Network, according to Kahramaa. energy effectively addresses the increasing power requirements in the region, as the ongoing construction projects ramp up in the shadow of the FIFA World Cup Kahramaa has targeted a generation capacity of 200 MW through solar power by Qatar s first solar power station is set to be operational by Kahramaa has recently launched a mega project to monitor its electricity distribution network in a bid to prevent outages. The monitoring for asset management of 11kV Electricity Distribution Network, which serves households, would have the capability to sense the conditions that could cause large-scale power supply disruptions. The scale of the above project is being considered as first of its kind in the Qatar Environment and Energy Research Institute (QEERI) announced its plans to set up a solar map by 2016, which will assist in identifying areas across the country that receive highintensity solar radiation, with the aim to install solar cells for power generation. Five solar stadiums for the 2022 World Cup will use ground-breaking solar-powered cooling technology to enhance the use of renewable energy. Renewable energy is still in nascent stages in Qatar. While the country has excellent solar energy potential and limited prospects for wind, biomass and tidal energy, it has negligible renewable energy capacity and no renewable energy legislation in place. Qatar experiences moderate wind speeds, which are suitable for small wind turbine generators for water pumping or to produce electricity at remote locations, such as isolated farms. Biomass energy potential in Qatar is largely contributed by municipal wastes and a 34 MW waste-to-energy plant is already in operation at Domestic Solid Waste Management Center at Messiaeed. Moreover, solar PV and concentrated solar power are well suited to local climatic conditions and serious efforts are already underway to tap Qatar s vast solar power potential. However, while Qatar has exceptional solar energy potential, price competitiveness and lack of a renewable energy policy framework poses a challenge to the growth of the solar power in the region. Qatar has set a goal to produce 20% of its electricity from solar energy by Qatar s power construction contractor awards are expected to decrease from US$ 2,000 million in 2016 to US$ 450 million in

20 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 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 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 country needs to grow at a year-on-year growth of 9.6% during in order to cater the growing need of electricity. The Oman Power and Water Procurement Company (OPWP) had signed an agreement in 2016 to build two independent power plants in Ibri and Sohar which is expected to have a combined capacity of 3,219 MW. Currently, power firms in Oman plan to invest around US$ 1,036 million for expanding and upgrading transmission and distribution networks in 2016 to expand and improve services by delivering more than 90% of its annual project budget for the first time in the group s history. Oman s Rural Areas Electricity Company will invest an estimated US$ 326 million to improve power generation capacity in rural areas in 2016 as a part of a countrywide-initiative aimed at addressing growing power demand in Oman. There is no doubt Oman faces major energy challenges in the coming decades as conventional fossil fuel resources dwindle and its young population continues to grow rapidly. Oman will have to devise a longterm strategy that considers adding alternative power generation sources such as renewable energies, while also enhancing energy efficiency and improving demand-side management both on an individual and industrial level. Oman has a nascent renewable energy sector, with several projects making progress. However, increasing consumption of natural gas for new 20

21 power projects has led the government to embrace renewable energy projects, in line with the sultanate s Vision 2020 economic diversification plan. For example, Oman s Rural Areas Electricity Company (RAECO) plans to install 90 MW of renewable capacity by Oman is developing an energy strategy that entails the production of 10% of its electricity needs from renewable energy resources. In line with this target, there are now several large-scale solar projects entering the pipeline, with more likely to follow, according to BMI. Gulf Renewable Energy (GRE) Mena has joined hands with Oman government-owned RAECO to develop a wind-based power project on Masirah Island off the sultanate s eastern seaboard. The proposed 1.7 MW capacity project is expected to be sultanate s first commercial windpowered plant with an implementation timeframe that is set to precede the much-anticipated 50 MW wind farm project planned at Thamrait in Dhofar Governorate. The latter scheme, originally planned for launch 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 dieselbased power plants at two locations within Raeco s sprawling jurisdiction. According to industry experts, Oman has been among the first in the region to introduce Independent Power Plants (IPP) with private involvement and across the GCC such initiatives are set to be imperative. With more projects on cards, more than 70% of power generation in the country comes from IPPs. Oman plans to develop two major power plants by 2022 within the main interconnected system (MIS), which 21

22 accounts for 90% of the nation s total electricity supply power plant. The Sultanate is expected to issue a request for qualifications (RfQ) for the new 800 MW IPP in Q While an 800 MW independent power plant (IPP) is expected to come on stream in 2021, a mega project with a capacity of 2,700 MW is planned to be operational in Oman also plans to integrate renewables in the power mix, contracts have already been awarded for the 50MW Harweel wind farm. Like the rest of the GCC, in the Sultanate OPWP holds majority equity stakes in all IPPs and usually offers 15-year power purchase agreements. The 2,700 MW power project will be tendered out under a new procurement methodology, which will come into play for the first time in According to OPWP, this new methodology will allow existing, out-of-contract plants to compete for power generation licenses alongside bidders for new power plants. Currently, the OPWP is seeking bids from major consultants to conduct a technical and economic study for setting up the first large-scale solar project in the sultanate. The winning consultancy will also help the company in the tendering process for the 200 MW independent power project (IPP) project. The tendering process will be overseen by the OPWP in line with its mandate as the procurer of all new power generation and related water desalination capacity. OPWP is now working on the first stages of tendering for consultancy services for the sultanate s first commercial-scale solar energy-based power plant. Two locations in Dakhiliyah governorate - Adam and Manah - have been identified as prospective sites for the establishment of a grid-connected large-scale renewable energy scheme. Oman s power construction contractor awards are expected to increase from US$ 3,186 million in 2016 to US$ 3,653 million in

23 KUWAIT Significant changes are on the cards in the Kuwaiti power sector as the government attempts to spur investment into the country s ageing infrastructure. The government has earmarked US$ 9.9 billion for infrastructure projects including power, and progress is being made on greenfield thermal and renewable projects. The energy ministry is aiming to double generating and desalination capacity by According to Apicorp, Kuwait s electricity market has long been closed to the private sector. The Ministry of Electricity and Water (MEW) is responsible for generation, transmission and distribution. Although the country has been slow to reform its sector, progress is taking place as the country looks to attract foreign investors. Kuwait is set to rely heavily on IPPs in the medium term and already has big plans for the next two years. Three projects are expected to be awarded in 2017: the 1.5 GW Al-Zour North 2 IWPP, the 1.5 GW Al-Khiran IWPP and the 280 MW Al-Abdaliya ISCC. Kuwait hopes to partner with international companies in a three-phase process, with the goal of generating a total of 2,000 MW of renewable energy (15% of its total energy needs) by The first phase will be a 70 MW energy park scheduled to be completed by This facility will be built on a 100-square-kilometre (39-square-mile) area in Shagaya, a desert zone 100 km (62 miles) west of Kuwait City, near the borders with Iraq and KSA. The second and third phases are projected to produce 930 MW and 1,000 MW, respectively. Kuwait had abandoned its plans to build a nuclear plant. In August 2016, Kuwait s Ministry of Electricity and Water s decision to not apply for a United Nations license for the nuclear plant was based on studies showing that the project is unfeasible and too costly. The ministry is likely to spend money on solar energy and wind. Kuwait plans to build more power stations between 2020 and According to RCREEE, Kuwait s electricity consumption relies almost entirely on oil products and natural gas for power generation. Currently, the country is facing important grid and capacity issues as well as rapidly 23

24 growing energy demand. As a response to these shortages, the Kuwaiti government is planning to increase generation capacity in the next decades. Renewable energy is set to meet up to 15% of Kuwait s electricity consumption needs by According to Oxford Business Group, Kuwait is working on facilitating the transfer of renewable energy techniques as well as providing applications and policies to tackle current challenges, mainly pollution and global warming. The government has earmarked US$ 9.9 billion for infrastructure projects including power and progress is being made on greenfield thermal and renewable projects. Kuwaiti authorities are eyeing 9,000 MW in additional new capacity by 2020 to meet demand. Kuwait is an emerging market and serious about solar power. Kuwait is planning to boost production of electricity on house roofs through model pilot projects in 150 homes, to be increased to 1,500 in a later stage after Kuwait offers attractive opportunities for investment in renewable energy. Promoting and developing renewable energy projects in Kuwait can complement conventional power and assist with power generation especially during peak demand periods. There are three key benefits from fostering renewable energy in Kuwait. Independent Power Producers (IPP) by-laws and Feed-in-Tariff schemes are being studied by the Ministry of Electricity and Water. According to industry experts, one nuclear power plant could supply more than 60% of Kuwait s power needs while the largest solar station would supply just 3%. Kuwait s power construction contractor awards are expected to increase from US$ 2,044 million in 2016 to US$ 2,920 million in

25 BAHRAIN Power-generation capacity in Bahrain needs to be increased at the rate of 6% a year to match the rising demand, according Apicorp. Bahrain has embarked on a new era of modernisation and development of the existing power infrastructure to meet the growing demand due to rising population and upcoming industrial projects. The government had announced multi-billion dollar investments in the power sector by 2020 and the private sector role remains crucial in implementing the strategy especially at a time when the public sector spending is squeezing due to the persistent low oil prices. The private sector is responsible for around 80% of the total electricity generation capacity and has been in the form of Independent Power Production (IPP). The official studies indicate that the involvement of the private sector will reduce the public exchequer bill, in form of salaries of the staff, low expenditures on maintenance side while bringing more efficiency through an open competition. Bahrain launched a major 400 kv electricity transmission line aimed at reducing short circuits and ensuring transfer of electricity from the production plants to load centres across the kingdom. The US$ 474 million project, implemented by the German company Siemens at the Hidd Power Station was inaugurated by His Royal Highness Prime Minister Prince Khalifa bin Salman Al Khalifa on 11th May This was one of the vital projects implemented by the Electricity and Water Authority. The next few years will see three major electricity transfer stations also being built. The project aims to meet all the needs of development and facilitate the exchange of electric power with the GCC network. 25

26 Bahrain, the smallest of the six GCC countries, aims to produce 5% of its energy from renewables by The country s energy resources are limited, 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-solarpower plant, in addition to small-scale hybrid power plants using solar and wind. Bahrain is also developing renewable energy sources to reduce its carbon emissions and fuel input costs, with hopes that the cost of solar infrastructure will eventually lower, making it more cost-effective in comparison to subsidised conventional utilities. Under the Kingdom s blueprint for social and economic development, named Vision 2030, up to 7% of its energy needs are to be met by renewable sources within 15 years. The construction of the pilot projects is expected to lay the groundwork for the renewable strategy. An extended period of low hydrocarbon prices may, however, put pressure on renewable energy investments as cheap input costs for conventional generation plants potentially reduces the appeal of new solar projects for private investors. Bahrain will force owners of homes and buildings to use renewable energy sources in a bid to ensure all properties are 100% dependent on renewable particularly solar energy. Owners will be introduced to the alternative sources of energy in stages starting with the use of power from the national electricity grid generated through affordable solar panels set in homes and buildings. Traffic lights across Bahrain will also run on solar energy as part of a five-year plan to incorporate alternative energies into electricity and water production. The plan, which is scheduled to start in December 2020, will include the building of the first government solar centre. Bahrain s power construction contractor awards are expected to increase from US$ 1,485 million in 2016 to US$ 2,102 million in

27 MAJOR GCC POWER PROJECTS 27

28 MAJOR GCC ON-GOING AND PLANNED POWER PROJECTS PROJECT NAME COUNTRY CLIENT EST VALUE (US$ MILLION) Nuclear Power Plant in Abu Dhabi UAE Emirates Nuclear Energy Corporation (ENEC) 20,000 Al Zour North IWPP Kuwait Kuwait Authority for Partnership Projects (KAPP), 8,387 Shamal Az Zour Al Oula KSC, Ministry of Electricity & Water (MEW), Kuwait Shagaya Renewable Energy - Phase 1 Kuwait Ministry of Electricity & Water (MEW), Kuwait, 5,610 Kuwait Institute for Scientific Research (KISR) Mohammed Bin Rashid Al Maktoum Solar Park UAE Dubai Electricity and Water Authority (DEWA) 5,000 Fadhili Power Plant KSA Saudi Aramco 4,700 Taibah Integrated Solar Combined Cycle (ISCC) Power Plant KSA Saudi Electricity Company (SEC) 3,500 Facility D - IWPP (Umm Al Houl Power Plant) Qatar Qatar General Electricity & Water Corporation (Kahramaa), 3,150 Tokyo Electric Power Company, Incorporated (TEPCO), Mitsubishi Corporation, Qatar Yanbu Power and Desalination Plant - Phase 3 KSA The Power & Water Utilities Company for Jubail & Yanbu (Marafiq), 3,000 Saline Water Conversion Corporation (SWCC) Thermal Power Plant in Jeddah South KSA Saudi Electricity Company (SEC) 3,000 Facility E IWPP Qatar Qatar General Electricity & Water Corporation (Kahramaa) 3,000 Sohar 3 - Ibri Independent Power Plant (IPP) Oman Oman Power and Water Procurement Company 2,300 Shuqaiq IPP KSA Saudi Electricity Company (SEC) 2,000 Qatar Power Transmission System Expansion - Phase 13 Qatar Qatar General Electricity & Water Corporation (Kahramaa) 2,000 Independent Power Project (IPP) at Addur - Phase 2 Bahrain Bahrain Ministry of Finance 2,000 Coal Fired Power Plant at Hassyan - Phase 1 UAE Dubai Electricity and Water Authority (DEWA) 1,800 Source: 28

29 FUTURE OUTLOOK 29

30 GCC POWER - WHAT NEXT? 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 segments to focus on their core business, and also encouraging capital investments from the private sector. Reform efforts in most of the GCC countries are limited to opening up the power sector for private investment in generation, transmission and distribution, however, much consideration 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 has been instrumental in meeting rapidly rising electricity demand. Oman was the first country to open up its power-generating sector. Currently, IPPs represent the majority of new capacity and continue to replace government power plants. Therefore, IPPs will continue to be at the forefront of GCC governments strategies to add generating capacities. With an increasingly demanding population and spiraling rates of power consumption, the need for sustainable and renewable sources of energy is expected to garner more importance in the coming years. The solar technology is approaching towards grid parity. With further advancement in technology, reduction of prices, clean technology, solar power is going to experience phenomenal growth and could be most likely preferred source of energy in the future. A latest trend catching up in the GCC countries is the Smart Cities plan that are being considered in each country s vision for sustainable electricity use. Also, smart grids will form key to boosting power efficiency in the GCC as peak demand increases in the coming years. New construction projects are likely to incorporate new smart dimensions. Among the GCC, the UAE, KSA and Qatar are leading in the forefront in the development of smart cities projects, which is also likely to continue in the coming years. According to Apicorp, the GCC governments will continue to cope well with rising demand and energy-price reform will help temper demand rises. Although GCC governments have announced budget deficits and indicated that government expenditures will be tightened in response to lower oil prices, investments in the power sector should not be affected and will be given priority will also see the rise of coal fired power plants, but technologies are being developed in order to mitigate the negative environmental impact from power generated by coal. This has seen ACWA Power in KSA commit to exploring the power generating market by building a coal fired power plant in Dubai to supply to the Expo Therefore, the GCC power construction industry is expected to register robust growth over the coming years with UAE, KSA and Kuwait being attractive markets for opportunities for power plants in the future. 30