Abu Dhabi is the undisputed leader in the regional power sector. The leading advocate of private power in the Middle East has not only managed to consistently meet high demand growth at home, but also has become a key electricity supplier to its neighbours. Even so, it still maintains one of the healthiest reserve margins in the region.

Abu Dhabi has become the model for private power development across the Gulf

Abu Dhabi has not always held such a lofty position in the power sector. In the 1990s, there were serious concerns that it would be hit by power shortages as a result of poor planning and slow decision-making. However, following the sector’s restructuring in 1998 and the subsequent establishment of Abu Dhabi Water & Electricity Authority (Adwea), those fears gradually disappeared.

Market leader

Since the groundbreaking Taweelah A2 project in 1999, Abu Dhabi has concluded seven more independent water and power projects (IWPPs) and contracted in total almost 12,000MW from the developer market. Its track record of implementing IWPPs on schedule and under a well-defined model has ensured that projects have received a healthy turnout from international developers: today more than 10 foreign companies hold equity stakes in generating assets with the largest being Japan’s Marubeni Corporation and the UK’s International Power.

Abu Dhabi power factfile, 2009
Installed generating capacity (MW) 10,110
Peak power demand (MW)* 7,680
Growth in peak power demand (%)** 11
Reserve power margin (%) 24
Largest generator Taweelah Asia 
Number of power customers 327,000
Number of IPPs/IWPPs concluded 9
Additional capacity requirement by 2019 (MW) 14,735
Estimated cost of required capacity ($bn) 17.7
*=Includes 1,275MW of demand from outside Abu Dhabi emirate; **=Abu Dhabi emirate demand only; IPP=Independent power project; IWPP=Independent water and power project. Source: MEED Insight

The success of its IWPP programme has been reflected in the fact that it has become the model for private power development across the Gulf. It has also led to a substantial improvement in the Abu Dhabi power situation. Despite an 11 per cent jump in Abu Dhabi peak demand, installed capacity of 10,110MW was more than enough to cover the emirate’s peak load of 6,255MW. Even with peak exports to Sharjah and the Northern Emirates increasing by 60 per cent to an estimated 1,380MW, Adwea still had more than 2,000MW of spare capacity.

Despite its capacity surplus, Abu Dhabi cannot afford to rest on its laurels. Data for the first three months of 2010 showed that weekly peak demand in Abu Dhabi was 10 per cent up on the corresponding period in 2009. Moreover, power exports will rise strongly in the coming years. The Federal Electricity & Water Authority (Fewa) is set to take 2,500MW by 2015, up from 900MW in 2009, while Sharjah will increase imports to 680MW in 2011 from 480MW last year. Abu Dhabi National Oil Company (Adnoc) will also become a major customer, taking some 2,500MW from the Adwea system in 2014.

Abu Dhabi Water & Electricity Company (Adwec) forecasts that peak electricity demand could triple to an estimated 22,700MW in 2019 and quadruple to 30,000MW by 2030. This would mean that some 1,500MW of new generating capacity will have to be brought on stream every year for the next two decades.

In itself, such a capacity building programme is not that daunting. Over the past decade, Adwea has on average awarded 1,600MW of new capacity every year. More-over, it has some 3,500MW of capacity under construction on the Shuweihat 2 and Fujairah 2 IWPPs and a further 1,600MW at the tendering stage on Shuweihat 3. However, there will be challenges to overcome, not least on the feedstock front, where new gas allocations are in short supply.

Nuclear energy

This was the primary reason why Abu Dhabi and the UAE decided to proceed with a nuclear energy programme in 2008, awarding in late 2009 a $20bn contract to a South Korean consortium. The project, consisting of 5,600MW of capacity, is the first commercial adoption of atomic power in the region. Just as with its private power model, Abu Dhabi’s framework for nuclear power is likely to be used as the preferred model for other nations in the region that will follow in its footsteps.

When the Abu Dhabi power sector was restructured and unbundled into separate companies in the late 1990s, it was anticipated that private sector involvement would eventually spread into distribution. In 2004, it seemed that a sell-down was approaching.

BNP Paribas was appointed to advise on the possible privatisation of both Abu Dhabi Distribution Company (ADDC) and Al-Ain Distribution Company (AADC). Its appointment was followed by bidding starting on two eight-year contracts to operate and manage the distribution firms. However, neither initiative came to fruition and both companies have remained in state hands.

From the outset, Abu Dhabi Transmission Company (Transco) was always expected to remain in government ownership. However, its role has changed over the years and is no longer confined to just meeting the needs of Abu Dhabi. Under a decision approved by the UAE cabinet in October 2007, Transco took over responsibility for Fewa’s 400kV backbone and most of the 132kV network in the Northern Emirates.