Demand for electricity soars in Abu Dhabi

28 March 2010

While the rate of electricity demand growth slows in other emirates, consumption in the UAE’s biggest emirate will double by 2015

The UAE power sector has for many years been characterised by the threat of future shortages both in terms of generating capacity and the availability of gas feedstock.

Electricity demand increased sharply during the boom years of 2003-2008 and even continued to rise during the recent global financial crisis. In response, power projects of ever-increasing size have been proposed, financed and fast-tracked through construction.

Peak electricity demand increased by 7 per cent in the UAE between 2008 and 2009, rising from 14,385MW to 15,426MW.

Growth in demand was strongest in Abu Dhabi, with consumption peaking in August at 6,255MW, compared with 5,616MW in 2008. The 11 per cent rise was the biggest annual increase in peak electricity consumption ever recorded in the emirate of Abu Dhabi, and it was even larger than the growth seen in the period 2002-2005.

UAE peak power demand by emirate (MW)
Abu Dhabi5,6166,255
Other emirates1,6921,709
e=estimate. Source: Adwec
Abu Dhabi peak power exports (MW)
Other emirates758909
Source: Adwec

Power planning

As an emirate with around 10,000MW of installed capacity, the increase in Abu Dhabi was easily absorbed. However, this may not always be so easily achieved. Forecasts by Abu Dhabi Water & Electricity Company (Adwec) expect demand to continue to rise with consumption set to more than double in Abu Dhabi within the next five years. Peak power demand is forecast to rise from 7,602MW in 2010 to 15,069MW by 2015.

Most of the additional electricity usage will come from industrial projects in the emirate.

Saudi Arabia faces an added challenge in that ageing power and desalination plants and to be decommissioned

By 2030, Abu Dhabi’s electricity demand is expected to be 3.5 times higher than its current power requirements.

In addition to meeting increased demand in its own emirate, Abu Dhabi also supplies the Northern Emirates with electricity and these power exports are predicted to continue to climb. At peak times, Abu Dhabi exported up to 1,356MW to Dubai and the Northern Emirates in the summer of 2009, compared with a maximum of 854MW in 2008.

The Abu Dhabi power sector has benefited from considered planning in recent years, which has resulted in roughly 10,000MW installed capacity currently in operation. This is set to expand further through the development of three key power projects – Shuweihat 2, Shuweihat 3 and Taweelah C.

Financing for the 1,500MW Shuweihat 2 independent power and water project (IWPP) was completed in October 2009. Abu Dhabi Water & Electricity Authority (Adwea) has a 60 per cent stake in the project while France’s GDF Suez holds 20 per cent and Japan’s Marubeni has 20 per cent. The plant is under construction at a site located in the west of the emirate, approximately 280 kilometres from Al-Taweelah.

Shuweihat 3, a 1,600MW independent power project (IPP), is also planned for the same site. Adwea was earlier planning to develop the project as an IWPP; however, the client removed the desalination component due to insufficient capacity for water transmission from the site.

Taweelah C is a proposed IWPP, which follows the Taweelah A1, Taweelah A2, and Taweelah B plants. It is currently in the study phase and is expected to have a nameplate capacity of 2,400-2,600MW. Adwea originally planned to locate the plant at Um Al Nar but later opted for the Taweelah site. However, a lack of gas supplies is threatening to derail the Taweelah C project, especially as the Shah Gas programme, which was hoped to be online by 2013 to supply the project, will not be operational in time.

In response to mounting problems over gas allocations, Abu Dhabi embarked on a study to identify other potential fuel sources. Nuclear power emerged as the most promising technology with to bridge the gap.

In late December 2009, it signed a $20.4bn contract with a consortium led by South Korea’s Korea Electric Power Corporation (Kepco) to build four nuclear reactors in the western region of the emirate. Under the deal, the first 1,400MW plant will begin production in 2017 with the three additional reactors operational by 2020.

Abu Dhabi is also developing a handful of alternative power projects with capacities greater than those of test facilities including a biomass facility, a solar power project and a hydrogen project. However, each of these facilities is progressing at a slow pace and the scope for additional renewable energy projects continues to be constrained by the absence of a structured renewables support scheme.

Dubai, meanwhile, has seen its year-on-year power demand growth halve, from around 12 per cent growth between 2007 and 2008 to just 6 per cent between 2008 and 2009. Peak electricity demand was 5,622MW in 2009, compared with 5,287MW in 2008 and 4,736MW
in 2007.

Generating capacity

As well as highlighting the impact the economic downturn has had on the emirate, this deceleration in the rate of electricity demand growth has also afforded Dubai the chance to pursue its capacity building plans at a less frenetic pace.

Already, Dubai has scrapped plans to develop two 1,500MW projects at Hassyan, which were to be financed in direct funding and come online in 2011-2012, in favour of a single 1,500MW IWPP. As Dubai’s first IWPP project, a longer procurement period is expected to result in the project coming online around 2013-2014. Had increased demand for electricity not eased significantly, Dubai Electricity & Water Authority (Dewa) would have been unable to opt for the IWPP plan which has half of the capacity of the original scheme and will come online around two years’ later.

Dubai currently has about 7,500MW generation capacity installed. While the emirate was looking to expand this further with several ambitious projects, those have now been scaled back following the sharp slowdown in the rate of electricity demand growth.

Most projects are now either officially shelved or facing delays. One exception is the Hassyan IWPP project for which Dewa is currently seeking advisers. 

Neighbouring Sharjah’s power problems are of a different nature. The emirate’s utility provider, Sharjah Electricity & Water Authority (Sewa), has sufficient generating capacity installed, but lacks the fuel with which to run the power plants. Power consumption in Sharjah peaked at 1,709MW in summer 2009, but Sewa had about 2,200MW of capacity available.

The utility receives sufficient gas to meet Sharjah’s off-peak demand but, during the hottest months, when electricity consumption soars due to the use of air-conditioning, it has to buy in liquid fuels to enable it to increase power production. This represents a huge financial burden for Sewa, and it is unable to recoup the additional cost through sales to customers because electricity prices in the emirate are subsidised.

In 2009, load shedding had to be implemented as the utility could not afford to meet demand.The gas supply issue has impacted on plans to develop a gas-fired facility at Hamriya. The emirate originally planned to fuel the plant using imported gas from Iran but these plans have stalled.

Consequently, the Hamriya IPP has been shelved and the emirate will likely remain dependent on Abu Dhabi to meet power demand until the issue is resolved.

The Federal Electricity & Water Authority (Fewa), the body responsible for utility provision in the other Northern Emirates, no longer has to worry about adding new electricity capacity.

In 2008, Abu Dhabi Water & Electricity Authority (Adwea) signed a deal with Fewa to supply it with increasing imports of electricity, reaching up to 2,500MW by 2015. Electricity demand in the emirates covered
by Fewa peaked at 1,840MW in the summer of 2009, 3 per cent higher than the maximum consumption of 1,790MW recorded in 2008. Peak exports to Fewa from Abu Dhabi in the summer of 2009 were about 909MW, compared with 758MW in 2008.

Fewa has about 1,120MW of generation capacity, but most of the power plants are small, ageing and inefficient. Since Abu Dhabi is the main contributor to the UAE federal budget, and the federation funds Fewa, the UAE government has taken the view that it makes economic sense to export electricity produced by Abu Dhabi Water & Electricity Company’s (Adwec’s) more modern and cost-effective power plants to Fewa.

Most of the electricity supplied to Fewa and Sewa by Adwec is generated at the 890MW Fujairah 1 power and desalination complex at Qidfa. A second plant, Fujairah 2, which will also supply the Northern Emirates, is under construction nearby. It will have a capacity of 2,000MW and is scheduled to start up later this year. A new 240-kilometre-long pipeline is being installed to take Qatari gas from receiving facilities at Taweelah in Abu Dhabi to Fujairah to fuel the facility.

Financial concerns

When the UAE cabinet approved the proposal for Adwec to supply power to Fewa in January 2008, it was decided that Fewa would only be responsible for supplying residential customers. Responsibility for supplying commercial and industrial users, and big real estate projects, transferred to the individual emirates.

This decision resulted in power supply problems in these emirates, as the governments were given responsibility before they had time to set up their own plants, let alone secure fuel allocations for them.

Although the Ajman and Ras al-Khaimah authorities have both initiated projects to construct coal-fired power plants, these plans appear to have stalled because of the financial crisis. Ras al-Khaimah was interested in developing up to 4,000MW of coal-fired generation capacity and Ajman has had a feasibility study carried out for a 1,000MW plant.

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