It is a typical scene in the Old City of Sanaa. At 9pm on Monday evening, shop owners have already brought electricity generators out onto the streets. At a few minutes past the hour, the streets are plunged into darkness as the power supply is cut. The generators roar into life, their collective hum a normal part of day-to-day life in the Yemeni capital.

Since early 2014, residents have grown accustomed to regular rolling power cuts of 8 hours or more a day. They also remain braced for militant attacks on electricity infrastructure, which can lead to even longer outages.

Elsewhere in the country, the situation is even more dire. Just 20 per cent of the rural population and 40 per cent of the total population have access to the national grid, according to the World Bank, with the needs of another 13 per cent covered by self-generation. Electricity supply is even more erratic outside Sanaa, often cutting out for days at a time. 

Generation issues

The outages are caused by several issues: a lack of generation capacity; an ongoing fuel crisis; and attacks on power plants and transmission lines by restive tribes. With a fuel and fiscal crisis looming, they are unlikely to be resolved in the near future.

Yemen has less than 1,000MW of permanent production capacity, while conservative internal estimates place demand at 1,300MW, and even higher during the heat of the summer. Government officials estimate Yemen needs more than 3,700MW of generation capacity by 2020 to meet rising demand. During the same period, about 600MW of ageing capacity would also need to be shut down. To meet future demand, the country would need to add 3,300MW of new capacity over the coming six years.

Significant investment also needs to be made in new power lines. It is estimated 30-40 per cent of all electricity generated in Yemen is lost due to inefficient transmission.

Although Yemen, the Arab world’s poorest state, has struggled to maintain fiscal stability since its 2011 uprising, there is plenty of money for these projects. Of a total of $7.9bn promised to Yemen in 2012, foreign donors pledged $620m for power projects, in addition to a similar set of funding commitments made in 2006.

India’s Bharat Heavy Electrical is in the process of building a 460MW gas-fired power plant at Mareb funded by foreign donors and regional development funds, which is due to be commissioned in early 2015. The governments of China, Turkey and India have recently held talks with the Yemeni authorities to help fund the construction of new power plants, which would not be part of the existing aid package.

Slow progress

The issue in meeting generation targets is not funding, but rather in implementing new projects, says Adel Damran, deputy electricity minister in charge of projects and planning. “You nominate a project, you discuss it with the cabinet, with parliament, you go to the site and announce it, you get a consultant to plan it,” he says. “From nominating to naming the [construction contractor] it takes two, three, four or five years.”

At the current rate of progress, there is no way [Yemen is] going to add anything like 2,000MW before 2020

Power industry executive

A tender for the Mareb plant, the second gas-fired facility to be built in the area, was announced in 2009 but faced repeated delays, Damran says. A construction contract was finally signed in early 2011, shortly before the uprising took place. Since then, progress has been slow. “It should have been ready in June but there have been difficulties on our side and on the contractor’s side,” he says. “We hope that it will be in service by the end of this year.”

Unless something can be done to ease the bottleneck, Yemen will struggle to solve its electricity crisis. “At the current rate of progress, there is no way [the Yemen government is] going to add anything like 2,000MW before 2020,” says an industry executive. 

In the interim, the government has elected to boost supply using small, temporary production facilities like the 54MW temporary power plant installed in Aden by Dubai-headquartered Altaaqa Global in 2013. In total, Damran estimates that 600MW of temporary capacity has been installed, with the government mulling a further 250MW. But the cost of temporary generation – $860m in 2013, according to the Electricity Ministry – is unsustainable, he says. In effect, the government pays YR80 ($0.37) to produce a kilowatt of electricity, but charges YR14 to the public. The continued use of heavily subsidised diesel at the country’s main power plants is equally destructive.

The power sector will account for more than 40 per cent of the $3.5bn Sanaa estimates it will spend on fuel subsidies in 2014. 

A reduction of the fuel subsidy is under discussion and could result in the Public Electricity Corporation (PEC), which oversees Yemen’s power production and distribution network, being forced to raise the cost to customers. However, Damran worries that this could cause a rise in the already high level of delinquent payments – including from government departments. 

Meanwhile, attacks by restive tribes in Mareb and elsewhere on power infrastructure also affect output. “It’s like a Mexican Telenovela,” Damran says of the problems the sector faces. “It never ends.”

Supply strategy

To ease the burden on the state of producing electricity and to ensure steadier supply, Damran says Yemen must find a way to speed up the tender process for power projects. It must also build more plants using gas that is currently flared at oil production sites across the country instead of using diesel as a feedstock. But even this is proving a difficult plan to bring to fruition.

A government body was set up in 2013 to help speed up the dispersal of aid to Yemen: the Executive Bureau. But in early 2014, it discovered that despite an earlier promise of 5 trillion cubic feet of natural gas to fuel 3,000MW of new power plants, only 0.9 trillion cubic feet are actually available. This was hardly enough to supply the Bharat project at Mareb. The bureau recommended that the funds targeted for gas power generation be reallocated to coal-fired plants. 

Without new power plants, it is hard to convince people that it is worth cooperating with the government

Government official

The bureau itself is meant to help speed up the time it takes for new projects to be brought to fruition, but executives at the unit concede that this is easier said than done. “There are a lot of hoops to jump through, both in terms of how the donors want to see their money spent and the government’s ability to make projects happen,” says an official. Of the $620m of aid available for electricity projects, $455m (73 per cent of the total) is aimed at a project using gas from Mareb to provide power to the nearby city of Dhammar. The project, a bureau executive noted in a March 2014 report, “has been on hold for [seven] years”.

Communication issues between different government departments also hamper plans to increase capacity. “Sometimes the Oil Ministry says there is no gas, the Planning Ministry says there are no funds, and the Finance Ministry says that it doesn’t have the funds either, so we end up doing nothing,” says Damran.

He recommends the creation of a small unit dedicated to overseeing projects, but concedes this could mean producing yet more parallel layers of government.

If Sanaa cannot find an alternative to diesel-powered plants running on heavily subsidised fuel, its ability to produce electricity will only be hampered further in the near future. Yemen faces a growing fiscal and fuel crisis, with falling oil production limiting the availability of foreign currency reserves to import fuel from abroad.

Damran estimates that the lack of fuel has already forced PEC to take about 200MW of production offline. He says Sanaa is withholding the fuel the company needs because it is in arrears on payments – largely because cash-strapped government departments have stopped paying their bills to the PEC.

Volatile security

Building new plants will also be difficult if Yemen’s volatile security situation does not improve.

There were about 20 attacks on electricity production and transmission infrastructure in 2013, and several engineering contractors say that it would be difficult to build a new plant under the current circumstances, transporting hundreds of millions of dollars of materials and equipment overland to sites in some of the most troubled areas in the country. One source suggests this issue may have led to delays in the construction of the new Mareb power plant. However, Damran says, with political will, security can be improved, and it must be.

Others are less optimistic. “It’s a huge chicken and egg issue,” says a government official involved in the power sector. “We just don’t know what to do first. If we don’t improve security and management in the government, we can’t build new power plants, and without the new power plants, it is hard to convince people that it is worth cooperating with the government, and it makes it harder for the government to pay their bills.”