Key fact

Dubai has only 4 trillion cubic feet of natural gas reserves. Abu Dhabi has 50 times more

Source: MEED

Faced with limited gas supplies and the demand for electricity rising by 10 per cent a year, Dubai has turned its attention to finding alternative fuels for power generation. For now, coal appears the most promising solution.

While the notion of Dubai importing coal for its domestic power needs seemed unthinkable until recently, state utility provider Dubai Electricity & Water Authority (Dewa) is currently working on plans to explore the potential of coal-fired power plants in the emirate.

Dubai has only 4 trillion cubic feet of natural gas reserves – Abu Dhabi is estimated to have about 50 times more – and consequently it relies on costly imports from neighbours to fuel its power plants.

Electricity demand in Dubai rebounds

Between 2007 and 2008, peak electricity demand in Dubai grew by 12 per cent. The pace of growth eased in the wake of the global financial crisis, with consumption increasing by just 6 per cent in 2008-09. This offered Dewa the opportunity to continue with its capacity expansion programme at a more manageable pace, but the tide appears to be turning back once more. In 2010, peak power demand rose 9.5 per cent to 6,161MW, from 5,622MW in 2009.

Dubai power sector
Year Installed power capacity (MW) Peak power demand (MW)
2004 3,833 3,228
2005 3,833 3,571
2006 4,599 4,113
2007 5,448 4,736
2008 6,676 5,287
2009 6,997 5,622
2010 7,461 6,161
Source: Dewa

In terms of electricity required by Dubai’s grid, 33,742GW an hour (GWh) was needed last year compared with 31,013 GWh in 2009.

The rise in demand is the result of an increase in the number of customers in the emirate. Dewa had 58,819 customers in 2010, compared with 49,826 in 2009.

So far, Dubai has managed to keep pace with rising demand for electricity. The emirate had 6,997MW of installed power capacity in 2009 and this had risen to 7,461MW by the end of 2010. But Dewa will need to press ahead with its capacity building programme if it is to keep up with consumption growth.

Coal is not an ideal fuel solution, but in the absence of other viable alternatives it appears the only option

The utility’s policy of using traditional fuels for power generation has already come at a significant cost. By continuing to install gas-fired power plants, Dewa is effectively committing itself to buying gas from its neighbours for decades ahead. As usage climbs, this will become unsustainable in the long term.

Dewa receives all of its natural gas from fellow state-owned entity Dubai Supply Authority (Dusup). In recent years, Dusup has experienced a shortage in gas supplies.

As a result, the price of gas has increased sharply. A lack of new gas supplies has meant that Dubai has had to turn to more expensive fuel oil to power its plants. In an effort to offset the financial strain, consumers in emirate have been hit by price increases, including a sharp hike implemented in 2010. Now, the utility firm is looking to launch non-gas fired power projects.

It is a long way before nuclear power will be available … So we really have to look into our fuel sources

Senior Dewa official

Dewa has received nine bids from consultants to carry out a coal study and advise on the tendering of a coal-fired power plant in an effort to diversify its energy mix. The utility invited bids in November 2010 and, according to a senior source at Dewa, it intends to select a consultant by the end of the first quarter of 2011.

The contract has attracted the attention of several international technical advisers. Bids were submitted by the US’ McKinsey & Company, Lahmeyer International and Fichtner of Germany, the UK’s Mott MacDonald and the US’ Parsons Brinkerhoff, along with four other firms.

The study will be divided into two phases. In the first phase, the consultant will conduct a preliminary analysis of the type of technology, coal and sourcing strategy that will best suit Dewa’s requirements. This includes logistics and infrastructure requirements, as well as the environmental impact of building the emirate’s first coal-based power plant.

Dubai electricity usage, 2009
Commercial 13,383 45
Residential 8,791 29
Power station and desalination  2,686 9
Other 2,656 9
Industrial 2,540 8
Total 30,056 100
Source: Dewa

The second phase will cover the conceptual design of the facility, along with requests for proposals and the assessment and development of new regulations for clean coal-based power plants. First power from the project is expected in 2015-16.

The project may be developed on an engineering, procurement and construction basis or as an independent power project. According to a source at Dewa, the utility is “looking for investment if there is appetite”.

“I believe there is [appetite, and the contract type] will be decided over several months once we see the consultant’s reports,” he says. “We are leaving that option open for the time being.”

Coal technologies

The proposed plant may use supercritical pulverised coal (SCPC) or integrated gasification combined-cycle (IGCC) technology.

Of the two technology options, IGCC offers the cleanest solution. In an IGCC plant, coal is converted into gas. Impurities are then removed from the gas and can be converted into by-products. In doing so, the plant produces less sulphur dioxide, particulates and mercury.

Excess heat from the primary combustion is passed through a steam cycle as it would in a combined-cycle gas turbine. This improves the efficiency of the project.

IGCC is a new technology, but has been applied in several projects across the world and there are sufficient case studies from which to draw experience.

Pulverised coal plants represent the standard coal-fired technology. The facilities burn powdered coal to produce thermal energy. This widely-used technology can be made more efficient by becoming supercritical. These plants operate at lower temperatures and are therefore more efficient and environmentally acceptable.

The winning consultant will be able to draw on a wealth of experience from the application of coal technologies across the world. Many countries outside the Middle East use coal as their primary fuel source.

Energy infrastructure challenge for the Gulf

The greatest challenge for introducing coal-fired projects in a Gulf country is associated with sourcing the feedstock. Without the necessary infrastructure to bring coal into the UAE, Dubai would need to start from scratch.

Once the coal reaches Dubai’s coastline, suitable offloading and transport infrastructure would need to be built to receive it. Alternatively, coal could be shipped to Jebel Ali port and transported by land to Hassyan, close to the Abu Dhabi border, where Dewa already plans to develop a series of power plants.

Whichever option is adopted, Dubai will need to invest in infrastructure to transport the coal to the power plant. This will add cost and time to any coal-fired projects.

Oman’s experience with what would have been the sultanate’s first coal-fired plant at Duqm is a good example of the added complications such projects entail. The need to import coal added an extra two years to the project schedule in order to build the necessary infrastructure. In the end, the project was cancelled.

The other significant drawback of using coal to generate electricity is the environmental impact. Using clean coal and other derivates mitigates this to a certain extent, but it will be an important factor when considering the location for the new plant.

Coal is not Dubai’s only option for diversifying its energy mix. It could follow Abu Dhabi’s lead and develop a nuclear power plant. Saudi Arabia, Jordan and Kuwait have unveiled plans to do so, along with several other countries in the region.

However, Dubai is unlikely to follow suit. The level of  upfront investment needed to build a nuclear scheme makes it impossible for Dubai to turn to atomic energy, as it lacks the oil wealth of its neighbour.

Instead, Dubai is more likely to broker a deal with Abu Dhabi for the offtake of some baseload capacity from its nuclear project once it is commissioned in 2017-19. Abu Dhabi itself considered coal-fired power plants as an option, before deciding to go ahead with a nuclear power programme. A feasibility study ruled out coal due to the potential negative impact on the environment.

Alternatively, Dubai could put its weight behind renewable energy. In 2009, it unveiled plans to develop a solar project in the emirate, with a capacity of between 10MW and 100MW. Dewa identified six possible sites following a study conducted by Lahmeyer International. The sites identified were suitable both for photovoltaic and thermal solar projects. 

However, renewable energy is a costly alternative to traditional power plants on a dollar to megawatt basis.

Abu Dhabi has been able to throw resources at building a green technology economy, Dubai is not in the same position financially. While renewable energy may in time play a part in Dubai’s energy mix, it will not provide the baseload capacity that the emirate needs.

Energy policy in the UAE

Coal is not an ideal fuel solution for Dubai, but in the absence of other viable alternatives it appears the only option.

“We really have no choice,” says a senior official at Dewa. “It is a long way before nuclear power will be available and renewables are not really playing a role in base load operations. Gas price fluctuations may cause some insensitivity in supply in the future. So we really have to look into our fuel sources.”

Dewa realises that it needs to adjust its current policy for generating electricity and the decisions it takes now are important. The utility worked with McKinsey & Company to draw up its Energy Strategy 2030. Much of the strategy focused on the emirate’s intention to bring private finance into the power sector. It also looked at the role different fuels could play in the energy mix.

Dewa managing director and chief executive officer Saeed Mohammad al-Tayer said in June last year that by 2030, clean coal and nuclear power could each account for 20 per cent of the emirate’s total electricity consumption. Even with 19 years to deliver this capacity, the schedule is highly ambitious, especially as overall power demand continues to rise.

The road to Dubai’s first coal-fired power plant will be long and Dewa will need to sure that the end results justify the effort.