Middle East Energy

UAE seeks broader fuel mix

Paul Breeze, UK

As hefty subsidies drive high electricity consumption, the UAE is looking to solar and nuclear power to cut its reliance on natural gas for generation.

Abu Dhabi is embracing solar power as part of its diversification from fossil fuel power generation Source: Masdar

The United Arab Emirates (UAE), a federation of seven emirates on the Gulf, has lifted its standard of living over the past 30 years largely through income from oil and gas discovered in the 1960s. Now, while fossil fuel remains a key source of revenue, the UAE has diversified economically to lessen its reliance on fossil fuel reserves that it recognizes will dwindle in coming decades.

In fact, only about 25 per cent of GDP in 2009 was based on oil and gas, according to US government figures. Even so, the UAE’s GDP plunged in 2009 as oil prices fell in the wake of the global economic crisis. The financial crisis also left Dubai facing a default on loans for its massive construction programme; while the emirate was effectively bailed out by Abu Dhabi, the richest emirate confidence in the UAE’s financial security has been dented.

Economic diversification has also failed to lift the UAE’s virtually exclusive reliance on its fossil fuels for energy and electricity generation. Heavily subsidized prices drive high gas and electricity consumption. Competing demands for natural gas also necessitate imports of gas, which look likely to grow over the medium term.

Partly as a consequence, energy diversification is being heavily promoted, with solar and nuclear power seen as the most attractive options. Even so, a significant shift away from fossil fuel is unlikely to be achieved before the end of the next decade.

The UAE is dominated by Abu Dhabi, which accounts for almost 90 per cent of the country’s land area and controls more than 90 per cent of oil reserves.

In 2010, UAE oil reserves were put at 97.8 billion barrels: 92.2 billion in Abu Dhabi; 4 billion in Dubai; 1.5 billion in Sharjah; and 100 million in Ras al Khaimah. Natural gas reserves were 6070 billion m3 in 2010, again mainly in Abu Dhabi. Globally, the UAE holds the sixth largest oil reserves and the seventh largest natural gas reserves.

The political structure of the UAE means that while the federal government controls areas such as foreign policy, security and defence, others such as the energy sector are administered at the state level. Each emirate within the federation controls its own fossil fuel reserves and administers its own energy sector, which has led to fragmentation within the electricity sector.

The electricity sector

Although in principle each emirate’s electricity supply is independent, only four principle utilities supply the seven emirates. Power supply is generally integrated with water supply, with power plants providing both power and water. Most plants are combined-cycle gas turbine plants with additional heat used for water production.

Abu Dhabi has the largest and most complex electricity sector. The main generator is the Abu Dhabi Water and Electricity Authority (ADWEA), which is owned by the government. The Abu Dhabi electricity generation sector is ostensibly privatized but in practice generation is carried out by a series of independent water and power producers (IWPP) in all of which ADWEA has a 60 per cent stake.

All electricity generated in Abu Dhabi is sold to Abu Dhabi Water and Electricity Company (ADWEC), a wholly owned subsidiary of ADWEA that owns Transco, the transmission company, and the two distribution companies that operate in the emirate, the Abu Dhabi Distribution Company and the Al Ain Distribution Company.

The UAE’s peak demand (MW) Source: ADWEC

Dubai has its own utility, the Dubai Electricity and Water Authority (DEWA), which is a vertically integrated, emirate-owned company. Sharjah also has its own utility, the Sharjah Electricity and Water Authority (SEWA), again vertically integrated and emirate-owned. The remaining four emirates are supplied with power by the Federal Electricity and Water Authority (FEWA).

Total capacity in the UAE in 2009 was 20 569 MW. DEWA operated installed capacity of 6997 MW, of which 5366 MW was based on gas turbines and 1631 MW on steam turbines. SEWA’s installed capacity was 2382 MW, with 1936 MW from gas turbines, 432 MW from steam turbines and 14 MW based on diesel units. FEWA’s total installed capacity in 2009 was 1080 MW. The capacity available to ADWEC at the end of 2009 was 10 110 MW, of which 95 per cent or 9560 MW was derived from IWPP plants.

Peak demand across the UAE in 2009 was about 15 430 MW allowing a margin of about 5000 MW or 25 per cent. The two main demand centres are Dubai and Abu Dhabi city. Dubai’s peak demand in 2009 was 5622 MW while the emirate of Abu Dhabi’s was 6255 MW, with Abu Dhabi city accounting for around 3500 MW.

During peak periods, Abu Dhabi, with the largest installed capacity, acts as a reserve for the other emirates and utilities through ADWEC. During 2009, FEWA imported up to 909 MW from ADWEC at demand peaks, SEWA imported up to 480 MW and even DEWA was forced to import a peak of 35 MW to meet demand.

Transmission integration

The transmission system across the UAE, based as it is on systems within the seven individual emirates, is fragmented. Abu Dhabi supplies power to its three internal regions – Abu Dhabi, Al Ain and the Western region – and also supplies power to the northern emirates, and its system provides the basis for a UAE grid backbone. While it also acts as spinning reserve for the other utilities within the UAE, overall integration between the seven emirates needs to be strengthened.

Greater integration is being undertaken under the auspices of the Emirates National Grid, a federal government backed project to fully integrate the electricity networks of the four major electricity authorities: ADWEA, DEWA, SEWA and FEWA. This integration will be achieved by constructing three new interconnections, two at 400 kV and one at 220 kV.

Meanwhile, wider regional integration is taking place through interconnection with the Gulf Cooperation Council (GCC) grid. The GCC grid is intended to interconnect all the countries within the region to increase security of supply. Completion of the UAE connection was due in 2010 but now appears to have been delayed until 2011. Interconnection will be through the Transco grid in Abu Dhabi and the Saudi Arabian grid. This will allow Oman to be integrated into the GCC grid as it is already interconnected with the Transco grid.

Demand growth

Electricity demand in the UAE has risen spectacularly during the past 20 years. It increased from 17.1 TWh/year in 1990 to nearly 40 TWh/year in 2000, and then hit 77 TWh/year by 2008 – a quadrupling of demand in just 18 years. Demand appears to be still climbing, even if financial crisis may have slowed the rate of increase.

The most recent predictions for future growth in demand are equally startling. UAE capacity is expected to reach 40 000 MW by 2020 to meet expected demand. ADWEC predicts capacity growth to 2030 to meet demand in Abu Dhabi and the other emirates to which it exports power.

The Authority forecasts the demand it will have to meet will soar from 7680 MW in 2009 to 19 296 MW by 2015, 23 907 MW by 2020, 26 834 MW in 2025, and 30 008 MW in 2030. This is close to a further quadrupling of demand over the next 20 years.

These figures reveal other startling statistics. While the UAE’s overall electricity consumption is about 13 000 kWh/year, the consumption of Abu Dhabi’s residents averaged 41 000 kWh/year in 2006 – close to four times the average US consumption in 2008. As a consequence, the UAE has the second largest greenhouse gas emissions per capita after Qatar.

Massive energy consumption, particularly of electricity, is prompted by heavily subsidized gas and electricity prices. Natural gas in Abu Dhabi is provided to power plants at about $3–7/MWh, according to a recent study of Abu Dhabi’s renewable energy policy1. The emirate’s power plants can therefore produce electricity at around $50/MWh. Residential customers actually pay less than $20/MWh.

One repercussion of the enormous demand for energy is a natural gas shortage. Gas demand is rising by 7 per cent annually across the UAE. By 2009, supply could not meet demand without imports, mainly from Qatar. Unless this trend is curbed, gas demand will double by 2020. The UAE is not alone: of the UAE’s neighbours, only Qatar has a surplus of supply over demand.

Generation development

Rising electricity demand will require Abu Dhabi to increase its generating capacity by 12 600 MW by 2020 – which would more than double its 10 110 MW capacity at the end of 2009 – and by a further 18 400 MW by 2030, according to ADWEC. Across the whole of the UAE an additional 20 000 MW is expected to be needed by 2020, double the country’s existing capacity. Capacity growth on this scale will put even greater strain on gas supplies, as well as further expand the emirates’ sizeable environmental footprint.

The most obvious way to curb this extravagant growth is to increase the cost to consumers of both gas and electricity, but this currently appears not to be politically possible. The only alternative is to find different sources of energy and electricity – the route chosen by the UAE.

Abu Dhabi has taken the lead with an announcement in 2009 that it intended to generate 7 per cent of its electricity from renewable sources by 2020. The emirate also hopes by then to gain 30 per cent of its electricity from low-carbon sources, including renewable, nuclear and hydrogen power; as Abu Dhabi’s demand is expected to near 20 000 MW in 2020 (24 000 MW including exports), this would require at least 6000 MW of low-carbon capacity.

Nuclear power

The UAE’s most ambitious power generation plan is its determination to develop a nuclear power programme. Planning for this programme began early in the decade with the formation of Emirates Nuclear Energy Corporation (ENEC). In December 2009, ENEC awarded a contract to a consortium led by Korea Electric Power (Kepco) to design, build and operate a series of nuclear power plants in the UAE.

The initial plan is to build four 1400 MW nuclear power plants. The units will be based on Kepco’s APR1400 pressurized water reactor, a third-generation nuclear design of which the first units are due to enter service from 2013.

Forecast of the UAE’s peak demand (MW) Source: ADWEC

The UAE’s schedule calls for its first units to be connected to the grid in 2017, with all four online by 2020, when they will, in theory, supply 5600 MW or 14 per cent of the UAE’s total demand. The initial programme of four reactors is worth $20 billion but more reactors are expected to be constructed beyond 2020. The nuclear programme has raised sensitive issues. To avoid international political difficulties, the UAE has been working closely with the International Atomic Energy Agency. To calm concerns over nuclear proliferation it has also undertaken not to enrich uranium to produce its own nuclear fuel.

Renewable generation

While nuclear power is likely to provide the largest portion of the UAE’s low-carbon electricity, the emirates are also trying to develop renewable sources of energy. Wind power offers little promise; although one 850 kW wind turbine has been operating in Abu Dhabi since 2008, further development has not been pursued. Instead, the focus has been on solar power, which appears the most promising alternative source.

The main solar developments are under the auspices of the Abu Dhabi Future Energy Company, aka Masdar, which has government funding of $15 billion for clean energy projects. These include both local and international projects. Masdar has already invested in wind energy in the UK and solar power in Spain, although its most ambitious scheme is Masdar City, a zero carbon development in Abu Dhabi intended to attract 40 000 residents and 1500 businesses when it is complete in 2016.

Projected breakdown of future supply increases Source: ADWEC

Masdar has already completed a 10 MW solar photovoltaic (PV) plant at Masdar City, which began providing power in June 2009. Its future solar ambitions are based on a series of solar thermal power plants – Shams-1, 2, 3, 4 and 5 – which are due to be constructed between 2011 and 2014, with one plant entering service each year.

The Shams plants will all be based on parabolic reflectors and each will have a nominal capacity of 100 MW. Construction of the first of these plants – to be built for $600 million by a consortium that unites Masdar with the Spanish solar thermal company Abengoa and the French company Total – was due to start late in 2010. Thermal energy storage will not feature in the first of these facilities but may be part of later plants.

Hydrogen power

Another flagship project being developed by Masdar for Abu Dhabi is a hydrogen power plant. The project aims to convert natural gas into hydrogen for firing a 420 MW power plant. Carbon dioxide captured during the conversion process would be pumped into depleted oil fields to enhance oil recovery.

The hydrogen power project is being developed by Masdar in conjunction with Hydrogen Energy, a partnership between BP and Rio Tinto. But, while design work continues, the date for awarding contracts and starting construction has been put back. The latest report suggests the plant will not be completed before 2014 at the earliest.

Other projects

In addition to its headline projects, Masdar has proposed using rooftop solar PV units to generate a further 500 MW of power in Abu Dhabi and has mooted the idea of a solar PV park with a capacity of 1500 MW by 2020.

Masdar has also awarded a $1.6 million geothermal prospecting contract to an Icelandic company. It is also reported to be testing a new design of solar thermal plant based on solar tower technology, but with heat collection at ground level.

The Ras al Khaimah government in conjunction with La Centre Suisse d’Electronique et de Microtechnique has meanwhile been testing prototype solar islands, which use solar heat to produce steam to drive generators. But development remains at a relatively early stage.

Such schemes can help provide an alternative to fossil fuels for generation, but cutting the UAE’s reliance on oil and natural gas requires lifting energy subsidies. Doing so would both discourage high consumption and enable renewable and other low-carbon sources to compete. Today, the subsidized cost of power makes that impossible. MEE

1. The Basis of Abu Dhabi’s Quest for Renewable Energy and Policies Required to Meet its Goals, Jim Krane, Dubai School of Government, September 2010.

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