Building Kuwait's electricity supply capacity and reducing demand

09 November 2007
Kuwait appears to have narrowly avoided a summer of discontent in the power sector. The much-anticipated nationwide power cuts never happened, allowing government ministers and civil servants to breathe a collective sigh of relief. An energy crisis that threatened to engulf the government in political turmoil was avoided at the last minute.

In late February, a crisi seemed inevitable. The state had total installed capacity of 9,800 MW, but summer peak demand for power was forecast to hit 9,700 MW, far exceeding the accepted 20 per cent reserve required to cope with sudden spikes in consumption.

While trying to fast-track power projects to boost existing capacity and bringing in emergency generation contractors to temporarily increase output, the government became almost totally reliant on people individually choosing to cut power consumption in a country where temperatures in the summer months average 44 degrees centigrade. “No one wants to be in that situation ever again,” says Ali al-Wazzan, assistant undersecretary for technical power services and the national control centre at the Electricity & Water Ministry.

“This sort of thing does not give the country a good image. It could happen again if the current [power] generation projects do not happen.”

Efforts are now under way to build more plants. According to Al-Wazzan, the ministry aims to install up to 5,840 MW of new capacity this year. Plans include a 1,500-MW plant at Subiya, a 3,000-MW plant at Al-Zour North, a 780-MW station at Shuaiba, and to turn the existing plant at Al-Zour into a combined-cycle station with an additional 560 MW.

Boosting existing capacity will be crucial, but one of the surprises to emerge from the summer was the action taken by the state’s citizens. Consumption, which was widely expected to soar, went down.

“It was reduced by 10 per cent, which is quite phenomenal because we really did not expect it to go down that much,” says Al-Wazzan.

Officials say the reduction is the result of the government’s awareness campaign, which was launched in early June, in a last-ditch attempt to avert the danger. Tarsheed, the national energy conservation project, uses TV, radio and newspaper advertising to encourage people to conserve energy.

But Kuwaitis still pay next to nothing for their utilities, a factor that effectively undermines any campaign to change patterns of consumption.

The state plans to run the awareness campaign for at least four years. “We want to build a culture to make the public aware of the value of energy conservation,” says Al-Wazzan. “There were campaigns in the mid-1980s, but they were not as effective. In the past we have also looked at rationing the use of power among businesses and industry, and changing working hours.”

But translating the success in reducing public levels of consumption into the reform of power tariffs will be difficult, if not impossible, according to Al-Wazzan.

“Tariff reform has been considered but needs the approval of parliament and will take a much longer time to come about,” he says. “We should not rely solely on getting new tariffs approved.”

Delayed response

One of the biggest complaints among Kuwaitis is the amount of time it took the authorities to address the problem. Criticism of the government and the ministry in the local press and the National Assembly (parliament) helped focus the effort.

“Lessons have been learned not only by the ministry, even though we knew what we were facing, but also by the Council of Ministers who have supported us by paving the way to accelerate these new projects,” says Al-Wazzan. “Everybody knows the gravity of the situation we faced, and that it has to be corrected immediately.”

Kuwait ended up in this situation mainly through political indecision and poor management. It was known for some time that the state required new capacity, but it was not until 2002 that the ministry had the budget and the data to bring new plants on line. “So many of the issues that delayed these projects were political and financial,” says Al-Wazzan.

Despite successes in reducing consumption and a renewed commitment from government and the ministry to push power projects through, some observers still think the country could yet face an energy crisis.

Kuwait’s inflexible tender regulations, which have often prevented the state from building new plants even when the ministry has given the go-ahead, are a cause for concern, say observers.

“We hear a lot of positive talk, but we are not seeing action,” says one Gulf-based turbine supplier. “Terms and conditions have not changed.”

Because of this, the state has had difficulty in attracting international contractors. The plan to build the Subiya power plant is a case in point. The estimated $800 million-1,000 million project is currently being retendered after a team of the US’ GE Energy and South Korea’s Hyundai Heavy Industries, which had previously been selected by the ministry, pulled out of negotiations for the contract in 2006.

The scheme was then revised to involve a 2,500-MW simple-cycle power plant, and was tendered in the spring. Despite bids being received from contractors for the project, the government once again changed its approach and decided to develop it on its original basis: a 1,500-MW plant on a lump-sum engineering, procurement and construction contract.

“It is difficult to judge whether a similar crisis will be repeated,” says the supplier.

“We will have to see who participates on Subiya. If everything remains on schedule in terms of new capacity, the government should be alright up to 2010, but any retender will lead to a hold-up.”

There are signs that the government is making efforts to address regulatory pitfalls. To attract more international contractors to bid for work in the state, the ministry has decided to drop a long-standing rule that bidding groups must contain a turbine supplier. In the future, civils contractors will be able to select turbines from a pool of equipment manufacturers.

Reducing demand

The government is also considering other technical solutions to reducing energy use. Al-Wazzan has identified district cooling - where a single system is used to cool several properties - as key to reducing power consumption.

“Among the measures planned for next year, one of the programmes will look at district cooling, which has been well received by the Housing Authority,” he says. “The amount of energy consumed can be radically reduced.”

But these are early days. More immediate action could be taken in the construction sector. “Building more eco-friendly buildings that conserve energy better is something that is happening across the region and around the world, and Kuwait University is looking at this,” says Al-Wazzan.

Under pressure from its citizens, the government appears to have wriggled out of an energy crisis for now. However, any slowdown in building up new capacity could lead to similar problems next year and in 2009. Tariff reform, which would offer a significant incentive to reduce energy consumption, is still some way off.

Yet some of the government programmes have yielded unexpected results. The Tarsheed campaign, although launched at the last minute, is successfully reducing consumption levels. Change may also come from building more environmentally friendly buildings and industrial sites.

But if anything can add to the current impetus for change in the power sector, it is the knowledge that civil servants and ministers know that a national embarrassment was only narrowly avoided.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications