The announcement that state utility Abu Dhabi Water & Electricity Authority (Adwea) and the Regulatory Supervisory Body (RSB) are to be folded into the newly established Abu Dhabi Department of Energy is the latest move from the UAE capital to consolidate its economy and major business sectors.
The move to merge Abu Dhabi’s key energy companies into a single department is part of the emirate’s plan to develop a coherent energy policy, the pace of which has accelerated following the plunge in oil prices in 2014.
Adwea was established in 1998, replacing the former Water & Electricity Department, and was responsible for implementing government policy in the electricity and water sectors. Under its stewardship, the emirate laid out the region’s blueprint for the independent water and power producer (IWPP) model, which has been hugely successful in developing significant desalination and electricity capacity in partnership with the private sector across the GCC.
While Adwea is regarded to have successfully led Abu Dhabi’s efforts to expand and upgrade its utilities infrastructure in partnership with the private sector, there has sometimes been a perceived disconnect between the emirate’s hydrocarbon entities and utility providers. The Department of Energy has been established to encourage more inclusive decision making and policy implementation.
In the new department’s published objectives, developing a “clear strategy for the future of the petroleum and mineral resources” and facilitating “effective and economic integration of power production resources” set out a clear blueprint for a coordinated strategic approach to the emirate’s energy policy. The new entity will work in cooperation with the emirate’s Executive Council to develop and implement strategic and operational plans, in addition to implementing projects and expansions across the energy sector.
The department will also play a key role in the UAE’s drive to develop 50 per cent of its total energy from clean resources by 2050, with “sustainable development” forming a central pillar of the organisation’s stated objectives. The emirate is currently developing the world’s largest photovoltaic (PV) solar plant and will house the federal Baraka nuclear energy plant, which is due to start producing energy by 2019.
The new department’s remit across the hydrocarbons and utilities sectors will also assist cooperation across the quickly converging oil and clean energy markets with international oil companies (IOCs), which are all making significant moves to invest in clean energy. France’s Total, which recently signed two new 40-year oil concession agreements with the emirate, was a key stakeholder in the development of Abu Dhabi’s first solar plant. Another key partner, BP, acquired a 43 per cent stake in Europe’s largest solar developer Lightsource in late 2017, six years after it had withdrawn from the renewables sector.
Abu Dhabi is not the first GCC state to make moves to bring important energy bodies under one umbrella. In 2016, Saudi Arabia established the Ministry of Energy, Industry and Mineral Resources to oversee hydrocarbon and electricity sectors in the kingdom.
Looking at the bigger picture, the establishment of the Energy Department is the latest part of Abu Dhabi’s aim to consolidate its companies and assets in response to the crash in oil prices in 2014. Since then, government entities have begun to restructure operations to reduce costs and improve efficiency as state budgets have been tightened.
The $125bn consolidation of Mubadala and the International Petroleum Investment Company [Ipic] to form Mubadala Investment Company in January 2017 set out the emirate’s stall for merging assets in the energy sector. This was followed by the merger of First Gulf Bank and National Bank of Abu Dhabi to form First Abu Dhabi, with assets of $180bn. In March this year, it was announced that the Abu Dhabi Investment Council (Adic) would be folded into Mubadala in the latest move to reduce costs across state entities.
While the establishment of the Department of Energy is not expected to have any impact on projects underway or planned to be tendered this year, such as the Taweelah independent water project (IWP), it will play an important role in planning strategic initiatives and projects moving forward. It also provides the latest signal that Abu Dhabi is committed to improving coordination and boosting efficiency across the public sector.