While Dubai and Abu Dhabi press ahead with major conventional and renewable power projects, the UAE’s northern emirates of Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah and Fujairah have become increasingly reliant on Abu Dhabi to meet their energy needs.

Both Sharjah Electricity & Water Authority (Sewa) and the Federal Electricity & Water Authority (Fewa), the utility provider for the northern emirates, continue to see strong growth in electricity demand due to population and industrial expansion, and have had to turn to Abu Dhabi Electricity & Water Authority (Adwea) to import electricity.

Lack of capacity

Some plans for private sector plants to support industrial schemes in Ras al-Khaimah are moving ahead, but as these are small in size and still in the early stages, the UAE’s less populous and poorer emirates remain dependent on the federal capital to meet demand for power.

Abu Dhabi is pledged to meet the requirements of the northern emirates, but the cost of this additional capacity is creating problems for some of the emirates to pay for the power imports, which will need to be addressed if the northern emirates wish to guarantee supplies.

Sharjah has experienced some of the worst power cuts in the GCC in recent years, with residents experiencing long blackouts in 2009 and 2010. The situation has improved since 2011, however, following an increase in electricity supplies from Abu Dhabi. However, consumption continues to grow rapidly.

Abu Dhabi knows that Fewa and Sewa cannot meet demand on their own, so it is helping by exporting electricity

UAE-based industry source

As in neighbouring Dubai, during the real estate boom of 2005-08, peak demand growth for electricity in Sharjah averaged 6-8 per cent a year. Growth fell to just 2 per cent in 2009, following the financial crisis and real estate crash, before rebounding to 4 per cent to reach 1,934MW in 2010, the last year for which Sewa released official demand figures.

The Sharjah utility provider’s most recent statistics show that total generated and imported power in the emirate was 10,847 million kilowatt hours (kWh) in 2012, compared with 10,420 million kWh in 2011. Sewa had an installed capacity of 2,768MW in 2012, with available capacity of 2,512MW. Demand in Sharjah is expected to continue to expand by 3-4 per cent in the coming years.

Across the northern emirates, peak power consumption growth has averaged 5-10 per cent over the past decade, although it declined to 3 per cent in 2009, as a result of the sharp slowdown in activity in the real estate industry. Over the medium term, growth is expected to average 4-5 per cent, which will be met by imports. As of 2011, Fewa’s plants were meeting about 35 per cent of peak electricity demand, which was estimated at 1,600-1,700MW.

As a result of Fewa’s inability to boost supply due to outdated infrastructure and a shortage in gas feedstock, both Sewa and Fewa receive imports of electricity from Adwea. In 2011, Abu Dhabi surpassed Fewa as the leading supplier of power in the northern emirates.

In 2013, Fewa received 1,551MW from Adwea, a 11.7 per cent increase on the 1,389MW it received in 2012. Imports to Sewa’s grid, meanwhile, grew by 6 per cent from 715MW to 761MW, according to Abu Dhabi Water & Electricity Company (Adwec).

Imports to continue

Imports from the UAE capital are expected to continue to increase in the coming years, with Adwec having predicted in its 2011/12 Electricity Peak Demand Forecast that by 2020, imports to Sewa will rise to 2,510MW and 4,086MW to Fewa.

Abu Dhabi reaffirmed its commitment to assisting the northern emirates in March 2011, when the UAE’s president and ruler of Abu Dhabi, Sheikh Khalifa bin Zayed al-Nahyan, pledged to invest $1.6bn to expand the water and electricity supply in the neighbouring emirates.

“Abu Dhabi knows that Fewa and Sewa cannot meet demand on their own, so it is helping by exporting electricity,” says a UAE-based industry source. “It has become a particularly important issue following the Arab [uprisings] in 2011. [The UAE government] does not want unhappy people without power and water.”

[The clean-coal plant in Ras al-Khaimah] is going ahead, plans are well on the way…. We have now received approval

Richard Menezes, Utico

Despite the federal commitment to support the northern emirates, tensions have been reported in the relationship between Abu Dhabi and Sewa over payments for imports. Sewa has faced financial difficulties as a result of high fuel costs in recent years, and according to sources within the local power sector, this has put the utility provider’s finances under pressure.

“Sewa owes a lot of money for electricity,” says one industry source. “Sewa will need to improve on the payment front or Adwea will not keep increasing exports. There is some movement on this front, I hear, so I would expect it to improve in the next six months.”

While previous plans by the northern emirates to implement independent power projects (IPPs) have failed due to problems with gas allocations and financing, private companies are beginning to look at ways to procure and distribute power for industrial and commercial users.

Planned projects

Ras al-Khaimah-based utilities company Utico is pushing ahead with two power schemes and a water desalination project as it seeks to exploit the need for additional capacity. The company is planning to oversee the construction of its own generation assets and transmission and distribution grid. While it may look to join the Adwea grid in the future, its immediate concern is moving forward with power projects to address demand from local industrial areas and freezones.

“We operate below the government level – with zero subsidies,” says Richard Menezes, managing director at Utico.

The firm’s largest planned scheme is a AED1.5bn ($408m) 270MW clean-coal plant, which Utico is hoping to develop in partnership with China’s Shanghai Electric.

“[The clean-coal plant] is going ahead, plans are well on the way,” says Menezes. “There were environmental concerns, but we have now received approval.”

According to Menezes, Shanghai Electric, which is a co-investor, will build the main plant, but there will be another eight to 10 packages out for tender. “We have raised the equity and are now working on finalising the packages,” says Menezes.

In December, Utico signed a memorandum of understanding (MoU) with Namibia to receive coal for the planned Ras al-Khaimah project. The firm is also pushing ahead with plans to develop a 40MW solar IPP and a 20 million-gallon-a-day (g/d) independent water project (IWP) in the northern emirate. Dutch firm KPMG is the financial adviser for both schemes.

Five consortiums have been prequalified for the desalination project and Utico has set a submission date in July for the developer contract. The desalination plant is planned to be powered by the proposed solar project.

Utico invited companies to submit prequalification bids for the solar IPP in March, and is currently finalising the prequalification list before it issues the request for proposals. Several consortiums consisting of more than 20 companies submitted prequalification entries for the scheme.

Desalination capacity

Adwea also supplies desalinated water to the northern emirates, with exports increasing from 45 million g/d in 2012 to 60 million g/d in 2013. Progress is also being made on some independent projects in the sector.

In February, Abu Dhabi National Energy Company (Taqa) signed a MoU with Fewa to develop a seawater desalination plant in the emirate of Ajman. The Al-Zawra IWP will have a capacity of 30 million g/d and will be able to supply 250,000 people in the northern emirates with drinking water. The desalination plant will use reverse osmosis (RO) technology, unlike most of the UAE’s existing desalination facilities, which use thermal technologies.

The IWP will be owned by Fewa and Taqa, with the utility provider having a long-term water purchase agreement. Construction work is expected to start in early 2015, with a scheduled commissioning date of 2017.

In August 2013, Fewa invited firms to bid for the contract to provide consultancy services on a 15 million-g/d desalination plant at Al-Zawra, the same site that Spain’s Cadagua and its local partner, Essa Engineering, were awarded a deal to build a 10 million-g/d RO plant. In 2009, Austria’s Aqua Engineering won the contract to build a 7 million-g/d desalination plant at the same site.

With demand for utilities continuing to grow, it is important that Sewa and Fewa are able to ensure supplies are available from Abu Dhabi to meet demand in the electricity sector. While the capital’s commitment to assist the northern emirates should guarantee the availability of capacity, Sewa and Fewa need to make sure they deliver on financial commitments so that transmission of power is not delayed.