Electricity demand in the GCC has continued to rise strongly despite the global financial crisis. Although the rate at which consumption is rising has slowed in some parts of the region (most notably in Dubai), Gulf utility providers still face an ongoing battle to keep pace with demand growth.

According to regional projects tracker MEED Projects, there are currently $125.3bn worth of conventional power generation, transmission and distribution projects planned or under way in the GCC.

Unsurprisingly, most projects – some 42 per cent of the total value –  are in Saudi Arabia, which has the largest population in the Arabian peninsula. The kingdom is experiencing a steady growth in peak power demand, rising 7 per cent in 2008 and 8 per cent in 2009. Electricity consumption in the kingdom is forecast to climb to more than 60,000MW by 2025, from about 38,000MW today.

Rebuilding reserves

Investment in new generation capacity is not just needed to satisfy rising usage, but also to rebuild the country’s reserve margin, which has been eroded over the past decade. Saudi Arabia has a cushion of just 7.4 per cent of capacity, compared with the industry norm of at least 10-15 per cent. A reserve margin is need to ensure networks can cope with unexpected increases in demand, particularly during the summer months. At least 34 power projects are planned over the next eight years in Saudi Arabia, ranging from 20-30MW extensions of existing plants to new projects in excess of 1,600MW. In all, they will add more than 21,000MW of capacity. Included in this massive expansion programme are five independent power projects (IPPs) worth about $20bn, and expected to be completed by 2019.

The UAE is the next largest market, with $36.7bn-worth of generation, transmission and distribution projects planned or under way – 29.3 per cent of the region’s total. Included in this are Abu Dhabi’s projects at Taweelah, Shuweihat, Fujairah, and Dubai’s first independent power and water project (IWPP) at Hassyan. If the value of Abu Dhabi’s nuclear award were also to be included, then the value of power projects in the UAE would total $57.1bn – slightly more than the $52.2bn in Saudi Arabia.

The emirate of Abu Dhabi experienced the second highest growth in peak power demand in the GCC last year, at 11 per cent. The increase was mostly driven by rising industrial usage. Consumption peaked in August at 6,255MW, compared with 5,616MW in 2008. The 11 per cent jump was the biggest annual increase in peak electricity consumption ever recorded in Abu Dhabi, and it was even larger than the total growth seen in the period 2002-2005. Peak power demand in Abu Dhabi is forecast to reach 15,069MW by 2015. And by 2030, Abu Dhabi’s electricity demand is expected to be 3.5 times higher than at present.

Power exports

In addition to meeting increased demand of its own, Abu Dhabi also supplies the Northern Emirates with electricity. 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.

Faced with a looming gas shortage, in December 2009, Abu Dhabi signed a $20.4bn contract with a consortium led by Seoul’s Korea Electric Power Corporation 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.

In 2009, the highest growth in power consumption in the GCC was recorded in Qatar. Last summer, the Qatar General Electricity & Water Corporation recorded peak power demand of 4,535MW, a 14 per cent increase on the 2008 high. Consumption is expected to climb to 7,791MW by 2013. So far, the utility provider has managed to stay one step ahead of demand and following the first phase start-up of the Mesaieed power plant in September 2009, the country may now have spare capacity to export electricity using the GCC interconnected grid. For this reason, despite having highest growth rates in the region, Qatar has just $7.3bn of power generation, transmission and distribution projects planned or under way – this includes the $2bn phase eight transmission scheme and the $3.85bn Ras Laffan C IWPP.

Kuwait, which has struggled to execute power projects during the past decade due to bureaucratic wranglings, has some $24.1bn-worth of projects under way or planned for the power sector, according to MEED Projects. Demand for electricity is growing at about 8 per cent a year, and the Electricity & Water Ministry proposes to more than double installed capacity to some 26,000MW by 2020. In early 2009, the ministry said it would tender $11.2bn-worth of power generation and desalination projects by the end of the following year. The size of the utilities programme has since risen and involves building 14,260MW of new production capacity by 2017, including the country’s first IWPP, a 1,500MW plant at Al-Zour. Kuwait desperately needs to bring new power plants online as its reserve margin has been eroded to 3 per cent of capacity (based on 2009 figures).

Smallest markets

Oman also has an active capacity building programme with schemes planned or under way at Duqm, Salalah, Sohar and Barka. But because power plants are often small in Oman, the total value of the projects is just $3bn. Peak power demand in Oman reached 3,546MW in 2009 and is set to climb to nearly 6,000MW by 2015. Consumption is being driven by industrial development.

As in Dubai, the rate at which electricity demand in Bahrain is rising slowed in the wake of the global economic recession. Consumption peaked at 11 per cent in 2007, before dropping to 8 per cent the following year and to 5 per cent in 2009. Demand is forecast to reach 4,365MW by 2019, from 2,438MW last year. Bahrain’s Ministry of Electricity and Water has just one major power project in the pipeline, the Addur IWPP. The facility will be developed over four phases with a first phase capacity of 1,200MW and 48 million gallons a day of water. The $2bn first phase is being built by France’s GDF Suez and Gulf Investment Corporation and is due for start up in 2011. If the other three phases go ahead the total capacity at Addur would be 4,000MW of power and 60 million gallons a day of water. This will meet the country’s needs for the next couple of decades.