Strong demand growth has been an abiding feature of the Libyan power sector over the past decade. In the period 2000-09, peak load doubled to 5,282MW, but judging by the most recent forecasts from state-owned General Electricity Company of Libya (Gecol), the growth will pale into insignificance compared with the coming 10 years, when demand is projected to reach 19,000MW by 2019.
Despite the project delays … Libya’s power sector is on a much sounder footing than it was in 2004
Much of this growth is based on an ambitious programme of new projects, as Tripoli pushes ahead with its National Development Plan. Under the plan, it is envisaged that the investment of more than $50bn will go to various sectors, including housing, education, healthcare, transport and tourism.
Even taking these project plans into consideration with other factors, such as an expanding economy, rising living standards and an ongoing rural electrification programme, the demand outlook looks high. It appears to have been based on project developments proceeding on schedule, something that is a rarity for any sector in the Libyan projects market.
The power sector has not been immune to this, experiencing its own fair share of projects suffering extensive delays. One of the more extreme examples is the Mellitah power station, which was first planned in the early 1990s. Despite contractors being selected to build it, the project has still to move into the implementation phase. Today, it is planned as a 1,500MW station that will deliver its output to Europe.
|Libya power factfile, 2009|
|Installed generating capacity (MW)||6,039|
|Peak power demand (MW)||5,282|
|Growth in peak power demand (%)||8|
|Reserve power margin (%)||12|
|Number of power customers||1.4 million|
|Number of IPPs/IWPPs concluded||0|
|Additional capacity requirement by 2020 (MW)||13,000|
|Estimated cost of required capacity ($bn)||15.6|
|IPP=Independent power project; IWPP=Independent water and power project Source: MEED Insight|
Even when power station contracts have been awarded, there are no guarantees they will actually proceed. Gecol tends to sign power plant contracts and then seek budget approval from the central government and a letter of credit. In many cases, funding is simply not forthcoming resulting in projects either being extensively delayed or cancelled altogether.
As of September 2009, there was an estimated 4,700MW of capacity under construction at six separate sites across Libya. Since then, two more major power plant contracts have been awarded to Korean contractors, the dominant force in the Libyan utility sector.
Hyundai Engineering & Construction won in July 2010 a $1.2bn contract, believed to be for the long-planned Tripoli West project, while a month later, Daewoo Engineering & Construction signed up to add 750MW of new capacity at Zueitina. It is not yet clear when any of the projects will actually be completed.
To date, all power plant contracts have been government-funded and structured on an engineering, procurement and construction basis. However, in a major policy shift Tripoli has indicated that up to 9,000MW of the planned new capacity will be developed by the private sector. The Libyan Investment Authority is involved in the programme, which includes brownfield and grassroots projects and is aimed at relieving some of the budgetary constraints that have blighted the sector for years and raising efficiency.
Tripoli has not so far launched a formal bid round for the independent power project (IPP) scheme, but has instead held discussions with a handful of developers on an individual basis. Progress has reportedly been extremely slow with talks dogged by a lack of decision-making.
One of the major obstacles that has to be overcome in the IPP programme is the lack of enabling legislation, which would allow private power projects to proceed. At the same time, there remain questions about how projects can be funded given the lack of a robust legal and financial framework. Finally, it remains unclear whether there is the political will to push through an initiative that is by Libyan standards a radical move. As a result, the state’s first IPP remains some way off.
On the transmission and distribution side, Libya is now over half way through a $1bn project to establish a 400kV grid system. This involves the installation of more than 5,000 kilometres of overhead line. At the same time, Gecol will install more than 2,000km of 220kV cables including 256km of underground cables in major cities, such as Tripoli, Benghazi, Zawia and Misurata. In addition, 71 substations will be constructed. Further connections to neighbouring countries are also planned, including a 400kV link between Libya and Algeria and a planned 500kV subsea cable linking the long-planned 1,500MW Mellitah power plant to Italy.
Despite the project delays, bureaucracy and budgetary issues, Libya’s power sector is on a much sounder footing than it was in 2004, when widespread blackouts swept the country on account of consumption outstripping supplies. Even with a demand growth forecast of 8-10 per cent a year and an active plant retirement programme, Tripoli should have sufficient power over the medium term. It has a growing reserve capacity and several new plants under construction, although it is likely to be some time before Libya receives its first private power. Just as importantly, it has no shortage of cheap oil and gas fuel feedstocks.