Doha's power sector enters the comfort zone

30 September 2010

The state’s power reserve margin is healthy and it is now looking to export power through the recently completed GCC integrated grid

Just like its economy, Qatar’s electricity sector has been transformed over the past decade. Unprecedented investment in generation and transmission and distribution (T&D) infrastructure has enabled Doha not only to meet runaway power demand, but also to consider exporting electricity for the first time.

Qatar is now in the comfort zone on the power generation front. Fears of blackouts … have long disappeared

The sector’s growth has been exceptional. In 2000, installed generating capacity stood at just 1,800MW, a figure that will reach an estimated 9,000MW in 2011. By then, there will be 270 high-voltage substations, a significant jump from the 80 in operation in 2000.

In total, an estimated $10bn has been invested in electricity infrastructure since Qatar General Electricity & Water Corporation (Kahramaa) was formed in 2000. The unprecedented investment has been needed. Consistently high economic growth, coupled with a population that doubled in size in the period 2004-10, has meant that Doha has regularly had to cope with peak power demand growth of 10-15 per cent a year. Even in 2009, at the height of the global credit crunch and amid a sharp downturn in the local real-estate market, peak load grew by 14 per cent, the highest rate in the GCC.

High demand

With the economy set to expand by an estimated 14 per cent in 2010 and a further 11 per cent in 2011, high power demand growth will remain a feature of the utility sector for the immediate future. Even assuming a relatively conservative rate of growth of 10 per cent a year, Qatar’s installed generating capacity will need to increase to about 13,500MW in 2019 from 5,314MW in 2009. The capacity challenge is not quite as daunting as it first appears. In 2010 and 2011, full commissioning of the Mesaieed A and Ras Laffan C plants will add a further 3,700MW to the system.

Qatar power factfile, 2009
Installed generating capacity (MW)5,314
Peak power demand (MW)4,535
Growth in peak power demand (%)14
Reserve power margin (%)15
Largest generatorQEWC
Number of power customers220,000
Number of IPPs/IWPPs concluded4
Additional capacity requirement by 2019 (MW)8,216
Estimated cost of required capacity ($bn)9.9
IPP=Independent power project; IWPP=Independent water and power project. Source: MEED Insight

Qatar is now in the comfort zone on the power generation front. Fears of blackouts as a result of surging power demand outstripping limited capacity have long disappeared. The state’s power reserve margin was restored to 15 per cent in 2009 and could well exceed 30 per cent in 2011. As a result, it is now looking to export power through the recently completed GCC integrated grid, and recently reached a deal with Bahrain to supply the kingdom with 150MW to help it with its urgent power demands.

At the same time, plans for a new 2,000MW IWPP, known as facility D, have been put on the backburner. Instead, Kahramaa approached the developer market in early 2010 for 170MW of additional capacity by 2014-15.

Private investors have played a major role in the surge in new generating capacity. In 1990, one of the Gulf’s first semi-private utility, the joint stock Qatar Electricity & Water Company (QEWC), was established with the remit to undertake an IWPP at Al-Wusail in what would have been the first adoption of private power in the region. Although the project never materialised, QEWC became the leading generator in the state, taking over the generating assets of the former Ministry of Electricity & Water (MEW), as well as participating as a shareholder in the Qatar IWPP programme. As of early 2010, QEWC wholly-owned eight plants with generating capacity of 2,500MW, as well as stakes in the four private plants.

The drive to increase private sector involvement was stepped up a gear in 2000 with the formation of Kahramaa to replace MEW. Just a year later, Kahramaa tendered its first independent water and power project (IWPP), Ras Laffan A, among international developers. Since then, it has awarded three more private projects, the Ras Laffan B IWPP, the Mesaieed independent power project and the Ras Laffan C. In total, some 6,500MW of capacity has been contracted from the developer market and $7.8bn of investment secured, making Qatar one of the largest procurers of private power in the region.

Privatisation deferred

Kahramaa has also considered introducing private investors into the T&D sector. In 2003, it commissioned a detailed study looking into the possible privatisation of both the electricity and water networks. The government later decided not to go ahead with the sell-off, although it said it did not rule out doing so in future.

In hindsight, postponing plans to privatise the networks was the right decision. In light of the growing demands on the existing network, its age and the increasing number of blackouts, it was clear in 2004 that massive investment was needed to expand and reinforce T&D infrastructure. In response, Kahramaa launched a $5bn upgrade of its power network, pushing ahead with phases 5-9 of the Qatar transmission programme.

All the phases, including the last, which is due to be completed in 2012, have been conventionally procured and state-funded. The massive cash injection will provide the state with one of the most advanced and modern T&D networks in the Middle East and ensure it is well-prepared for future power demand growth.

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