Temporary power gains favour

15 May 2014

Utility providers are increasingly turning to mobile power to avoid a shortfall in supply as demand for electricity surges on rapid economic growth

As electricity demand in the Middle East and North Africa (Mena) region continues to grow at a rapid pace, governments are turning to mobile power to ensure sufficient capacity is available for both residential and industrial use.

According to forecasts from MEED’s premium research division MEED Insight, installed power capacity in the region will have to rise by 171.7GW to 332.9GW by 2020 if utilities are to keep pace with demand. With centralised power plants taking an average of 3-5 years to build, a growing proportion of supply will be met by temporary generation units.

Growth market

“The amount of growth [in the Mena region] is going to be huge,” says Lorraine Bolsinger, president and CEO of the distributed power division of the US’ GE Power & Water. “If you look across the world, electricity growth rates are probably 2-3 per cent, but there are pockets of growth that are really high. There are areas here where the growth rate can be as high as 9 per cent or more.”

The amount of electricity growth [in the Middle East and North Africa region] is going to be huge

Lorraine Bolsinger, GE Power & Water

Demand for temporary power is rising across the world, with annual mobile capacity additions increasing from 47GW in 2000 to 142GW in 2012. GE estimates that globally distributed power capacity additions will reach 200GW by 2020, which will represent 42 per cent of combined central generation and mobile power capacity additions, up from 21 per cent in 2000. The Mena region will be one of the main markets driving the increased use of temporary power plants in this period.

The need for mobile power is particularly strong in countries such as Libya and Iraq, where conflicts have damaged existing electricity infrastructure and prevented the development of new power stations.

GE’s distributed power division, the firm’s mobile power product arm, has already benefited from the urgent demand for electricity in the region, securing a $135m contract late last year to install mobile power plants in Libya. The first of four trailer-mounted units were in place six weeks after site selection. Together, they will add 100MW of power supply to the country’s grid and as dual-fuel units can run on either diesel or gas.

US-based temporary power provider APR Energy is also a big presence in Libya. It secured an extension on its deal with the General Electricity Company of Libya (Gecol) in January.

“We have more than 520MW of power capacity in Libya,” says Ranjit Singh, managing director, EMEA region, APR Energy. “We are generating more than 450MW continuously over six different sites.”

It is not just Libya that has proved a profitable market for APR Energy in the region; the firm also won a contract in Oman in the past year, and is active in Iraq, after acquiring work after it bought the GE power rental business in 2013.

“If you look at the percentage of total revenue from the Middle East and Africa year-on-year in 2013, it went from 31 per cent to 59 per cent of APR’s total revenue,” says Singh. APR Energy’s revenue for the region in 2013 was 123 per cent up on 2012, compared with a 17 per cent rise globally.

Sizeable orders

The UK’s Aggreko has also won several sizeable orders in the Middle East in the past 12 months. In 2013, it was awarded 170MW of short-term generator deals to cover summer peak periods in Oman and Saudi Arabia, and a 120MW contract to provide temporary power in Libya.

Singh attributes the surge in demand for fast-track power provision to the region’s rapidly developing economies and expanding populations. “Whatever industry, whether it is energy, mining or infrastructure, everybody is looking at the Middle East and Africa,” he says. “And demand for power follows that. [The region] is also where there is one of the largest population growths worldwide.”

If you look at opportunities, 80 per cent is in emerging markets such as Libya… and Sub-Saharan Africa

Lorraine Bolsinger, GE Power & Water

Temporary power units offer a number of advantages for governments and industrial companies that require additional capacity. Speed of installation is the most obvious benefit. “We can install power, depending on site and size, within 30 days, 90 days or 100 days,” says Singh. “Last year in Oman, we installed a power plant within 20 days of equipment arriving in the country. Governments are now aware that the power is available today.”

The scalability of mobile power technologies is also a key advantage according to Bolsinger. This makes the technology cheaper to buy, build and operate. The provision of instant power allows governments and industrial firms to push ahead with development projects that would be much more difficult if they had to wait for traditional power plants.

Global distributed power growth 
 2000201220202012-20 average growth rate (%)
Annual central power additions (GW/year)1802182722.8
Annual distributed power additions (GW/year)471422004.4
Distributed power share of annual additions (%)213942-
Distributed power investment ($bn)301502054
Source: GE

“Getting electrification, whether it’s for a rural village, commercial development or hospital, can happen much more quickly. As a result these projects are much more financeable,” says Bolsinger. “It reduces construction risk, and there is not a lot of site risk or commercialisation risk, and so [it means] we can get these projects up and running, in many cases, in less than six months.”

Offshore use

Mobile power units also form a key component of the region’s oil and gas sector, with the turbines providing power for offshore installations. GE has supplied gas turbine units to both Abu Dhabi Gas Industries and Zakum Development Company, and also for Algeria’s state energy company Sonelgaz.

“Because of the lightweight nature of the gas turbine parts, these are ideally suited for power generation and pumping on platform applications offshore,” says Bolsinger.

Technological advancements in the fast-track power sector have meant electricity can be provided through mobile gas turbine units, which are cheaper to run and more environmentally friendly than traditional diesel generators. “Every customer I’ve talked to would much rather burn gas than diesel, because of the cost and the environmental issue,” says Bolsinger. “And when customers have access to gas, they’ll be able to switch fuels, giving them greater flexibility.”

In addition to greater efficiency and lower emissions, the cost of fuel makes distributed gas power the more prudent choice.

“For the most part, diesel is somewhere between 1.5 and 2 times more expensive than gas,” adds Bolsinger. “So the major cost of any utility or co-generator is the cost of fuel; that has an enormous effect.”

Due to a lack of gas availability, diesel remains the predominant fuel for temporary power installations, but dual-fuel engines and turbines, which will allow utility providers and companies to use whatever fuel is accessible, are becoming increasingly common.

Power equipment providers are also investing heavily in research and development to develop mobile power solutions to reduce wastage and improve the efficiency of municipal and industrial operations. GE is planning to invest $1.4bn over the next five years on efficiency and sustainability. One of its current pilot projects is the Al-Qusais landfill gas project in Dubai, where the methane produced is used to power a 1MW mobile power generation system.

While temporary power offers a convenient, cost-effective quick fix for electricity shortages, there are still barriers to its wider deployment in the region.

Singh points to decision-making as a challenge facing the mobile power sector in the Mena region.

“Decision-making [is a challenge],” he says. “Many countries such as the kingdom of Saudi Arabia and Oman, they have done it before and understand the products and solutions, so their decision-making is much faster. However, in other countries that haven’t done it, it takes more time. That is one of the biggest challenges.”

The other key challenge (not limited to mobile facilities) for the region’s power sector in meeting capacity requirements is feedstock. “Customers may desire the generation solution, but they don’t have access to fuel today to engage some solutions,” says Singh. “The countries, utility providers and customers have to figure out these fuel solutions.” 

Security is another risk that needs to be addressed by companies in the temporary power sector, with a significant proportion of units going to conflict-hit countries or places where the political environment is unstable.

“In countries such as Iraq, there are security issues,” says Bolsinger. “It’s important to ensure people are safe, and machines are reliably operated. To do this, you need to have in-country regional teams that know the local customs and business environment.”

Nonetheless, Bolsinger expects demand for fast-track temporary power to remain strong in the Mena region.

“Emerging markets are set to grow three times faster than the developed world,” she says. “So while 60 per cent of our current installed base is in the US and Western Europe, if you look at opportunities, 80 per cent is in emerging markets such as Libya, Yemen and Sub-Saharan Africa.”

Abu Dhabi demand

The region’s more developed power markets will also continue to offer opportunities. Abu Dhabi is one, with the emirate facing electricity shortages in 2016 due to delays with the Mirfa independent water and power project. Any setback with the start-up of the Baraka nuclear reactors, currently under construction in the emirate, could also necessitate the deployment of temporary power units.

“I’ve never seen a Nuclear Power Plant come online on time,” says Bolsinger. “[If Baraka does], fantastic. But if not, there may be a time period where they need some temporary units of power.”

With no sign of electricity consumption slowing down, the Mena region will remain a key market for the temporary power industry at least for the next decade.

In numbers

332.9GW The amount of installed power capacity required in the region by 2020

142GW Mobile power capacity added globally, 2012

47GW Mobile power capacity added globally, 2000

Sources: MEED Insight; GE

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