The UAE’s electricity sector will need at least $8 billion (Dh29.3bn) in investment in the next six to eight years to meet growing demand, according to forecasts. The government has plans to expand its 10 gigawatt (GW) of capacity by more than 50 per cent during the next decade, the Business Monitor International (BMI) said in its overview of the country’s power sector, quoted in a report by Dubai Chamber. Dubai alone will have to boost its power generating capacity to 9.5 GW by 2010, BMI estimated.
The firm predicted electricity consumption per capita is set to increase by two per cent between 2006 and 2011, with the UAE’s power consumption expected to rise from an estimated 56.6 terawatt hours (twh) in 2006 to 82 twh by 2011.
Similarly, the UAE has one of the highest per capita rates of water consumption in the world. Only the United States and Canada use more. The boom in residential and commercial development has led Dubai Electricity and Water Authority (Dewa) to invest in power generation and desalination capacity to match demand. Dewa recently unveiled a new 1.3 GW power and desalination project in Jebel Ali and expects a two GW expansion of the project by 2010.
Dewa is also seeking bids for a three GW plant at the same location for 2012 start-up, Dubai Chamber said.
Abu Dhabi currently has 1.05 GW of new capacity at its Taweelah site, due to come onstream this year.
Demand for electricity in the GCC has grown by at least 10 per cent over the past decade, and is expected to pick up in the coming years due to steady growth. In the UAE, demand for water and electricity will continue to grow at a minimum rate of 10 per cent a year until 2010.
Dubai’s demand for power is expected to grow at 14 per cent a year until 2010 and is likely double in Abu Dhabi between 2008 and 2013.
“The reasons behind the shortfall are supply shortage and increase in loss of electricity and water during transmission and supply due to shortcomings in network,” said Mohammad Ibrahim Al Hammadi, director of the Federal Electricity and Water Authority (Fewa), earlier this month. He said while large investments in water and electricity projects are needed, there is also a need to introduce new legislation, especially regarding environment, health and safety procedures in water and electricity services.
The BMI report predicts the UAE will account for 5.77 per cent of the regional power generation by 2011.
Regional power generation is estimated to rise to 1,473 twh by that time, representing an increase of 29.7 per cent between 2007 and 2011. The UAE’s contribution to thermal generation in 2006 is estimated at 58.8 twh – 6.19 per cent of the regional total for the Middle East and Africa – but the country is expected to account for only 6.60 per cent by 2011.
BMI’s regional forecast for 2011 is 1,289 twh, indicating a growth of 28.3 per cent and slightly reducing the market share of thermal power generation to 87.5 per cent.
According to Dubai Chamber, the reduction is expected in response to environmental pressures to promote renewable energy sources and nuclear power generation.
BMI is forecasting an average 7.4 per cent annual increase in generation to reach 85 twh by 2011, all of which will be thermal.
Conventional thermal sources are expected to remain the dominant fuel for electricity generation in the coming years, with most power projects under construction or planned using gas.
“There is long-term possibility of diversification into nuclear, while other options are being considered in order to limit the use of gas,” Dubai Chamber said in its overview report. The cost of raising capacity is set to catch up with the UAE’s steps to boost power generation.
According to BMI estimates, costs to generate power in the UAE will hit between $3.1bn (Dh11.3bn) and $3.9bn (Dh14.3bn) between 2007 and 2011, assuming lower oil and gas prices, but increased fuel and power consumption.
“UAE power prices are expected to increase steadily over the next several years, aligning with world market prices. Therefore, residential and industrial power prices are expected to follow the underlying generating costs,” Dubai Chamber stated.
Natural gas demand is forecasted to increase from 41.7 billion cubic mere (bcm) in 2006 to 60.1 bcm by 2011, and the gas-fired power generation to increase from 57.6 twh to 83.1 twh, representing 97.7 per cent of total generation by 2011. BMI also predicted oil will remain relatively insignificant to the UAE power generation mix.
Oil is expected to rise to a maximum of 2.4 per cent by 2011. BMI estimates there will be no more than two twh of oil-fired power generation by 2011. On the other hand, the UAE is considering coal-fired generation to reduce dependency on gas. However, a lack of domestic resources and the size, cost and environmental implication of coal-fired facilities mean they are unlikely to be built during the forecast period, BMI said. And while nuclear energy is on the long-term agenda for the Emirates, renewable energy is not expected to contribute significantly to generation during the forecast period.
The numbers
- $8bn: Investment needed to meet the UAE’s future power
demands
- 50: Percentage increase needed in output in the next 10 years
- 5.77: Percentage of the region’s power output used by UAE by
2011
- 60.1: Natural gas demand, in billion cubic metres, needed by 2011
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