GCC grid in numbers
42,800MWh: Electricity imported by Kuwait from the GCC interconnection grid
41,221MWh: Amount of power exported by Saudi Arabia
$8.3m: Value of the contract won by ABB for maintenance of the grid’s seven substations
Sources: GCCIA; MEED
Development of the GCC unified electricity grid has been more than 30 years in the planning, but progress has accelerated in recent years. Today Kuwait, Qatar, Bahrain and Saudi Arabia are interlinked and able to share power. The UAE will join the network in the next 12 months as contractors from Saudi Arabia’s National Contracting Company (NCC) complete construction of a double circuit 400kV line between Salwa in Saudi Arabia and Shuweihat in Abu Dhabi.
The final phase of the project involves the construction of two 220kV lines between Al-Ouhah in the UAE and Al-Waseet in Oman, and is expected to get under way in 2011.
The physical infrastructure is not the only work progressing. The GCC Interconnection Authority (GCCIA) is currently putting together the regulatory framework that will facilitate region-wide electricity trading. Key to this is the formation of an Advisory and Regulatory Committee consisting of two representatives from each member state. The first meeting was held in Kuwait in April and officials tell MEED that further meetings are scheduled on a quarterly basis.
“The first step was creating a defensive mechanism, a network that provides security to keep the lights on and the air-conditioning flowing. Once you have that in place, there is an opportunity to start trading electricity,” says Richard Metcalf, projects and energy partner at UK legal firm Norton Rose.
In an emergency situation, the grid is always there for all states for immediate availability
The grid has already been used several times since it went live in July 2009. “In an emergency situation, the grid is always there for all states for immediate availability,” an official at the GCCIA tells MEED.
Pricing is an inevitable part of a trading agreement and the GCCIA is also working on a tariff study
Data released by the GCCIA on usage between July and November 2009 shows Kuwait has benefited most from the grid. The country imported some 42,800 megawatt hours of electricity, compared with exports of 25,200MWh. Saudi Arabia was the biggest exporter and was the only country to export more than it has taken from the system, with imports of 40,185MWh against exports of 41,221MWh.
With the grid providing additional spinning reserve, the authority is now moving on to developing a trading framework. Norton Rose, together with US economic consultant National Economic Research Associates (Nera) is advising the GCCIA on the establishment of bilateral trading agreements.
“The work that Norton Rose has been doing with Nera and the authority is on how to develop the second phase of using the interconnector,” says Metcalf.
“This is not only as emergency back-up, but by developing some proforma trading agreements that member states can use to fit in with the other agreements that are in place on how the interconnector is owned and operated,” says Metcalf.
|GCC power exchanges* (Megawatt hours)|
|*Total to November 2009|
The GCCIA will act as the regulator and manage the flows of electricity through the network once two states negotiate a deal. “It makes sure that the flows being sent from A to B can actually happen. It can only happen if the superhighway has space on it,” says Metcalf.
“The system is dynamic and there are lots of bad practices that can cause a network to become unbalanced. Member states have to ensure they manage their networks so that trading can happen.”
Under the trading agreements states can choose to supply on a long or short-term basis. If a state member fails to provide the power it has promised then penalties will come into effect.
“There are two consequences. Like with any contract, there will be a sanction for failing to supply [to the buyer], but equally if we have notified the authority, which has adjusted the system to account for them and the party fails to deliver, then there will be consequences for destabilising the system,” says Metcalfe.
In terms of trading, an idea that is currently being examined is whether buyers and sellers should be left to talk directly or whether the GCCIA should act as an intermediary to enable transactions.
“For instance, by having an electronic notice board through which people say ‘we want to buy three months power to cover the hot season is anyone selling’?,” says Metcalfe.
Pricing is an inevitable part of a trading agreement and the GCCIA is also working on a tariff study along with developing its own business plan. Bids from international consultants are currently being evaluated as the authority chooses an adviser to assist in its short, medium and long-term planning.
|Peak power demand growth|
A long-term option that the authority is considering is opening the network to the private sector. GCCIA chairman Yousif Janahi told delegates at the Arab Electricity Conference in Kuwait in November 2009 that most future regional power schemes are expected to be tendered under an independent project structure.
Other long-term options include expanding the grid into other regions, including the Mahgreb, and eventually joining with the Mediterranean Ring. However, officials at GCCIA tell MEED that such negotiations are not yet under way.
Memorandums of understanding (MoU), however, have been signed for the leasing out of the fibre optic cables, which were laid along with the power cables. Of the 48 fibres in the first phase of the grid, 36 can be used by telecoms firms. “We have signed MoUs with telecoms companies, but contracts have not been signed yet. We have had lots of interest,” says the official.
The GCCIA is liaising with telecoms regulators in the region to assist in development of the legal framework, covering areas such as licences and landing point rights for telecoms satellites to be used in member states.
Meanwhile, a maintenance contract was recently awarded for the grid’s seven substations to Switzerland’s ABB, who also installed the units. “We will provide round-the-clock support to the interconnection grid,” says Jalal Bageri, country services manager for ABB in Saudi Arabia. “This includes frequent substation visits for preventive maintenance and inspection, as well as coordination with all suppliers for substation equipment.” The $8.3m contract was signed on 2 June and will run for two years.
The past 12 months has been a period of great activity for the GCC interconnected grid. Phase one has opened, construction of the final phase of the network has begun and maintenance deals have been signed. On top of this, the GCCIA regulatory authority has convened for the first time and trading agreement framework has begun to be developed.
Looking ahead to this summer, GCCIA officials say that no power exchange agreements have as yet been signed by member states the peak demand period. They also refute reports that Kuwait has had requests refused for extra power supply from the grid.
“This is not true. I am not aware of any exchange agreements having been signed yet,” says the official.
Kuwait suffered power cuts at the start of June as electricity consumption soared amid a heat wave, which saw temperatures rise to more than 50 degrees Celsius. Usage peaked at a record 10,921MW. Kuwait’s total installed capacity is less than 11,500MW.
Given the fluctuating nature of the region’s electricity demand, industry observers expect that it will not be long before the GCC states start to test the potential of trading within the system and the grid is put to full use.