Electricity costs double in three years in Dubai

A 35,000sqm tower on Sheikh Zayed Road now pays Dh2.6m more while villas in Jumeirah have to pay Dh16,650 more annually

Commercial and industrial businesses are in for a shock later this month when they receive their electricity bills. Many who failed to take any sort of energy saving measures will calculate that their bill has now roughly doubled, according to a survey by leading energy conservation specialist and total facilities management company Farnek Avireal.

A new tariff structure or slab system was first introduced on March 1, 2008 by Dubai Electricity and Water Authority (Dewa) aimed at encouraging consumers to conserve energy. Effective January 1, 2011, Dewa once again increased its tariff due to the escalating gas and oil prices. Thermal power stations produce 93 per cent of the UAE’s the total energy supply and they are primarily powered by 70 per cent gas and 30 per cent oil.

“Consumers, particularly commercial, that did nothing to arrest consumption or waste after the first slab tariff increase in March 2008, will have electricity bills that in some cases will have soared by an additional Dh1.1 million during the past twelve months,” said Markus Oberlin, General Manager, Farnek Avireal.

On January 1, 2011, Dewa increased electricity charges from 20 fils per kilowatt (KWh) to 23 fils for monthly consumption below 2,000 KWh and from 33 fils to 38 fils per KWh for consumption of more than 6,000 KWh per month.

Average individual electricity usage is said by Dewa to be 20,000 KWh hours per annum and 130 gallons of water daily, putting Dubai among the cities with the highest consumption per person in the world, with one of the highest carbon footprints per capita.

The Farnek Avireal survey, based on actual buildings, shows a Dubai office tower of around 35,000 square metres on Sheikh Zayed Road, which for the calendar year 2007 had an annual electricity bill of Dh2.5 million. In 2011, electricity charges for the same building will have doubled to Dh5.14 million.  

Similarly, a hotel of around 20,000 square metres in the New Dubai area which had annual energy costs of Dh1.5 million will now be paying over Dh3 million in 2011.

Homeowners are not spared either. A typical villa in Jumeirah with a previous annual energy bill of Dh23,850 in January 2008 will see a rise of up to 70 per cent from January 2011 to around Dh40,500.

Farnek Avireal believes its intelligent energy and cost-saving solutions, already in widespread use throughout the United Arab Emirates, could substantially reduce the impact of the latest Dewa tariffs especially on commercial and industrial businesses.

“It is critical that businesses plug in these increased expenses into their profit and loss accounts, because it will have an adverse effect on the bottom line. Moving forward, there is an undeniable business case to reduce energy demands and, therefore, utility bills," said Oberlin.

"Dubai is already looking at coal fired power stations, a cheaper alternative to oil and gas in the short term, while plans to introduce solar power plants within the next 2-3 years and nuclear reactors by 2020 take shape. Sustainable, clean, renewable energy is the future. We must reduce our carbon emissions before we damage the environment irreparably,” added Oberlin.

Before the slab tariff was introduced in March 2008, the investment cost of Farnek Avireal's own Energy Saving Module – which reduces electricity consumption from air conditioning and refrigeration systems by up to 20 per cent – could be paid back in utility costs savings within 22 months.

"Having had two price increases inside three years our Energy Saving Devices could now in some instances have pay back periods of less than 12 months – that makes good business sense and environmentally it’s absolute common sense,” said Oberlin.

Farneik said Dewa’s new tariff means that residential and commercial consumers will pay 20 fils per kilowatt hour (kWh) for 0 to 2,000 kWh; 24 fils per kWh for 2,001 to 4,000; 28 fils per kWh for 4,001 to 6,000; and 33 fils per kWh for 6,001 and above. For industrial users, the rates will be 20 fils per kWh for 0 to 10,000 and 33 fils per kWh for 10,001 and above. A similar pricing structure is also being introduced for water charges. UAE nationals are only excluded from the new tariffs for their houses and farms.

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