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25 April 2024

GCC power trading by Feb-end

The GCC countries are seeing increasing demands for power due to rapid population, commercial and industrial growth (FILE)

By Staff

GCC member states are expected to approve contracts that will enable bilateral power trading agreements using the GCC Interconnector by the end of February, according to a report in a business magazine.

The agreements have been finalised and sent to member states for their approval. The GCC Interconnection Authority (GCCIA) expects to receive approval by the end of February and send them out to utilities in March, an official at the GCCIA told Meed magazine.

The GCC countries have been undergoing transformational changes to their power sectors as a result of increasing demands for power due to rapid population, commercial and industrial growth in their respective countries. 

Realising the financial burden to construct utility projects to meet such demand, the governments of the GCC countries embarked on a plan to restructure and privatise their power sectors thus encouraging the private sector to invest in this lucrative industry. 

Legislation has been passed in several GCC countries to restructure and privatise their power sectors into separate generation, transmission and distribution entities.  The GCC countries have also established a Power Grid Authority known as the GCC Interconnection Authority to develop the GCC Power grid. 

The power grid will reduce high long-term investment costs in constructing generation plants by reducing the level of reserves needed in each country as well as providing wheeling services and enabling energy trading. 

By providing trading services to the power sector, the GCC Interconnection Authority will become the ‘launch pad’ for energy trading, not only, between the GCC countries but with Independent Water and Power Producers and other power grids such as the Pan-Arab, European and Mediterranean Grids; making the GCC into a major exporter of power and thus enhancing the economies of the GCC countries.

The current demand for electrical power in the GCC countries is approximately 70 GW and is expected to triple over the next 25 years.

Since the GCC North section of the electricity grid opened in July 2009, the system has provided additional spinning reserve to the connected member states of Kuwait, Saudi Arabia, Qatar and Bahrain. The final section of the grid to connect the northern network with the southern network of the UAE and Oman will be constructed this year.

At the same time the GCCIA has been developing a trading framework with the UK law firm Norton Rose and US economic consultant National Economic Research Associates (NERA). This will enable states to choose to supply electricity on a long- or short-term basis, rather than its current use in emergency situations.

In line with international electricity trading, the GCCIA will act as the regulator and manage the flows of electricity through the network once two states negotiate a deal. It is understood that the agreements will cover the way that buyers and sellers interact, including whether buyers and sellers should be left to talk directly or whether the GCCIA should act as an intermediary to enable transactions.

Pricing will also be part of the trading agreements and the GCCIA is working on a tariff study along with developing its business plan. In the long term, the authority is working on opening of the network to the private sector.