Confirmation that the countries of the Gulf Cooperation Council (GCC) are likely to remain among the world’s hotspots for power infrastructure development came recently with the publication of a report by the Economist Intelligence Unit (EIU), which forecasts an investment programme of as much as $50 billion in power projects between 2009 and 2015. The figure of $50 billion is not unfamiliar. Indeed, this magazine has quoted it in the past as the predicted power industry spend in the region up until 2010. What is striking is that, despite the economic downturn and its impact on the region, there is no apparent let up in the needs of the region going forward and its ability to develop a supporting power generation and delivery infrastructure.
The EIU predicts that the economies of the Middle East and North Africa (Mena) region are set to consistently outperform every other region in the world over the next five years. It says that a rising population and fast economic growth are driving governments towards this level of investment in the electricity sector. The GCC has seen its population rise from just over 28m in 1998 to an estimated 39m in 2008, and this trend is set to continue.
Total installed capacity in the GCC countries (Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and UAE) is currently 75 GW, but if demand continues to grow at the present annual rate of 9.5 per cent, more than 55 GW of additional power will be required by 2015. This is a tall order, but the good news is that the region has the wealth to be able to afford the development and has shown it can attract private investors to participate in the required projects, reducing the reliance on state budgets.
The news that the first phase of the GCC Interconnection Grid has been completed (reported in this issue of MEE), provides some relief for those countries whose power networks are now joined, given their new-found ability to share reserve margins and opening up the prospect of electricity trading.
Although the establishment of regional grid interconnections is a welcome development, it does nothing to tackle the fundamental and long-term challenges the GCC faces with regard to its power sector. These include the failure to address the high levels of per capita electricity consumption in the region and the consequent dismal record on carbon dioxide emissions. The region is also almost wholly dependent on fossil fuels for electricity production, which not only affects its environmental footprint but is also diverting highly valuable oil and gas resources, which otherwise could be exported to less well-endowed regions, willing to pay generously.
There is no doubt that the next few years will see a significant drive towards producing electricity from renewable sources within the GCC in order to free up oil for export and for industrial feedstock. Abu Dhabi has positioned itself as a leader in developing ‘green’ technology with its Masdar initiative and has recently outbid Germany to become the interim host of the International Renewable Energy Agency (Irena). GCC states are investing in solar and wind technology and given the solar resources available and the advances in electricity transmission technology, serious planning is now underway for the export of solar energy to Europe through a chain of long-distance cable and transmission stations, by the Desertec Foundation.
The other ‘game-changing’ development would be construction of one or more nuclear power plants in the region, able to supply baseload electricity without depleting fossil fuel stocks or adding to the release of CO2. With centrally-planned economies and long-term planning horizons, GCC countries are in some ways well suited to the development of a nuclear power industry, but whether one country could go it alone without the cooperation of neighbouring countries and whether the geopolitically-sensitive nature of such a move could be finessed, remains to be seen. This is certainly what Abu Dhabi is currently planning to do and it has already signed up to all safeguards and international monitoring mechanisms, as well as coming to an understanding with France over the technology to be used.
The EIU report confirms what most industry professionals have believed for some while that the GCC’s power (and water) needs will be fast-growing for the foreseeable future. But in achieving that growth the region has to balance many interests, some of which are in conflict with one another. The drive to expand renewable energy usage sits somewhat uncomfortably with a nuclear power policy, in the minds of many. The need to raise levels of energy efficiency is unlikely to met while consumers enjoy highly subsidized electricity supplies and, the addition of new installed capacity is most likely to be met by cheaper and easier to construct gas fired facilities, despite the desire to reduce dependence on the fuel.
So it looks like being ‘more of the same’, but with the distinct prospect of a ‘somewhat different’ picture emerging.